Soon the Australian people will have decided the referendum on the Voice. Media coverage thereafter will be dominated by what the result means for the nation. But most Australians will want the government to switch to dealing with the cost of living, the housing divide, and the energy transition.
While the Albanese government has been securing passage of the Housing Australia Future Fund and releasing policies on jobs through its employment white paper, polling conducted for the Financial Review has identified the most commonly cited reason for switching from voting Yes to No is that the Voice has been a distraction from the cost of living and the cost of housing.
Politics abhors a vacuum. In the absence of new, head-turning policies, the post-referendum vacuum will be filled with acrimony, recriminations, and free character assessments – regardless of the outcome.
Albanese has recognised this first law of political physics, announcing last week with premier Peter Malinauskas an agreement to develop a hydrogen hub near Whyalla. See, there has been no Whyalla wipe out after all.
More policy will follow, with the Albanese government already developing a response to the Biden Administration’s Inflation Reduction Act ahead of the prime minister’s visit to Washington in late-October.
Australia’s energy transition was never going to be smooth, but it has been made harder by a decade of denial, from Senate defeat of the Rudd government’s carbon price, to repeal of the Gillard government’s carbon price, and the undermining within of prime minister Turnbull’s attempts to legislate a National Energy Guarantee.
During that decade of policy inaction, Australia’s coal-fired power stations have aged and become increasingly unreliable, while sufficient new capacity to provide firming and back-up for renewables has not been installed.
The great white hope, Snowy 2.0, seems bogged in the mud. When I predicted back in 2019 that Snowy 2.0 wouldn’t be operational before 2027, I received a phone call from the company offering a meeting to explain that it would be operating in 2025.
Gaining access from landowners for transmission lines for solar energy was never going to be speedy. Nor is the construction of offshore wind farms and their connection to the existing grid.
State governments are contracting with coal-fired power station owners to keep them open for longer, to generate electricity in the evenings and nights when fewer renewables are available.
As any private investor will tell you, these ageing coal-fired power stations will not be replaced by new ones. Increasingly they will be prone to breakdowns and even generating units collapsing entirely.
And as the Coalition embraces nuclear energy, it is doing what it has consistently done since the declaration of the climate wars 14 years ago – kicking the energy can down the road with another distraction designed to undermine a transition to renewable energy.
Nuclear power would be high cost, require enormous new and costly government regulation, and generate nuclear waste whose disposal Australia has already demonstrated to be incapable of confronting. And in no scenario can nuclear power plants be built in time to replace coal plants scheduled for closure over the next 10 years.
Voters have consistently shown that they are all for the transition to renewables if it doesn’t increase their electricity bills.
Unlike owners of ageing coal-fired power stations, who paid off their initial investments long ago, private investors in renewables will need to recover the capital cost of installing them and transporting the electricity to markets.
If this transition is to occur within a reasonable timeframe, consistent with replacing retiring coal-fired generators and Australia’s emission-reduction commitments under the Paris Agreement, government subsidies in one form or another – through the expenditure or revenue sides of the budget – will be required.
This, too, was the story with the establishment of Australia’s coal-fired generating capacity. These were government-owned generators, and the steaming coal was supplied at prices well below those it could have fetched on export markets.
In summary, there is no pathway to electricity supply to Australian users at a reasonable price that does not require government support.
The massive subsidies to decarbonising projects located in the US that are available through the Inflation Reduction Act will greatly accelerate the energy transition there. Wise investments will need to be made in Australia if we are to avoid those US government subsidies sucking investment away from Australia and into America.
As for those who want gas removed from our system forthwith, consider the reaction of Australian consumers to electricity supply disruptions in the evenings and nights when solar is unavailable and wind is intermittent. We lack the pumped hydro and big battery capacity to step into the breach.
A methodical policy program to achieve decarbonisation is the only viable pathway to a clean-energy future and Australia becoming a renewable energy superpower. In the immediate post-referendum period, the Albanese government will turn its energies to that task.
Craig Emerson is managing director of Emerson Economics. He is director of the APEC Study Centre at RMIT University, visiting fellow at the ANU and adjunct professor at Victoria University’s College of Business.