If the election of Donald Trump holds any lesson at all, it’s that energy costs and the security of its supply determine the economic and social health of any Nation, and ignoring that fact – by zealously pushing policies to the contrary – will end in tears for those foolish and arrogant enough to believe that sunshine and breezes can provide secure, reliable and affordable power.
Here’s The Australian’s Dennis Shanahan setting up a primer for ‘Energy 101’, the essential pre-requisite for any modern political leader.
All power to energy security: Australia could learn from Trump
26 November 2016
When US president-elect Donald Trump listed his six top priorities for executive action this week on “day one” of becoming the most powerful man in the world, naturally most attention was grabbed by his very first decision: withdrawing from the Trans-Pacific Partnership trade agreement.
Yet in global terms, and in Australia’s interest, his second priority was just as important.
This was Trump’s pledge to “cancel job-killing restrictions on the production of American energy including shale energy and clean coal, creating many millions of high-paying jobs”.
Energy security was placed above national security.
The jobs of coalminers, the use of low-cost shale deposits for energy and the creation of manufacturing jobs were placed ahead of national security, and the withdrawal from the Obama administration’s commitment to the Paris agreement on climate change didn’t even rate a mention.
There is global agitation about the pragmatism of protecting jobs through energy security, providing energy at a low enough price so people can afford to use it and producing energy when people need it, as well as an imperative to lower carbon emissions. The hidden cost of “intermittency” — the hallmark of wind and solar production — and the danger of blackouts are being recognised.
Australia is fortunate in that, historically, it has had low-cost energy, enormous natural resources, a pristine environment and the benefit of seeing how policy parameters such as the European emissions trading system and subsidised renewable energy programs work in practice.
Trump’s priorities and actions on energy are vital to Australia’s own energy future, economic growth, job creation and climate change actions as precipitous political decisions around the world are distorting energy markets, pushing up costs for industry, driving jobs across borders, exporting manufacturing opportunities and perversely affecting markets and carbon emissions.
There is also a political necessity to continue to get public support for climate change initiatives, although Trump has demonstrated there can be a white-hot anger about ideological climate change policies that don’t recognise the hurt to workers.
In recent weeks in Australia the closure of the Victorian Hazelwood coal-fired power station has been announced with the loss of 750 jobs in the Latrobe Valley, in part because of French government climate change policy; export coal prices have soared; coalmines have reopened; and AGL, one of the biggest domestic gas suppliers, has set aside $17 million for a feasibility study for Australia, the biggest exporter of liquefied natural gas, to import lower-cost LNG from suppliers in the Middle East.
As well, South Australia experienced catastrophic power blackouts, Victoria became a net electricity importer, with the potential for dire shortages or blackouts at times of extreme demand, and the Victorian Labor government introduced a bill this week to extend its existing moratorium on conventional onshore gas exploration to 2020.
The Greens, environmental activists and the ALP are simultaneously building a public campaign for the transition from coal and gas to a mainly renewable energy future that is putting cutting carbon emissions ahead of energy and job security.
It is a challenge for all sides of politics in form and substance.
According to Industry, Innovation and Science Minister Greg Hunt, the Victorian government’s decision to continue to ban onshore natural gas exploration is the final act in laying the foundation for a “manufacturing crisis” with a looming shortfall in natural gas supply because Australia is locked into long-term LNG exports, and Victoria and NSW are banning or effectively banning gas exploration and production.
“It is absolutely clear there is no shortage of gas resources in the ground but there is a shortage of gas supply to homes and industry,” Hunt tells Inquirer. “We have to be honest that the effective closure of new supplies will risk jobs, will risk prices and will risk economic activity.
“The sad part, over and above that, is that potentially we choose higher emissions sources of energy for electricity.”
Whereas Australia is aiming to reform its energy market, upgrade its electricity interchange, boost renewable energy, keep coal and gas as integral parts of energy generation and job creation for decades to come, and meet its international agreements to cut carbon emissions by 26 per cent to 28 per cent on 2005 levels by 2030, Trump is happy to shed global obligations to provide cheap power for the US economy.
He campaigned successfully on creating American jobs and specifically on returning the manufacturing and mining jobs lost in states such as Pennsylvania, which he snatched from Hillary Clinton, sensing the blue-collar fear and reality of job losses because of climate change policies closing mines and raising costs to support renewable energy.
As for Australia, seen as one of the world’s great carbon demons because of its coal production, it does not have the option of dumping carbon polices as Trump intends to do, but neither should Australian governments, state and federal, adopt distorting policies that push costs to domestic and industry users to levels that are punitive, unsustainable and a threat to a cohesive energy supply and security.
Without commenting on any US administration’s domestic policy, Hunt makes the point: “American manufacturing in recent years has become more competitive in significant measure because they have had access to lower-cost gas; it actually brought gas on board. As a matter of economics, if there is more natural gas available in the US, then their manufacturing will be even more competitive.”
In the past 10 years in the US, electricity generation from gas has risen from 18.7 per cent to 32.5 per cent while coal has fallen from 49.5 per cent to 33 per cent. Coal and natural gas are now almost equal as the producers of American electricity. During the same period, renewable electricity energy has grown from 8.8 per cent to 13.8 per cent and nuclear has remained steady at 19.4 per cent.
The real lesson for Australia in the US experience of the role of gas, coal and renewables in this energy-climate change mix is not the increased potential economic threat from Trump’s low-cost powered US industrial base but from Europe.
Although Trump’s first priority involved ensuring the US created American jobs by producing steel and “making cars”, the threat to Australia’s coal exports — which even Bill Shorten admits must go on for decades — is the framing of public opinion and policy development that puts energy security at risk.
Ideologically driven energy decisions in Europe taken years ago provide the example of how Australia should not proceed: unrealistic renewable energy targets, unsustainable renewable energy subsidies, rising electricity prices, precipitously doing away with fossil fuels, politically driven decisions to close nuclear power plants, the export of jobs and, ironically, the start of the failure of carbon emission reduction policies.
In the past two years Germany’s renowned world leader status on renewable energy has started to be tarnished as political decisions to subsidise renewables and to close nuclear power plants, coalmines and coal-fired power plants have resulted in price rises and environmental anomalies.
Rising costs for industry’s power have forced companies to relocate, the government has told renewable energy producers they have to manage without subsidies, coal-fired power stations are being commissioned, brown coal — lignite — mines are being opened and brown “dirty” coal is still a large part of baseload electricity generation.
Paradoxically, as Germany tries to become nuclear free, it is buying nuclear-generated electricity from France and the French are importing cheap lignite-powered electricity from Germany. This makes a mockery of carbon emission and nuclear energy reductions.
France introduced a carbon tax on coal-fired electricity and cut subsidies to coal — in part affecting the Latrobe Valley — as a climate change policy, but higher costs forced the government to cancel the tax within a few months.
As Europe heads into winter, there are predictions of greater demand from Britain and The Netherlands from electricity suppliers, and some of that will be coming from Germany’s “dirty secret” of lignite. Germany is being attacked by industry for higher prices creating job losses and by environmentalists for dropping its specific carbon emission reduction targets for 2050.
Australia has the opportunity to bring a sober, pragmatic but environmentally responsible energy security to bear in the national interest, but at the moment the approach is fractured, ideologically driven and not receiving the priority Trump is prepared to give energy security.