Labor has sparked a political clash over a new plan to use $15 billion in Commonwealth debt to finance new energy projects, with critics warning of a flood of spending on renewable power while others acclaim the "sensible" move.
Opposition Leader Bill Shorten surprised the energy industry with the scale of the investment plan, promising $5 billion to upgrade transmission lines and $10 billion for new electricity generation – excluding projects powered by coal.
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| Labor leader Bill Shorten. Credit: AAP |
But the Investor Group on Climate Change, which represents super funds and others with more than $2 trillion, warned that huge public investments could make it more uncertain for private investors already spending on energy projects.
Prime Minister Scott Morrison has declared the NEG to be "dead" and has abandoned its mechanism to reduce carbon emissions, but Mr Shorten said he was willing to legislate the scheme if he won the election and the Coalition changed its mind.
Groups as diverse as the Australian Chamber of Commerce and Industry, the Business Council of Australia, the Electrical Trades Union and the Australian Energy Council emphasised the NEG as a way to ensure certainty.
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| Illustration: Matt Golding |
Mr Shorten said his policy was to inject another $10 billion into the Clean Energy Finance Corporation over five years from next year, if Labor won the election.
The initial investment of $10 billion in the corporation when it was established in 2011 cost $312 million in expenses over four years. The $10 billion was not counted as an expense because the investments are treated as assets.
Energy Minister Angus Taylor warned that the electricity grid was already seeing a surge of investment in renewable power projects that could not deliver reliable power around the clock.
"This is just a policy without balance," he told Fairfax Media.
"They are encouraging huge investments in intermittent power over and above the $15 billion that is already being spent, which is at record levels.
"That’s why we have to take a break and absorb the investment we have now, not layer another $15 billion on top."
Mr Taylor is developing similar plans to underwrite new projects but wants them to provide "dispatchable" power such as gas, hydro or coal-fired electricity as well as solar and wind with battery storage.
Minerals Council of Australia chief Tania Constable said the Labor policy "discriminated" against other forms of energy and chose to "pick winners" by subsidising renewables.
Former chief executive of the CEFC Oliver Yates, a Liberal Party veteran and former Macquarie banker, said Labor’s $10 billion investment boost to the organisation was "very sensible" and would ensure the cost of capital did not rise as a result of stimulating investment in the renewable sector.
"Given the build out [of new projects] that is required by 2030 to get to 50 per cent renewables, that means the demand for capital is high in that sector," he said.
"If you want to actually lower the power price ... you want to inject capital into that market. Having another lender come into the market will actually help hold down borrowing costs."
Mr Yates said federal Labor’s plan for reverse auctions to attract new projects at the lowest cost was a proven way to provide investor certainty and had worked well in the ACT and Victoria.
He said this approach would provide stability and the lowest-cost electricity following years of national energy policy upheaval.
"This market has been trashed with uncertainty. That means investors are requiring a higher risk premium because of the uncertainty government policy has provided,” Mr Yates said.
"What a reverse auction does is, because the government provides a long term contract, it removes that risk from the project so the project can bid at the lowest price possible."
Mr Yates said if Labor was to rely solely on reviving the National Energy Guarantee, an investor would be "still subject to worrying a future government could come in and throw it out the window".
Mr Yates said while taxpayers paid the cost of interest on government borrowing used to fund CEFC investments, this was less than the average returns the corporation generated, meaning taxpayers were not worse off.
The corporation was established to be "a sustainable institution and [that] means trying not to burn your money or cost the taxpayer money," he said.
Australian Energy Council chief executive Sarah McNamara, whose organisation represents major generators, said Labor’s decision to resurrect the National Energy Guarantee correctly identified that stable policy was the key to greater investment and lower energy prices.
Greens climate change and energy spokesman Adam Bandt said Labor’s policy was timid and "will keep coal in the system for decades".
Parliamentary Library analysis commissioned by the Greens last month showed Australia would need to shut 12 of its coal power stations by 2030 to do its share to avoid the worst global warming impacts predicted by the Intergovernmental Panel on Climate Change.
"Scavenging a policy from the Liberals’ rubbish bin is not good enough. As a climate policy, this will do nothing to stop the planet burning," Mr Bandt said.
The Australian Conservation Foundation said Labor had responded to the climate change crisis, in contrast to the government's "reckless and irresponsible abandonment" of any emissions policy for the energy sector. Progressive think tank the Australia Institute also lauded the policy as a step in the right direction.
The Australian Council of Social Service applauded Labor’s move towards a faster clean energy transition. But it said more support should be provided to low-income earners struggling with high energy bills who could not afford to invest in solar power and batteries.
Links
- Bill Shorten Unveils $15bn Energy Plan To Help Tackle Climate 'Disaster'
- Shorten's energy plan is the art of the possible
- Battery Bill's welcome energy plan
- Coal power stations are old and dirty. Here are five ways to end Australia's energy war
- Bill Shorten: 'We've got to end the climate change war'
- Australian government backs coal in defiance of IPCC climate warning
- Labor says Australia can remain energy 'superpower' – but only if climate wars end
- At least for once, don't let politicking kill off a workable energy policy
- Turnbull predicts states will sign up to national energy guarantee
- Bill Shorten demands gas market transparency to tackle 'energy crisis'
- Bill Shorten says Labor willing to pass Finkel legislation to prevent climate 'brawling'
- Bill Shorten to accuse Coalition of 'vandalism over pragmatism' on energy policy
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