The first official concession came three weeks ago. Treasurer Jim Chalmers confirmed what everyone in the industry already knew — Australia is not on track to meet its climate targets.
“We will need to do even more to secure sufficient renewable energy generation, transmission and storage to meet our ambitions,” Chalmers told a Melbourne audience.
It was hardly an explosive revelation. The hints had been coming for a while.
The climate targets were legislated in one of the first acts of the newly elected Albanese government last year. It was a moment hailed as symbolising the sea-change election result.
The targets to lower emissions by 43 per cent by 2030 and to achieve net zero by 2050 became the law of the land. And to achieve the 2030 benchmark (and give industry greater clarity), an ambitious target to hit 82 per cent renewable energy by 2030 was also set — but not legislated.
No shortage of suggestions
Backing away from any of these targets was never an option. To do so would be an enormous admission of defeat, despite the growing list of obstacles thrown in the path of meeting them.
First came the war in Ukraine, triggering a post-COVID global inflation spiral. Then came the Biden administration’s enormous Inflation Reduction Act, sucking global green energy investment into the United States.
On top of the soaring supply chain costs and higher interest rates, energy companies in Australia have been battling rising community NIMBYism over transmission lines, along with planning and development delays.
Minister for Climate Change and Energy Chris Bowen has never pretended getting from around 35 per cent renewables now to 82 per cent in 2030 will be easy. Throughout this year, he’s acknowledged the target is “a hard task”, a “big lift”, and “ambitious”.
He’s never gilded the lily, but nor has he conceded defeat. The minister has always maintained the 82 per cent renewables target is achievable and left open the prospect of pulling additional levers to get there.
That’s led to plenty of suggestions.
Both the Productivity Commission and the OECD have been urging the government to dramatically expand the Safeguards Mechanism, which currently only applies to big polluters emitting more than 100,000 tonnes a year of greenhouse gases.
This would spread the load of lowering emissions across a greater slice of the economy but would also inevitably mean more firms passing on any higher costs. Not an ideal solution for a government at pains to let everyone know cost-of-living is its “number one priority”.
Groups including the ACTU and Smart Energy Council have urged the government to set up a $100 billion fund — along the lines of the Biden administration’s IRA — to attract investment into “green manufacturing”. This hasn’t been completely ruled out, but stumping up such a huge sum to join the global arms race on green subsidies doesn’t appear to be the government’s favoured option.
Instead, Chris Bowen has chosen another route to put the 82 per cent renewables target back on track — a route involving more taxpayer subsidies. How much more, conveniently, will remain confidential.
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Labor’s new plan
Today the minister will announce plans to significantly expand what’s known as the Capacity Investment Scheme (CIS).
After years of debate over the need for more investment in “dispatchable” clean energy ( available when there’s no wind or sun) as old coal-fired power generators shut down, the Commonwealth agreed with the states and territories to set up the CIS as a pilot a year ago.
The initial aim of the scheme was to drive investment in six gigawatts of “dispatchable” energy and storage by 2030. Today that level of ambition will be lifted more than 5-fold to 32 gigawatts by 2030.
Importantly, not all of the 32 gigawatts will be for “dispatchable” projects like batteries and pumped hydro. Most of this additional capacity — 23 of the 32 gigawatts — will be for “variable” clean energy projects. In other words, direct subsidies for wind and solar projects. None of it will be available for gas.
The scheme is a little complicated in its operation, but essentially involves a government commitment to guarantee returns.
If energy prices fall below an agreed “floor”, taxpayers subsidise energy companies for their losses. If prices rise above an agreed “ceiling”, taxpayers enjoy a return.
The idea is to remove the risk and give some certainty to nervous investors in an uncertain market.
Just what it might cost taxpayers, the government won’t say. Making such a figure public, it says, would reveal how much the government is willing to spend and therefore remove its negotiating power.
Equally convenient, government sources point out that any significant costs won’t hit until later in the decade when more renewables are online and energy prices are more likely to fall below the agreed “floor”.
There’s confidence, however, that expanding the CIS will work to put the 82 per cent target back on track. On paper, the numbers apparently add up.
Just how the various challenges of supply shortages for wind turbines, skilled labour shortages, planning delays, and community resistance over transmission lines will be overcome, remains unclear.
What is clear is the government isn’t watering down its targets. It’s doubling down on renewables and storage. And it’s doing so with an unknown additional commitment of taxpayers’ dollars to incentivise more private investment.
Labor clearly believes this is a more convincing route to net zero than the Coalition’s nuclear energy dream.
David Speers is National Political Lead and host of Insiders, which airs on ABC TV at 9am on Sunday or on iview.