A critical juncture in energy transition

Australia is at a critical juncture in the energy transition. We must bring renewable power generation to market at pace, but as we and the rest of the country drive towards our net zero targets, we need to remain aware of the significant challenges in achieving this lower emissions future while at the same time maintaining a reliable and affordable energy system.  

It seems abundantly clear that even with the industry’s best endeavours and most optimistic view of the road ahead, there are several factors at play that will inevitably delay the achievement of Australia’s renewable energy targets and hence emissions reduction targets.  

These factors include the competition for skilled labour, critical minerals and equipment supply right around the world, with many other countries competing for the same resources as Australia.  They also include inflationary pressures that are significantly impacting project costs and the glacial pace of project approval processes.  

Not to mention that increasingly interventionist energy policies across Australia have also, in a number of instances, rattled investment confidence and there is also significant ongoing local community opposition to new electricity transmission and renewables projects.  

What all this means is that we need to be realistic about the energy policies that will take us forward.  

While I applaud ambitious emission reduction targets, the reality is policy settings also need to ensure the lights stay on and energy remains affordable. If they don’t, and there are rolling blackouts and further substantial increases in the cost of energy caused by a lack of reliable generation and a lack of natural gas supplies, it will cause political and economic upheaval.  

Public support for the transition will evaporate overnight making the transition even harder to deliver, and that’s not what any of us at APA or others across our industry want. We cannot as a country allow perfection to be the enemy of the good.  

In Victoria and NSW, governments have either done, or are in the process of negotiating, deals to extend the operating life of coal fired generators out of necessity. You can do that at relatively short notice when you are dealing with existing assets. You can't do that at short notice when the assets – like essential gas firming generation or new natural gas resources – need to be developed.  

At APA we want to be part of the solution. That’s why we are not only investing in renewable and electricity transmission assets as well as hydrogen opportunities, but we’ve also taken the initiative at our own risk, to invest in expanding the capacity of our East Coast Gas Grid. We’ve done this because it is obvious to us that given the dwindling natural gas supplies in the southern states, more gas will need to flow from north to south in the years ahead. Without the ability to move larger amounts of gas from the north to the south, southern states will experience energy supply shortfalls, including potential blackouts and higher prices.  

This isn’t scaremongering. It’s there in black and white, as advised by the Australian Energy Market Operator and the Australian Competition and Consumer Commission in recent reports on the supply and demand outlook in our key energy markets.  

But our East Coast Gas Grid expansion is only part of the solution. Government policies need to ensure there are both adequate new gas supplies and new reliable gas firming generation capacity before it’s too late. 

There are several longstanding and emerging gas projects that need to be progressed quickly. The timeframes needed to bring this type of new investment to market are long. You can't just wake up one day and click your fingers to solve the problem.  

In this context, it is important to remember that 90 per cent of the gas consumed in Australia is used to power our most critical industries.  

Gas is essential for generating industrial heat used in the manufacture of basic building products like bricks, steel and cement. It is also essential to the production of ammonia-based fertilisers for the agricultural sector and explosives used extensively in the mining industry. And gas is also critical to powering our mining and resources projects that are so critical to jobs, our economy and the energy transition itself.  

So if we don’t take action and alleviate gas supply pressures, not only are governments putting energy reliability at risk, but they are also adding to the cost of gas and, in turn, further stoking cost of living pressures and the housing crisis.  

Now is the time for all levels of government to take out insurance in the form of policies that ensure the energy transition is as rapid as possible, without causing major disruptions socially and economically to the country. If they don’t, no one will forgive them when the lights go out, when higher energy bills need to be paid and when future governments need to pay yet again to extend the life of whichever emissions intensive coal fired generators are left standing at the time.