So much of what we read and hear about climate change is bad news. Recent days brought a welcome update on how far we have come as a global community in starting to address this epoch defining problem, but also a reminder of how far we have to go in Australia.
In a market analysis last week, the Paris-based International Energy Agency found across the globe there is now more renewable energy capacity installed than coal. This is an extraordinary shift, hastened by a dramatic fall in the cost of clean electricity that few predicted just a handful of years ago. Over the past five years, the price of wind energy has decreased by about a third and solar by two-thirds.
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| The question Australia faces is not whether to embrace clean energy, but how to make sure it works. Photo: Paul Rovere |
Despite this, the story in Australia is otherwise not as positive as elsewhere. The scale of the problem the country faces was described in detail last week by Australian Industry Group chief executive Innes Willox in a speech to the Re-powering NSW Conference. While some media coverage has focused on Mr Willox's concern about state renewable energy targets in Victoria, South Australia and Queensland that are out of step with the national goal, in truth his speech was much broader in scope.
Mr Willox stressed that Australians need to re-think their expectations about the cost of electricity. Australia has historically enjoyed cheap power, but prices are rising and are likely to continue to increase due to the cost of building new generation.
That cost is coming regardless of what sort of electricity plants we build to replace today's ageing infrastructure, but no business is going to build traditional coal power in Australia again given they reasonably assume at some point there will be policies in place to put the country on a trajectory to meet that zero emissions goal. They are not viable commercially.
As Mr Willox also pointed out, the projected cost of building new electricity generation appears significantly cheaper overseas compared with Australia. It is possible it has been overestimated and that cleaner energy will be cheaper than previously thought. There is already evidence that costs in Australia have been less than expected. Alternatively, it is possible projections that Australia will pay more are correct, but not inevitable. Mr Willox raised the prospect that construction costs were inflated and could be reduced, but also that finance costs were higher here than they need to be, in significant part because energy and climate policies have been so unstable.
We agree with the growing call from leaders across business, labour, welfare, science and the environmental movement that policy stability is key. The question Australia faces is not whether to embrace clean energy, but how to make sure it works across a vast but lightly populated continent. The country urgently needs enduring cross-party policies that can be scaled up to meet increasingly ambitious climate targets at lowest cost. It also needs new electricity market rules to ensure a rapidly changing system delivers reliable supply across the grid. This may not be easy, but is achievable. Overwhelmingly, politics is the major barrier. We urge the government to listen and take the lead.
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