With the election drawing to a close, we set out what a Labor government means for energy policy.
Climate Change
Policy: Cutting carbon emissions by 43% from 2005 levels by 2030 and achieving net zero by 2050. Australian Public Service to reach net zero emissions by 2030.
Commentary: With a substantial cut in carbon emissions already being achieved in the last 17 years, the emission reductions targets are not overly ambitious (especially when compared to the Greens’ net zero policy by 2030).
With Australian business (and voter sentiment) already driving the green economy (see our articles here and here), it will be interesting to see how this target will be adjusted in future.
Renewables
Policy: Targeting 82% renewable energy by 2030.
Commentary: With electricity generation being the largest contributor to Australian greenhouse gas emissions, a robust renewable energy policy is crucial to achieving climate goals.
According to the Clean Energy Council (CEC), renewable energy supplies 32.5% of Australia’s electricity. This has led to relatively low electricity prices compared to the rest of the developed world, with Australians on average paying US17.6 c/kWh when adjusted for purchasing power parity, compared to the OECD average cost of 24.2 US c/kWh.
An increase in renewable penetration will however come with cost challenges due to the continued rise in the cost of materials used in generation, transmission and storage infrastructure.
An increased support for renewable energy sends a strong market signal, and will lead to the unlocking of substantial investment if supported by the correct policy interventions.
Storage
Policy:
- $100 million investment in the creation of 85 community co-operative solar banks which will exclusively service approximately 25,000 low income households and renters, who are unlikely to have the opportunity to install solar.
- $220 million investment in installation of 400 community batteries, with a focus on storage of rooftop generated solar energy.
Commentary: It will be interesting to see how government plans to deliver on its storage ambitions, especially with regard to technology selection, storage location and effective regulation to ensure a redesign of the National Electricity Market that facilitates this massive uptake in dispatchable generation.
EVs
Policy: Removing taxes from low priced EVs to boost demand.
Labor will introduce an Electric Car Discount (Discount). As part of the Discount, Labor will exempt many electric cars from:
- Import tariffs – a 5% tax on some imported electric cars; and
- Fringe benefits tax – a 47% tax on electric cars that are provided through work for private use.
These exemptions will be available to all electric cars below the luxury car tax threshold for fuel efficient vehicles ($77,565 in 2020-21).
The Discount will begin on 1 July 2022 and be reviewed after three years, in light of electric car take up at that time.
Commentary: With the transport sector generating more than 20% of Australia’s total emissions, the uptake of electric vehicles will be crucial to reaching net zero emissions by 2050. The rollout of a national charging network will be important to realise this goal. An unintended win may very well be the storage capacity and grid balancing services that EVs add to the grid (see our article here for more on vehicle-to-grid).
Safeguard mechanism
Policy: Setting pollution limits on Australia’s 215 biggest carbon polluters.
Commentary: Labor has stated that it intends to “Adopt the Business Council of Australia’s recommendation for facilities already covered by the Government’s Safeguard Mechanism that emissions be reduced gradually and predictably over time, to support international competitiveness and economic growth – consistent with industry’s own commitment to net zero by 2050.” To ensure Australia remains competitive and relevant, this may require a larger commitment.
Grid
Policy: Modernising Australia’s electricity grid through the $20 billion Rewiring the Nation plan.
Commentary: The lack of government intervention in recent years has led to the private sector solving capacity constraints by installing storage at their generation facilities. While grid upgrades are welcomed it is important to undertake these in line with a national energy plan.
Labor seems to be aware of the challenges in this space, with Labor’s energy spokesman Chris Bowen saying that the investment test for transmission (RIT-T) can delay projects unreasonably and has called for a major reworking of the scheme.
Manufacturing
Policy: Allocating up to $3 billion from Labor’s National Reconstruction Fund to invest in green metals (steel, alumina and aluminium); clean energy component manufacturing; hydrogen electrolysers and fuel switching; and agricultural methane reduction and waste reduction.
Commentary: Reducing carbon emissions requires a whole of market approach. See our article on the Business Drivers for Australia’s green economy here. The CEC is of the opinion that low-cost electricity provided by renewable energy can help expand Australian manufacturing capacity, create more regional jobs and growth, and reduce Australia’s greenhouse gas emissions.
In the short term, the scaling up of electrolysers and a massive expansion in renewable energy infrastructure will be hugely important to make the overall cost of green hydrogen production cost-competitive with the incumbent fossil fuels (i.e. coal).
Jobs
Policy: 10,000 New Energy Apprentices and a $10 million investment in the New Energy Skills Program (to establish training (and retraining) pathways in the renewables sector).
Commentary: The CEC estimates that the transition to a clean energy market could support 80,000 jobs. Specialist engineers and trades will be required to construct infrastructure required to achieve this renewable future.
Movement on policies
As it is unclear whether Labor will win enough seats in the lower house to govern in its own right, there are two energy policy scenarios that may unfold:
- Labor wins a majority in the lower house: Labor will be free to push ahead with its renewable energy policy in its current form. However, getting the policy through the lower house is only part 1 of the battle. Passing it through a fragmented Senate will prove another challenge.
- Labor forms a minority government: Labor will need to negotiate with the Greens and other independents to guarantee confidence and supply in the lower house. This will open the door to the Greens or independents to push for a more ambitious renewable energy policy. This will put the Labor government between a rock and a hard place given that Anthony Albanese made it clear during the election campaign that he would not negotiate his policies to form a minority government. Energy policy is a touchy subject for Labor following its deal with the Greens after the 2010 federal election which saw the introduction of a carbon price that played a part in the downfall of the Labor government.
