Scott Morrison 'future proofs' power plans against Labor as Victoria backs renewables
Energy Minister Angus Taylor has told industry representatives that the government favours contracts to back firm power generation - such as coal or gas plant projects - over underwriting because it would be harder for a future Labor government to reverse the measure.
The move comes as Victorian Premier Daniel Andrews vows to extend the state's renewable energy target to 50 per cent by 2030 and illustrates the sharp political divide between the Coalition and Labor on energy and climate. The Victorian opposition says it will tear up the state renewable energy target if it wins the 24 November state election.
Mr Taylor's remarks at a forum with power industry executives on Wednesday confirm the Morrison government's determination to use taxpayers' money to back new coal, gas or hydro plant before the federal election due to be held by May 18 next year, potentially making the measure - favoured by vocal anti-renewables backbenchers - a fait accompli.
Labor's energy spokesman, Mark Butler, has said a Labor federal government would not rip up signed contracts but is strongly opposed to government funds being used to help build new coal power stations, which would make it harder for Australia to meet its Paris emissions reduction targets.
Industry sources said Mr Taylor told the forum he rewrote a recommendation by the Australian Competition and Consumer Commission for limited underwriting at a low $45-$50 per megawatt hour for years six to 15 of a firm generation project that already has customers for its early years because he wanted to future proof the measure against the prospect of Labor repealing the program if it wins government.
Coal, gas, hydro
Under the proposal the federal government will instead choose from a wide range of contractual instruments - including contracts for difference of the type used by Victoria to back 928 megawatts of wind and solar projects - of potentially unlimited duration to support firm generation projects with the program open to all comers and not restricted to smaller players.
These are likely to include coal, gas or hydro plant and the government wants the contracts in place by early next year, well before the election, Mr Taylor wrote in The Australian on Wednesday.
A spokesperson for Mr Taylor said, "The Minister indicated his preference was to ensure Government support was via contractual obligations which gives investment certainty to project sponsors."
Industry representatives told Mr Taylor at the meeting that the measure was unnecessary and could put a chill on the strong pipeline of private sector wind, solar, pumped hydro and battery storage projects already committed or going through development planning, which is more than sufficient to cover the 1160 MW of new generation the minister says is needed.
The industry representatives told Mr Taylor that the Australian Energy Market Operator is already requiring firming or grid support for new wind and solar generation coming onto the grid, for example insisting that French giant Tota Eren instal a synchronous condenser at its 200 MW Kiamal solar farm before being connected to northwestern Victoria's highly congested grid, and that this could go a long way to solving the problem identified by Mr Taylor.
Mind made up
The sources said they asked Mr Taylor if he was taking this into account in his plans but he declined to answer, instead saying that he is still concerned about the volume of variable wind and solar coming onto the grid and the lack of "firm" supply to balance it and that he was interested in what the industry representatives had to say.
Mr Taylor's spokesman said, "The Minister outlined that this program would work seamlessly with other government initiatives such as the reliability guarantee and AEMO directions for firming. The reality is that the energy market needs all of these initiatives to ensure there is reliability and prices are driven down."
The exchanges left industry people with the impression that the government has made up its mind. The industry believes any federal subsidy program must be minimal if it is not to harm existing investment, and should ideally be confined to firming wind and solar energy because this is the cheapest form of new firm power and will only get cheaper.
The meeting was the second between the minister and industry representatives on Wednesday. An earlier meeting drew failed to elicit promises of price cuts sought by Mr Taylor.
Victoria Labor's new renewable energy target pledge extends the existing target of 40 per cent by 2040 to 50 per cent by 2030 and is in line with federal Labor's national renewable energy target and only a little ahead of AEMO's projections for just under 50 per cent or renewable energy in the grid by 2030.
"The last Liberal government smashed our renewable energy sector and the Liberals are promising to do it again by axing VRET if they're given the chance," climate change and energy minister Lily d'Ambrosio said.
Friday, November 16, 2018
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