Is Australia’s energy policy risking national security?

The latest paper from the Institute of Public Affairs (IPA) makes a bold claim – Australia’s commitment to renewable energy is a national security risk.

Stephen Wilson, the report’s author, starts by linking energy security and national security: energy generation powers economic activity. Without it, society ceases to function, leading to civil unrest and the inability of armed forces to defend the country. Trade in energy binds countries together as allies and promotes mutual security.

In the paper, Wilson argues that renewable energy sources, when compared to traditional oil and gas, threaten Australia’s energy security because they are of low quality and form value, and have low availability, controllability and reliability. The continued ban on nuclear energy is “self-destructive”.Renewable energy’s inherent qualities mean it can’t compete with traditional energy sources, according to Wilson. Using it to replace traditional energy sources would be prohibitively expensive and require land footprints that would cause more environmental damage than greenhouse gas emissions.

Wilson argues that the current timelines for the phasing out of coal and gas are unrealistic, threatening to shut down one system before the new one is ready. As it is, he claims the National Electricity Market (NEM) has been so tested that episodes of failure within our current system are now almost certain, and the Integrated System Plan’s “…deficiencies are becoming more apparent by the day”.

He also points out that Australia is a major exporter of coal, natural gas and uranium, which contributes to the security of the Pacific region.

How valid are the concerns raised in the IPA report?

The IPA is a right-leaning public policy thinktank. Is this new report sound policy advice, or conservative political posturing?

We asked Kaushal Ramesh, head of Rystad Energy’s LNG and Power Markets Research division, and Kevin Morrison, Energy Finance Analyst with the Institute for Energy Economics and Financial Analysis, for their take on the issue.

Ramesh agrees there are legitimate concerns about energy security, particularly the ongoing ambiguity around the role of natural gas on both coasts and structural underinvestment on the East Coast.

“It is a medium-term concern (10-15 years) given the learning curve of cleantech,” he says. 

“It also doesn’t help that we are now in a geopolitically-charged world, where energy commodities could see tremendous volatility – all of which will feed into domestic energy security concerns, especially given Australia’s dependence on fuel imports.”

He sees the main risks as rising demand from the growing population and electrification of direct uses. This is coupled with insufficient investment in gas supplies to keep prices sustainably low, and bottlenecks such as slow permitting or transmission constraints slowing the expansion of renewables.

“The risk here is uncertainty over how long fossil fuels will be in use, which dissuades investment (especially gas which needs heavy upfront investments),” he says. 

“Another key bottleneck is prevalence of China in the Solar PV supply chain, wind turbine manufacturing, and battery material processing capacity.”

While Ramesh agrees that renewable energy projects are proceeding slower than what’s ideal, and “thin margins are weakening innovation and the incentive for further cost reduction”, he doesn’t believe this is an insurmountable problem. He says that nuclear power has itself been subject to cost blowouts, and even if it were to be pursued in Australia, it would take decades to have the required infrastructure and skillset in place.

“And in that timeframe, we expect the cleantech learning curve will continue to reduce costs for battery storage, allowing firming of intermittent renewables,” he says.

He believes that renewables will have an important role to play in energy security.

“Renewables have the advantage of decoupling the energy system from commodity prices. As such, they are able to deliver energy security outcomes when there is some form of firming, as intermittency could cause substantial volatility from time to time. The missing piece is battery storage which we expect will several more years to scale.”

For Morrison, the biggest risk to energy security is Australia’s reliance on imports for 80% of our petrol and diesel. In his view, government policy should be aligned to the Integrated System Plan (ISP), with an aggressive push to EVs to address the risk around fuel imports.

“I don’t see nuclear in Australia being one of our solutions. What the Australian Energy Market Operator (AEMO) has done in the ISP is where we’ve got to be heading, and that’s what the government policy should be orientated to. There’s a lot of research, there’s been a lot of studies, and it’s backed up by economics as well.”

He doesn’t see the ISP as unrealistic or deficient.

“I completely don’t agree with that. It’s the best blueprint we have for our electricity market future. It’s not just a bunch of people sitting in an ivory tower which some would paint it to be, there is wide consultation involving everyone in the energy sector,” he says.

“It’s not just ‘we think this is a great idea’ - they are trying to bring as many people along as possible. They have just released the draft ISP so it’s open to comments… everyone can say what they want about it, then it’s refined before the final report.”

He disagrees with the claim that moving away from oil and gas exports weakens regional security. From his perspective, Australia has exhausted our most accessible gas fields, and as production is getting more expensive, we are losing our competitive edge. “It’s not politics, it’s geology”.

He says countries like Japan are well aware Australia only has 2% of the world’s gas reserves and they know they have to diversify.

“The Institute of Public Affairs’ interpretation of energy security is that we’re not being a great exporter. We’re still up there in terms of energy exporters and we’re doing it on a much smaller base than our competitors, America and Qatar. We really have been punching above our weight when it comes to gas exports.”

He argues that the boom period from the late noughties to the 2010s was unusual for Australia – Shell gas in the US was still getting up to speed, there were none of the discoveries off East Africa and the Middle East was having the Arab Spring.

“We almost quadrupled our energy exports over that time,” he says, “and it’s unrealistic to think we can just maintain it at that level for the foreseeable future. We simply don’t have the resources.”

Conversely, he points out that Australia has some of the best solar and wind resources in the world, which gives us a competitive advantage internationally in renewables.