Populism and reality – A path to sustainable energy policy in Australia

Australia’s energy policy journey continues to be at the forefront of political debate. Whether it is proposing nuclear power or the slow down of major renewable energy projects, there is work to do and time is ticking.

While it is convenient to lay the blame for the state of energy policy at the feet of politicians, the truth is leaders are tasked with crafting solutions that satisfy both the practicalities of markets, technology, and resources, and the expectations of voters concerning affordability, environmental integrity, and reliability.

And there are long term political trends that we need to recognise. Populism is surging, with voices from both the left and the right decrying a perceived disconnect between the elites and the nation’s direction. 

Progressive populists argue that mainstream politicians, in an alliance with large corporations, are hindering the energy transition and endangering the planet. I heard this same language being used in relation to housing policy at a recent National Press Club event.

Conversely, conservative populists contend that the alliance of environmentalists, academia, and ‘big finance’ is imposing environmental targets that endanger the working poor, who are already struggling to afford the energy transition.

In order to land a sustainable energy policy, we really need to delve into the fundamentals of the perceptions of voters and the reality of energy production. I want to point you to two helpful resources.

Recent polling undertaken by Redbridge on behalf of the peak body representing Australasia’s pipeline infrastructure sets out some important findings [link]:

1. Energy prices take precedence over emissions and reliability

2. There is support for using gas to accelerate the retirement of coal fired power stations

3. Public perceptions of fuel sources are varied. Wind and natural gas are not far apart. Nuclear struggles to have public support.

When it comes to the reality of energy production, the Australian Energy Market Operator’s (AEMO) draft 2024 Integrated Systems Plan sets out many important considerations:

1. Electricity consumption will go up and we need to meet this demand.
   • “The great increase in demand for electricity, as consumers use it it for transport, heating, cooling and cooking. Even more electricity will be needed as hydrogen production and other new energy industries emerge.”
   • There is also emerging evidence that increased uptake of home solar may give rise to ‘moral licensing’ where households let down their guard in other areas of energy use – Recent Study: Are Solar Homes Truly Green or Just Energy Hungry? (solarquotes.com.au)
2. While hydroelectric is valuable, it is not a panacea to all our energy needs. Gas powered generation is needed.
   • AEMO modelled ‘renewable droughts’ where weather severely impacts renewable generation. If these persist for 3-10 days, it is important for gas generation to be available to support the grid.

3. The gas market currently is not set up to support this gas generation, and new solutions are needed.

• “This is a change in the role of GPG from more continuous ‘mid-merit’ gas to a strategic, back-up role. Figure 22 shows that change in role, from relatively stable supply in 2015, to the forecast winter peaks in 2040. These peaks are forecast to test the limitations of the gas supply network, and solutions will be needed to address them.”

My final thoughts are that the way forward for Australia’s energy policy is likely to incorporate:

1. Scaling up home-based batteries – both to increase reliability in the system and to build social licence – where household see smaller bills because less power is drawn from the grid. Subsidising more solar, particularly in Queensland will not be as effective.
2. Gas Powered Generation – not in the way we think of it now, but as an insurance against troubles in the future and to fast-track coal phase-out. There is voter support for gas in targeted ways.
3. New technology – There is still a lot of space for new solutions to meet these challenges. I attended a fascinating talk this week on geothermal energy, which isn’t mentioned in either report. And yet, if validated, this reliable, renewable energy source could play a vital role in our future.