A remarkable degree of public consensus has developed over the past few years. If only our major parties could agree.
A remarkable degree of public consensus has developed over the past few years. If only our major parties could agree.
Opinion
January 20, 2025 — 4.01am
Despite the continuing political arm-wrestling on climate policy, a remarkable degree of public consensus has developed over the past few years.
From this, the two major parties could build a bipartisan operational strategy for assuring ample long-term electricity supply in an increasingly electricity-dependent economy.
So, how has public opinion shifted? First, there is a consensus that climate change is happening and that we should respond. Both main parties already support the 2050 net zero target.
Second, we should transition away from coal generation as the current fleet of generators reaches the end of their economic lives. Only a fringe view still argues for building new coal-generation capacity.
Third, given our natural advantages in renewables (solar and wind), these should form the core of the replacement capacity. The daily fluctuations in renewables generation should be smoothed with batteries and pumped hydro.
Fourth: renewables, by themselves, cannot provide assured reliability. In sustained periods of low renewable generation, additional generation capacity will be needed. This additional capacity will also be needed during the lumpy phase-out of coal generation.
Will electricity be cheaper for households? Probably not.
Fifth: community concerns about the safety of nuclear have diminished. The unresolved issues are cost and speed of implementation. Even here a consensus is developing that in the longer term, nuclear may well play a role, although its practical implementation here is at least twenty years away – longer than the economic lifetime of the current coal-generation fleet.
Sixth: this gap will be filled by gas generation. Climate transition will not be possible without a key role for gas – recognised in Labor’s 2024 Future Gas Strategy, which sees a role for gas even beyond 2050.
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Of course, there is no absolute unanimity on these issues – just an emerging consensus with plenty of dissenting voices and loud vested interests. But it is the basis of a sensible path forward, supported by a majority of public opinion.
Under such a strategy, we would press forward with the expansion of renewables (and their grid connections and battery support), knowing that in any longer-term mix of generation, renewables capacity should be substantially larger than at present.
Gas generation capacity should be installed in time to cover the coal generation transition over the next decade and, in the longer term, meet sustained periods of low generation of renewables.
Assuring adequate gas supply will require more support from state governments (Victoria has already accepted this change), building LNG facilities, and negotiating supply agreements with Australian LNG producers, who will recognise such agreements as being in their long-term interests.
Meanwhile, we should begin the decades-long process of exploring the nuclear option. The first few years will be taken up with revising the federal and state legislation which currently prohibits any nuclear development.
This period will be politically fraught but economically low-cost and without firm commitment. This gives time to explore the practical issues of construction and cost before commitment.
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Experience shows a five-fold difference in cost between the Korean-built turnkey nuclear reactors in the UAE, on the one hand, and the cost and time overrun disasters of Hinkley Point in the UK and Vogtle in the US, on the other.
Over the next few years, we can assess where we might be on this cost spectrum, depending on our state capacity, regulatory and environmental framework, big project construction expertise, and specialised technical knowledge. We benefit from evolving overseas experience, including with small modular reactors, not yet in commercial operation.
Nuclear is ranked among the hardest of the big project challenges, and success requires comprehensive pre-planning rather than a race against the clock to fill the gap left by the retirement of coal generation. The next decade will clarify many of the current uncertainties about the long-term mix of technology.
How will Australia’s substantial rooftop capacity fit with other modes of generation, with its surplus of essentially free energy during the daytime? What happens to battery and storage technology, including EV-to-grid? What are the opportunities to shift electricity demand over the course of the day to benefit from cheap electricity? Other details will fall into place, such as the timetable of economic phasing-out of coal generation.
Will electricity be cheaper for households? Probably not. Two-thirds of the costs of retail supply come from the grid and retail distribution rather than generation, and these costs are rising strongly along with other infrastructure costs. The focus should be on the least-cost pathway.
How would the prime minister and the opposition leader announce this unaccustomed amity? Here is a first draft of the beginning of their joint statement:
“Fellow citizens. The leader of the opposition and I have agreed that the challenge of climate change is too serious for us to go on seeking political advantage, scoring debating points and inflaming differences in community opinion. These differences are trivial compared with the enormity and urgency of the challenge.”
“For this decades-long task, we need a consistency of planning and application, beyond the short horizon of the electoral cycle. Australia needs to press forward with a comprehensive but flexible plan which will take us towards net zero emissions by 2050 at the least cost possible. We have here the basis for assuring ample electricity supply, the key energy element for a prosperous low-carbon Australia.”
Stephen Grenville is a former deputy governor of the Reserve Bank of Australia and a non-resident fellow at the Lowy Institute.
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Stephen Grenville is a former deputy governor of the Reserve Bank of Australia and a non-resident fellow at the Lowy Institute.
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