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Analysis-Rising power bills complicate Australia’s election climate war
Global Banking and Finance Review
Company
By Sonali Paul
MELBOURNE (Reuters) – In Australia’s election fight, politicians are tiptoeing around the climate wars that have marked the past decade and a half, even as an activist billionaire put the issue front and centre this week, buying a key stake in Australia’s top power producer.
Climate-focused investor Mike Cannon-Brookes said his 11% stake in AGL Energy was part of a plan to shut down its coal plants faster by preventing the company from splitting into an energy retailer and generator.
His position is clear. But politicians must balance their climate promises with the fear of rising power prices that stoke cost-of-living concerns for voters as a May 21 election looms.
“If you don’t support reliable, affordable energy and don’t have balanced targets on these things, then you’re going to put more pressure on families and households and small businesses,” Prime Minister Scott Morrison said on the campaign trail on Tuesday.
Following drought, bushfires and floods since the last election three years ago, the governing conservative coalition and opposition Labor have committed to net zero carbon emissions by 2050 to combat climate change. Both sides have also promised to lower electricity bills – a tough target amid disagreement on what to do about coal-fired plants.
Labor wants to cut emissions by 43% by 2030 from 2005 levels, compared with the government’s target of a reduction of up to 28%.
The party says its plan will lead to lower power prices by 2025. Cannon-Brookes agreed, saying keeping AGL together and shutting its coal plants by 2030 would drive prices down as more solar and wind energy is developed.
“I think the demerger will result in higher prices and a less stable grid. I think the facts and science are on my side,” Cannon-Brookes told Reuters in an interview.
He and others say rising coal and gas costs, plus the cost of maintaining ageing plants, will lead to higher prices without faster additions of renewable energy.
The coalition and AGL say coal-fired plants need to be shut gradually to ensure steady supply and stable electricity bills. AGL expects to shut its last coal plant by 2045.
POWER PRICE PAIN
Two-thirds of the country’s generation comes from coal- and gas-fired plants. Australia also has the world’s highest uptake of rooftop solar power per capita and is rapidly building wind and solar farms and more hydropower.
The coalition government expects renewables to make up about 70% of power output by 2030, while Labor sees renewables making up 82% by then.
Either way, higher power bills seem certain.
After falling last year, average wholesale power prices more than doubled in the first quarter of 2022 from the same quarter last year to A$87 per megawatt-hour (MWh). The increase was driven by outages at several coal plants, weaker solar output with more cloudy days, and higher coal and gas prices, worsened by the Ukraine conflict.
Meanwhile, Australia’s grid will require at least $10 billion for new transmission lines in the near term to handle output from solar and wind farms, according to Australia’s electricity market operator.
“All the predictions about bringing prices down are mostly rubbish. … When you think about power prices, all the pointers right now are going up,” said Tony Wood, energy program director at the Grattan Institute, a think tank.
INDEPENDENTS’ SWAY
Australia’s conservatives and Labor, who don’t want to spook voters whose jobs are tied to coal and gas, have been avoiding climate issues. Such voters are widely credited with returning the conservatives to power in 2019.
That could backfire, as independent candidates have targeted several moderate Liberals in urban seats, pressing for at least a 60% reduction in carbon emissions by 2030.
“We are heading towards a 1.5 degrees Celsius increase in global temperatures and beyond. That is the existential threat for us right now,” neurologist Monique Ryan said in a debate, explaining why she was challenging Australia’s Treasurer Josh Frydenberg for a long-held Liberal seat.
If the independents succeed, Australia could end up with a minority government on May 21, forced to negotiate with new politicians pushing for tougher climate action.
(Reporting by Sonali Paul. Editing by Gerry Doyle)
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