Australia Needs a National Energy Plan
The Treasurer will tell the country on Tuesday, when he addresses the National Press Club, that the road to recovery will be through rapid and high growth and greater productivity. A stable energy policy is fundamental if this is to be achieved.
The framework for this energy policy will need to be developed quickly if it is to underpin the recovery that must occur sooner rather than later if Australia is to avoid a deep recession or a depression.
The Energy Policy Institute of Australia (EPIA) argues that there should be a National Energy Plan that is supported by the commonwealth and all the state governments. In a submission to the National COVID-19 Co-ordination Commission, it suggests that the National Cabinet is the appropriate vehicle to consider such a plan.
In the view of some commentators, the plan should cover two phases of economic recovery. In the short term (ten years) the emphasis should be on augmenting growth and productivity in order to get the economy back on to a sustainable growth trajectory as soon as possible. In the medium term other issues, such as emission reductions, can be incorporated into the plan.
EPIA has outlined a comprehensive list of elements that should be included in the plan. They cover issues such as investment which they argue needs a new framework that covers both economic and environmental rules. They argue that the aspirational target of zero emissions by 2050 should be part of the policy but the key focus should be on the development of technology that enables the achievement of that goal.
As far as energy sources are concerned, renewables, fossil fuels, and nuclear energy should all be part of the mix. In the short term, it is likely that gas will play an important role in supporting the transition from coal-fired power to renewables. The review of the national energy market (NEM) needs to be completed as soon as possible so an approach can be developed that will ensure reliable and affordable power is available to meet the rapidly rising demand generated by the economic recovery.
Energy experts at Monash University have made a study of the NEM and found that it is currently under-resourced to meet rising demand. At the moment renewables are supplying only 6% of the power consumed. In order to increase the proportion of power supplied by wind and solar, it will be necessary to substantially upgrade the grid. In the short term, governments will have to finance this upgrade.
At the moment the Minister for Energy, Angus Taylor, has a policy of underwriting a number of energy projects. However, the rationale for that support is not transparent to the public. This gives rise to a suspicion that the decisions are more political than economic.
A better approach would be for the provision of funding for particular projects to be subject to inquiry and report from an independent authority In the short term, funding should be given to those energy projects that provide the biggest boost to national productivity and growth.
In the medium term, a similar transparent process of inquiry and report should be employed to make an assessment of projects that want to enter the national energy market. These assessments will include external issues like emission reductions. These assessments should incorporate an analysis of the costs and benefits of any approach to energy market reform.