Australians can be forgiven for feeling a little bit smug about the gas price crisis engulfing Europe.
While inflation rates have been spiking in many countries around the world, Australia has only experienced a modest increase of 3.5% - higher than it should be but much lower than the over 7% rise seen by many Western nations. The reason for this is that we do not rely upon gas in the same way so many other countries have. We have been largely insulated from the energy price rise because of our use of coal instead.
Australia’s Coalition Government has historically supported the coal industry for two reasons: because we have understood the importance of supporting the many jobs that rely on coal, particularly in mining communities; and because we can produce and export it ourselves (coal is Australia’s second-biggest export), thereby boosting our energy security and trade opportunities.
Energy security and job security are, of course, both vitally important, and the Government ought to help provide both where it can - despite a global commitment to phase down coal use, the world will not stop using it tomorrow. While nations need it to keep their economies running, Australia will continue exporting it.
But the inconvenient truth about coal is that its days as an electricity generation fuel will end sooner than people may think. The market is already adjusting, generators using coal are adapting, and the cost of coal is struggling to compete with renewable energy. Power stations are now feeling the heat: Australia’s biggest coal-fired power plant, Eraring Power Station, recently announced that it was going to close in 2025, seven years ahead of schedule, as it cannot compete with an “influx of renewables”.Two more large coal power plants belonging to AGL (Australia’s largest energy company) may also shut early if a takeover by billionaire entrepreneur Mike Cannon-Brookes is successful.
While coal must be phased out at a pace the market in alternative firm energy sources can meet, Australia’s Coalition Government believes coal’s end will ensue in time. For this reason, we put forward the Technology Investment Roadmap, committing $20 billion to the development and deployment of low emission technologies. Over $35 billion has already been invested in clean energy since 2017, and as a result, power generated by renewable sources rose to provide 30 per cent of Australia's electricity in 2021.Renewable energy is cheap, leading to prices so low that more coal power stations are likely to close early as they are unable to compete on price.
Australia is blessed with vast amounts of natural resources, and we have a unique opportunity to become a world leader in renewable energy while boosting our energy security. We have a great international success story to tell when it comes to photovoltaic technology, where nearly one-third of households have rooftop solar. As one of the windiest countries in the world our potential for offshore wind is second to none: according to the Global Offshore Wind Energy Council, we could meet our needs with a fraction of our potential capacity though there are distribution constraints.
The Government passed legislation last year that will enable this industry to take off. With significant mineral wealth and a highly skilled workforce, Australia can set the agenda for new renewables too, pioneering clean technologies such as green hydrogen. Our aim is to use excess wind and solar production to produce green hydrogen under A$2/kg, which will help the world to decarbonise tricky sectors like steel and chemical production. Hydrogen has the potential to take the place coal once did, supporting our businesses at home and opening trade opportunities around the world.
We should take pains to make sure that our transition from coal is handled responsibly and ensure we have other reliable energy sources to fall back on. To achieve this, we need to invest in renewables to meet our domestic energy demands, expand our storage capacity to combat issues around intermittency and keep household electricity prices trending lower. Not only would these measures help to reduce the electricity grid’s reliance on coal as a firming source, but they would also help create entirely new industries in Australia, supporting thousands of jobs without placing upward pressure on household bills.
The gas crisis in Europe is a warning. Still Australia can achieve energy security without the need to open ourselves up to the same volatility that we can see across the world. We can’t run the risk of suffering from the same price instability that other countries are experiencing by relying too much on gas. The Coalition Government is creating the right conditions for the phase out of coal combined with the right investment in renewables. As outlined, when we committed to net zero by 2050, we are taking all the appropriate steps to get there.
Our energy transition must happen at the right pace and with the right support for those working in the fossil fuel industry, but we have an exciting future ahead of us if we get it right.
First published in Mace Magazine. David Van is a Liberal Party Senator for the Australian State of Victoria