The Australian government has recently announced an extension of their support for renewable energy projects. Kane Thornton, the Clean Energy Council’s retiring chief executive, warmly welcomed this decision. This announcement has plenty of positive precedent, aligned with the new Albanese government’s ambitious 82 percent renewable energy target by 2030. As the nation progresses towards this goal, significant voices in the economic and environmental sectors are urging caution regarding Australia’s energy policies.
Professor Garnaut, a noted economist, has expressed grave concerns about the current trajectory of Australia’s energy strategy. He further warns that without immediate reintroduction of a carbon price, Australia is “on a trajectory to total, utter, and irreversible failure.” His assertion highlights the delicate balance between advancing renewable energy and managing financial risks associated with energy supply and pricing.
Expansion of Capacity Investment Scheme
In another promising sign, Chris Bowen, the new Climate Change and Energy Minister, kicked things off with an inspiring announcement. He announced an extension of the Capacity Investment Scheme (CIS). This scheme is designed to increase investment into dispatchable capacity as well as storage. Those will be three extremely important elements as we move through the years to come. The recent announcement is a plus 5 gigawatts of dispatchable capacity, net. This increase is key for maintaining a reliable grid as Australia transitions into the 100% renewable energy future.
Bowen noted that the CIS is already playing a key role in helping attract investment in renewable energy. He stated, “The CIS will serve as a backbone for our strategy to meet renewable energy targets effectively.” According to the president’s infrastructure proposal, the federal government would underwrite another 3 GW of new generation capacity. This increase is set to power more than 1 million households and represents a crucial milestone in Australia’s transition towards renewable energy.
Australian economist Professor Garnaut urged caution against taking CIS at face value. Otherwise, he cautioned, if there is no carbon price, this may create considerable budgetary hazards. He noted, “If we are hugely expanding the CIS and using it as a main mechanism to reach our targets without a carbon price, then the budget risks are large.” This statement is a reminder that we must take an integrated approach to energy policy and balance short-term investment with long-term prosperity.
The Call for a Carbon Price
Instead, Professor Garnaut argues for the reintroduction of a carbon price as a cheaper and more effective solution for cutting emissions. He contends this is the most technology agnostic and equitable way to reduce emissions in all economic sectors. “All forms of energy and all ways of reducing emissions can compete on a level playing field,” he stated.
He then went on to explain that adopting a carbon price would significantly reduce the contingent budget liabilities associated with the CIS. This would improve all other underwriting programs. Garnaut warned against the risks of “spending a national budgetary fortune to buy failure,” emphasizing that without proper pricing mechanisms, Australia could find itself vulnerable to the oligopolistic behavior of gas suppliers and major energy generators.
Garnaut floated an idea that expanding the commonwealth’s Renewable Energy Target (RET) would offer a short-term solution. True, but what he steadfastly defended in return was a long-term solution through the introduction of carbon pricing. “The best cure in the national interest is a carbon price. Not by a little bit, but by a big margin,” he asserted.
The Future of Energy in Australia
As Australia aims for its renewable energy targets, it faces critical challenges that require careful consideration and strategic planning. Followed by five hopeful years of a renewable energy capacity doubling every two years. Professor Garnaut and other experts point out that we need to pay attention to historical precedents and the lessons that we’ve learned.
He commented on past governmental decisions that have influenced voluntary commitments to renewable energy, stating, “The announcement of the extended CIS was one of several Commonwealth policy changes that led to this slowdown.” Garnaut’s talk focused on the extreme political changes shaking Australia’s world of renewable energy. The potential election of President Trump in 2024 has further complicated these changes.
