This week’s news from the Finkel front is that the clean energy target doesn’t matter.
Everyone should now stop worrying and arguing about the 50th Finkel recommendation and start on a plan for Australia’s post-coal economy.
In his address to the National Press Club on Wednesday, Chief Scientist Alan Finkel said: “Ever cheaper wind and large-scale solar, even without subsidies, are dominating investor interest. Investors prefer wind and solar because they are now cheaper to build than traditional generation such as hydro and coal.”
Finkel was backed up on the same day by the CEO of AGL Energy, Andy Vesey, who said: “We don’t see anything baseload other than renewables.”
So, no need to subsidise renewables. The only use for a scheme that does so is to humiliate Malcolm Turnbull, because he can’t get it past the dills in his party.
Meanwhile, the oil price has dropped 20 per cent in a month and this week Saudi Arabia took a big step towards its post-oil future when King Salman installed his son, Mohammad bin Salman as Crown Prince and next in line.
It was Mohammad who, in April last year, launched Saudi Arabia’s “Vision 2030” — an ambitious plan to reduce the country’s reliance on oil, or rather to deal with the fact that the oil price is not going back to $US100 a barrel, including the partial listing of Aramco and using the money to create Saudi’s first true sovereign wealth fund.
The king has now silenced the critics and declared full steam ahead for Vision 2030, and the transformation of Saudi Arabia for a post-oil era.
Australia is the Saudi Arabia of coal and must do something similar. We don’t have an autocrat king who can just make it happen, but instead a prime minister who requires partyroom votes, and we don’t have an all-encompassing economic vision — we’ve just got Finkel, and it’s just about electricity.
But that’s a start, and 98 per cent of it (49 out of 50 recommendations) is useful. As for the last one — the CET — it’s too late.
Australia’s coal and Saudi Arabia’s oil are facing the same enemy: technology.
The Saudis have been brought undone by the technologies of fracking and horizontal drilling, which have brought huge quantities of American oil and gas on to the market and cut the oil price from more than $US100 to less than $US50, sending the place on the road to bankruptcy.
The technology that is eating coal’s lunch is the collapsing cost of photovoltaic cell solar generation and large-scale batteries.
The full quote from Finkel’s speech is: “Disruptive technology has lived up to its name. One technological disruption is that ever cheaper wind and large-scale solar, even without subsidies, are dominating investor interest.
“Investors prefer wind and solar because they are now cheaper to build than traditional generation such as hydro and coal.”
Finkel went on to say that two other technology disruptions: the two million rooftop solar generators that households have installed, and “stunning improvements in battery capacity and cost”. Andy Vesey told Australian Energy Week in Melbourne that “the fundamental issue is technology is driving this new direction”.
“What’s the new baseload for us? It’s going to be large-scale renewables. It’ll be firmed up by probably open-cycle gas and, eventually, when storage comes down, that’s what it will be. We don’t see anything baseload other than renewables”.
Overlaying and sharpening the challenge of technology for Saudi Arabia’s oil and Australia’s coal is the global agreement about the need to reduce carbon dioxide emissions.
The Paris Agreement is probably too little, too late and is under attack from the Trumpists, but at least it’s something, and only three countries are out of it — the US, because of Trump, Syria because of its civil war, and Nicaragua because it thought the deal didn’t go far enough. Paris is the first truly global agreement about anything for decades.
But the market and technology are starting to make the Paris Agreement — that is, the need for government action — irrelevant as well, at least as far as the future of oil and coal is concerned.
Capitalism’s characteristic relentless march towards lowest cost and greatest demand is taking over. The technologies are being helped towards critical mass by the willingness of most people to believe scientists that carbon dioxide emissions must be reduced and to do their bit to help — by installing PV on the roof or buying an electric car.
Mind you, there’s a limit: there’s not yet much sign that we’re all going vegetarian as the scientists also suggest, since 50 per cent of Australia’s carbon emissions come from livestock.
So while the stupidity of Australia’s conservative politicians — especially the ones suggesting that taxpayers subsidise, or even build, coal-fired power generation — is pitiable and embarrassing, it is fast becoming irrelevant.
Coal is near the end thanks to new technology, that’s clear.
The real task for the government is not to come up with policies to either hasten or slow coal’s demise, but to come up with a “Vision 2030” to deal with the fact of it.
Alan Kohler is the publisher of The Constant Investor.
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