Thursday, 3 August 2023

Energy policy

David LIMBRICK (South-Eastern Metropolitan) (17:36): (368) My adjournment matter this evening is for the attention of the Minister for Energy and Resources. From advocates for weather-dependent energy to the CSIRO, the Australian Energy Market Operator and governments all around the nation, it is common to hear this quote:

… wind and solar are the cheapest source of electricity generation and storage in Australia …

or something similar, and I expect that it is the most common talking point on energy throughout Australia. In a joint media release last July the federal Minister for Climate Change and Energy and the Minister for Industry and Science stated in the first line the quote that I just read out, saying that it was confirmed by CSIRO and the AEMO’s GenCost report. It is a lot of acronyms and the reports themselves can appear quite technical, but I would like to acknowledge Claire Lehmann, who wrote a fantastic article in the Australian last week titled ‘Why our energy transition needs a price tag’, explaining why a better understanding of these reports is absolutely critical.

But it is about not just understanding the reports, which are essentially modelling aspects of energy costs, but the gaps and flaws in this evidence which is used by parliaments around the country to justify decisions on electricity infrastructure. Small cohorts of energy policy wonks and economists have long criticised the GenCost report for failing to adequately model the costs of energy infrastructure firming the grid and backup supply, such as pumped hydro, batteries and gas peaking plants, and the masses of transmission lines required to connect the dispersed energy infrastructure into an integrated electricity grid.

Lehmann’s article, referencing the work of Aidan Morrison and others, highlights the critical flaw: the GenCost report considers all of the energy infrastructure required to allow for more solar and wind prior to 2030 as sunk costs; essentially the tens of billions of dollars that will be spent between now and 2030 magically disappears. It is easy to claim that renewables are cheap if you pretend that the money spent on integrating them is free. Snowy 2.0 is one of these projects and is now estimated to cost up to $10 billion. The Western Renewables Link is expected to cost $3.3 billion, so let us say realistically about $5 billion. The Victoria to New South Wales Interconnector West transmission project is estimated to cost another $3.5 billion, so let us round that to $5 billion as well. So we are $20 billion down and we have barely even started to account for the costs of a solar- and wind-dominated grid. But the CSIRO and the AEMO, through magic accounting, pretend this is somehow a sunk cost and does not contribute to the cost of a low-carbon grid. This is sloppy policymaking at its best. Without understanding the true costs, how can anything approximating good policy emerge?

In 2020 I co-authored a minority report on the inquiry into nuclear prohibition with Mrs McArthur and Dr Bach. The third recommendation of this minority report called on the government to make representations to federal counterparts requesting AEMO to consider the addition of nuclear modelling into the Integrated System Plan. I make that request of the minister now, in addition to requesting that modelling be conducted that accounts for the full cost of renewables integration.