A new, $600m gas-fired power plant? Smells like a byelection

With the rest of the constituency temporarily disenfranchised, the only opinion that matters is that of powerful interests, and the voters in a single electorate. How else are we to understand Wednesday's announcement by Energy and Emissions Reduction Minister Angus Taylor of a new $600 million taxpayer-funded gas power plant in the Hunter?

The government is certainly not responding to diplomatic pressure from outside Australia. All of our economic peers have recently strengthened their pledges to speed the transition to net-zero emissions. Indeed, the Biden administration is actively renewing international efforts to eliminate fossil fuel subsidies. With impeccable timing, the International Energy Agency released a report on Wednesday, Australian time, concluding that if we are to limit global warming to 1.5 degrees, developed economies should stop fossil fuel investments now and transition to zero-emissions electricity grids by 2040.

This is clearly at odds with the leaked recommendation of Australia's National Covid-19 Coordination Commission (NCCC) that the government create the market for gas and build fossil fuel infrastructure that would operate for decades.

NCCC aside, expert opinion within Australia does not appear to be the driver of the Kurri Kurri Power Plant decision. The Australian Energy Market Operator (AEMO), a special joint NSW-federal taskforce and many leading scientists all disagree that such gas plants are necessary to maintain stability and reliability of the grid when Liddell closes in 2023. Experts and foreign governments are, however, only indirect components of our democracy. So what about the voting public?

It's hard to see that the proposed plant is designed to serve the interests of a broader Australian voting public - even one which has shown it cares about energy prices at the ballot box. Avoiding electricity price spikes after Liddell's closure is a major argument Angus Taylor makes in favour of the new gas plant.

Energy experts, however, including the chair of the government's own Energy Security Board, Kerry Schott, disagree. Burning natural gas is an expensive way of providing electricity - even dispatchable electricity. Plummeting prices of solar, wind and batteries, combined with Snowy Hydro 2.0 coming online in 2025, mean that a combination of renewables, storage and transmission will be cheaper. In addition, rewarding consumers for reducing their demand at peak times is a way of putting money back in the pockets of voters, and is cheaper than any combination of new capacity. While it's true that not all of these options will be fully in place by the time Liddell closes in April 2023, the proposed gas plant won't be either.

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Australia is an export-driven economy, so the competitiveness of Australian industries matters for jobs, growth, and yes, votes. Energy prices matter for competitiveness, especially in energy-intensive industries like mining and mineral refining. But even if we take the minister's claims that the new gas plant will help keep electricity bills down at face value, it's unlikely to boost competitiveness. The imposition of carbon border adjustment mechanisms (C-BAMs) by trading partners will have implications for trade-exposed emissions-intensive industries in Australia. In order for Australian exporters to avoid (and maybe even benefit from) the introduction of C-BAMs, one of two things need to happen.

Option one is that Australian government policy becomes sufficiently emissions-abating that it is considered equivalent to that of the imposing country. This seems unlikely - and is certainly not helped by a taxpayer-funded gas plant. The other option is that our exporters are able to access large amounts of cheap, clean energy and prove that their own emissions are negligible. Clearly renewables, storage, integration and demand management would be preferable on this count too.

So who is the government catering to with this announcement? According to the minister, "the Hunter Power Project will deliver an important economic boost to the region, creating up to 600 new jobs during peak construction". Meanwhile, the last three paragraphs of his press release begin "New gas supply ...", "Gas supports ..." and "Gas is a critical ...".