Not joking.
As perverse as it seems, achieving the dream of linking Australian renewable energy to Asian energy buyers may generate a household electricity crisis as artificial as the current gas crisis. As with LNG, large scale solar projects are set to largely, perhaps even entirely, bypass domestic demand.
The increase in energy prices in recent months has hurt individuals and larger economies. Explanations from politicians and oil and gas companies for this rapid price rise include the pandemic to supply chain issues, although the conflict in Ukraine is probably the number one culprit.
The press and public should seriously question these excuses. In Australia they are nakedly laughable. That doesn’t mean, however, that Australian business ‘leaders’ and politicians haven’t tried them on.
Australian LNG exports increased radically in the 2010’s, although not as quickly as American exports. Australia now vies for the title of largest exporter of LNG with Qatar and the USA.
Even with this abundance of gas, the price of gas in Australia has skyrocketed, with wholesale gas prices in the first quarter of 2022 up 141% from the same period last year.
Not only have prices gone up, but there is even talk of a gas shortfall next year. To protect against this, the Australian Competition and Consumer Commission (ACCC) recommended in its 1 August 2022 report that the government initiate the first steps of the Australian Domestic Gas Security Mechanism, the so-called ‘gas trigger’.
The ACCC forecast a 56 petajoule (PJ) shortfall in domestic gas supply in 2023 “if LNG exporters decide to export all the gas that they expect to have in excess of their contractual commitments (167 PJ) as they did in 2021”. The ACC then proposed a radical measure to address the issue:
It is very likely that to avoid the forecast shortfall in the east coast gas market in 2023, LNG producers will need to divert a significant proportion of their excess gas into the domestic market.
The Australian Financial Review provided the argument from gas producers: “Surely the first response to forecasts of a shortage of gas in Australia should be: let’s get more gas out of the ground!”
Appealing as this might sound, Richard Denniss explained the simple but sad reality of the Australian gas market in the July edition of The Monthly:
Ironically, until 2016 Australians could already rely on relatively cheap gas to heat their homes and fuel their factories. Then the gas industry spent $80 billion on infrastructure, making it possible to start exporting gas from our east coast, and now the Australian gas industry, which is actually 95 per cent foreign-owned, can sell our gas overseas at the world price rather than to Australians at the cost of production. Unsurprisingly, it has been putting the interests of shareholders first ever since.
As the Australian electricity market is so heavily reliant on coal and gas, which contributed 54% and 20% respectively to Australia’s total electricity generation in 2020, it is not insulated from these same forces. In June, the Australian Energy Market Operator (AEMO) suspended the National Energy Market, which provides electricity to most Australian consumers. AEMO argued its hand was forced: “….it has become impossible to continue operating the spot market while ensuring a secure and reliable supply of electricity for consumers.”
The case for renewable energy itself is strong enough that it hardly needs personal financial stress as an additional justification. However, much of the renewable energy investment is designed to maintain the same economic pressures on Australian residents.
In Australia, the uptake of rooftop solar is high, with 30% of houses using solar, and it has received support from government at various levels. According to the Clean Energy Council, the industry body representing the renewable energy sector, small-scale solar accounted for 8.1% of electricity generated in 2021.
Large scale solar, defined as systems larger than 5MW, is still in its infancy as an industry. It only accounted for 4% of electricity generated in Australia in 2021 but is growing rapidly. In 2012, producers installed 10MW of large-scale capacity; in 2021, they added 1,249MW of large-scale solar capacity.
Sun Cable, an Australian company founded by David Griffin and backed by celebrity investors Andrew “Twiggy” Forrest of Forestcue Metals and Mike Cannon-Brookes of Atlassian, is entering this large-scale solar market. In March 2022, the two invested A$210m in Series B capital raising. In parallel, Cannon-Brookes announced in May that he had bought an 11.28% share in AGL Energy Ltd, Australia’s largest electricity generator. He campaigned against a planned demerger that would have seen the company split its generation and retail arms. Cannon-Brookes was ultimately successful when the plan was withdrawn by the end of the month.
Sun Cable plans to add the largest solar plant in Australia, with a total capacity of 17-20GW. This single project would be nearly three times larger than the total currently installed large-scale solar. This enormous solar farm will be installed near the town of Elliott in the Northern Territory. With a population of 339, Elliot clearly won’t need all that power, but nor will the other residents of the NT, some 250,000 people.
The stated plan is to export this power via 4,200 km of submarine cables to Singapore. The name of the proposed Australia link, the Australia-Asia PowerLink (and sometimes Australia-ASEAN PowerLink) shows their larger ambitions. A 2020 document that was part of Environment Protection Act compliance outlined the company’s plans:
The company vision is to establish a high-voltage direct current (HVDC) transmission network across the Indo-Pacific region supplied by large-scale solar and storage facilities utilising the abundant high-quality solar resource in northern Australia.
As it is currently forecast, the solar plant will provide power to residents in the Northern Territory, but will not be connected to the National Energy Market, a unified power network that provides electricity to most Australians outside Western Australia and the Northern Territory.
Experts have posed technical questions about the buildout, which needs to run the world’s longest power cable through busy Indonesian waters to Singapore, as well as about the financial viability of the reportedly A$30b project. Even though Sun Cable has announced plans to sell electricity to Singapore, Singapore has not announced any plans to buy electricity from Sun Cable. Singapore’s dependence on imported gas and high electricity prices might make it an appealing beacon for Sun Cable, but its neighbors in Malaysia and Indonesia have far greater national energy resources.
Despite these somewhat fundamental issues, Cannon-Brookes outlined his long-term hopes to the Washington Post in 2020:
I am hopeful we will build 50 cables to Asia, but the first one is always the hardest to get done…We can show the world, ‘Look what Australia can do.’ We can export sunshine to Asia.
Both the NT government and the federal government have been enticed by this idea and have granted “major project status” to the plan.
Former Minister for Energy and Emissions Reduction Angus Taylor, announcing this elevation, was equally explicit about Australia as an energy exporter:
Australia has long been a world leader in energy exports. As technologies change, we can capitalise on our strengths in renewables to continue to lead the world in energy exports.
There are currently 31 projects with Major Project Status at the federal level in Australia. Of these, only two are focused on renewable power. Aside from Sun Cable, the Asian Renewable Energy Hub, now 40.5% owned and operated by BP, plans to install 26GW of solar and wind generation capacity, some of which will be used locally. The majority of this capacity will be used, however, to produce green hydrogen and green ammonia for export.
On 8 June 2022, recently elected Labor PM Anthony Albanese reported that he had engaged in discussions with Cannon-Brookes and others connected to Sun Cable. On 24 June 2022, the government agency Infrastructure Australia announced that the AAPL had achieved ‘investment ready’ status.
As solar power production and storage in Australia transforms from small-scale, roof-top, and domestic towards a large-scale corporate investment model, business and Australian governments on both sides of politics are clearly in alignment that this must be export driven, whatever the obvious geographic and technological hurdles. Despite the new Labor government currently legislating to raise Australia’s emissions reduction target, the largest planned solar plant in Australia will do little to reduce direct emissions in Australia.
Government decisions at the territory and federal level are designed to force the majority of Australians to compete with increasingly larger markets over the price of energy, turning solar energy into just another extractive industry.
