How can we ensure a just energy transition?

With the goal of net zero 2050 in sight, Australia’s clean energy transition is underway. So how do we ensure the transition is a fair one? 

A genuinely fair transition factors in several variables, on top of environmental sustainability – social inclusion, viable work opportunities and reduction of poverty.

We all stand to benefit equally from the environmental effects of a decarbonised economy. When it comes to cost, however, some people and communities may be required to do more of the heavy lifting. 

As the wave of electrification sweeps across Australia, some households and organisations are reaping the financial rewards at the expense of others.

We take a look at how Australia is shaping up, and what needs to be done to facilitate the smoothest and fairest transition to a cleaner, greener world.

What are the dangers of an unjust transition?

With Australia undergoing one of the world’s fastest transformations in electricity systems, the workers involved in traditional coal-fired power production face an uncertain future.

This “once-in-a-century” transition affects entire regions, as the Australian Energy Council (AEC) points out. This is having significant impact in areas like Victoria’s Latrobe Valley, and the Hunter Valley in NSW.

Gavin Dufty, Policy and Research Manager at St Vincent De Paul Society Victoria, says the move away from gas is just as challenging for consumers. It’s a costly process to electrify homes, with many lower-income families unable to afford solar panels or to replace their gas appliances.

If we don’t share the stranded asset risk and exit costs evenly, he claims, people who leave the gas network early pass on escalating costs to those left behind.

Dufty is concerned about uneven cost allocations. 

“At the moment, most transition costs are being loaded onto consumers of energy. Those with solar consume less, and receive feed-in tariffs, so proportionally more costs get borne by others consuming in the network.”

There is also confusion around energy subsidies. Who should get them, and for what? For instance, built-in subsidies for electric vehicles can mean non-EV drivers paying for others’ EV mileage, as was the case for solar PV support. 

Once subsidies are in place, it can be very hard to unpick them. So, it’s important to build on the right foundation going forward.

What solutions are needed to promote social inclusivity?

• Repurposing coal-fired power stations and workforces

The Collie Transition Package in WA and the Latrobe Valley Authority’s transition plan in Victoria both provide state government support to areas with a workforce traditionally dedicated to coal generation move into new renewable energy production.

Drawing on positive studies like these, the AEC commissioned a wide-ranging review of national and international transitional experiences. The resulting report, Just Transition: Navigating Australia’s Energy Transformation, was released in December 2022, providing important insights for Australia. 

Old coal-fired power station and mine sites will continue to be recommissioned as large-scale battery storage and renewable hubs. Yet government support will be required on an ongoing basis to offset the impact of closures, the AEC concludes.

According to Anna Freeman, Policy Director (Decarbonisation) at the Clean Energy Council, we need long-term strategic planning. 

This involves community conversations at local and regional level, to ensure a smooth employment transition for workers. The right incentives also need to be in place, to attract investors in emerging renewable industries.

• Creating the best platforms and consumer framework

Smarter foundations are critical to provide certainty, Dufty says. A “joined up policy” will encourage both investors and households to invest in the transition. 

“While the transition has started, we haven’t yet fully developed the platforms to support it. Without this, we will see people being left behind.”

Dufty regards tariff reform as crucial. The right pricing structures will allow people to make informed decisions, for instance, charging their EV during the day and consuming their own solar energy.

“If we’re awash with solar in the middle of the day, we can give it away for people to consume. This is better than switching off inverters, and helps those on low incomes. Some networks are already planning this. We also need to help households make an orderly, affordable transition from gas to electric.”

• The right subsidies and concessions, for the right people

As Freeman says, more needs to be done to help energy consumers adjust to the process of electrification. 

“Governments must be mindful of supporting lower income households, to avoid them bearing higher costs as a result of a late transition. Holistic planning at state and national levels is needed to help homes and businesses move from gas to electric.”

Dufty also points to a worst-case scenario, where households may find themselves underwriting the infrastructure used by business to make big profits. 

The beneficiaries, often large industry players, should be required to pay for transmission lines and plants, he says. This will ensure that costs don’t get loaded onto vulnerable groups and communities. 

“We need complete transparency, as we grow new sectors like hydrogen. Again, this comes down to the right platforms and policy bases. The quicker we get them in, the quicker we can make sound investments into the future.”