Battery power alone does not solve SA’s baseload power issue

July 28th, 2017

It has been a bad couple of weeks for any hope of a non-partisan attempt by our political leaders to address Australia’s energy challenges.

A fortnight ago we had the Victorian Premier adopting the language of the enviro-activist movement, telling the Commonwealth it could “frack off” with its urgings for a withdrawal of the State’s irrational gas-development bans.

Earlier this week we had Greens Federal leader Richard Di Natale proudly sporting a “no coal seam gas” tee-shirt as he posed for photos promoting the Splendour in the Grass festival at Byron Bay. This at a time when NSW industries and small businesses (as well as millions of consumers) are crying out for more natural gas – and an economic regional renaissance is occurring just over the border in south-western Queensland, based on safe and successful coal seam gas drilling.

Little wonder then that by week’s end, Federal Treasurer Scott Morrison was showing signs of frustration, particularly when pressed about the Elon Musk ‘world’s biggest battery’ rescue mission for South Australia.

“With great respect, Elon Musk has got more money than you have,” an Adelaide reporter goaded Mr Morrison, prompting this response:

“By all means have the world’s biggest battery, have the world’s biggest banana, have the world’s biggest prawn…” Mr Morrison said.

“But that is not solving the problem. That’s just trying to say, ‘bright shiny thing over here, don’t look at the problem over there’. That’s an old trick from a politician. What we’re talking about here is something that 30,000 South Australian households could not get through watching one episode of Australia’s Ninja Warrior with this big battery. So let’s not pretend it is a solution.”

The chairman of the ACCC, Rod Sims appeared to agree – even though he was not addressing Mr Morrison’s remarks, he was reported as telling Adelaide’s The Advertiser  newspaper that “gas-fired generators have become more important at times of peak demand”.

“In South Australia, particularly after the closure of Northern at Port Augusta, gas-fired generators have become more important at times of peak demand,” Mr Sims said.

He went on to praise the SA Government for adopting a pragmatic response to tight gas supply.

“In a welcome move, the SA Government has announced new incentives for gas exploration, including royalties for landowners whose property overlie a producing gas field,” Mr Sims said.

The schism in the political discourse on Australia’s energy needs which was identified as a major challenge for the oil and gas industry in a speech delivered to a Perth audience a week ago by Chevron executive and Australian Petroleum Producers and Exploration Association director Peter Fairclough.

In the speech, Mr Fairclough quoted a recent McKinsey & Co. survey of global CEOs, which found that:

  • 50% say managing the regulation and external affairs is a top 3 priority
  • 65% expect Government intervention will increase and
  • 50% expect regulation and external affairs issues will decrease their operating income.

“We are faced with a combination of developments – playing out locally and globally,” Mr Fairclough said.

“Public trust in institutions, including our industry, is at an all-time low. There are unprecedented levels of political activism and social media is having a profound effect.

“We have also seen the rise of disparate minor parties and cross-benchers,  tapping into a mistrust of business and our industry.   The result of these developments has been highly damaging and poses a serious threat to resources investment and growth.”

Mr Fairclough also quoted Business Council of Australia president Grant King:

‘Australia’s … competitive advantage … has been put at risk through inconsistent and poorly designed and implemented policies reflecting extreme ideologies of either eliminating fossil fuels or questioning the need to respond to climate change.’

Indeed, the high price of energy on Australia’s  east coast had been largely blamed on the resident gas producers – with other factors conveniently ignored or considered too hard to tackle, Mr Fairclough said.

“The mission of the anti-development groups is clear – to shut down fossil fuel projects.

“This is highlighted on the websites of the many major organisations involved in campaigns against fossil fuel.” 

Just a few examples:

  • which seeks to ‘stop all new coal, oil and gas projects’;
  • Market Forces’ seeks to force banks; superannuation and insurance companies to divest from fossil fuels;
  • Greenpeace seeks to end the fossil fuel era and keep fossil fuels in the ground
  • The US based Rockefeller Family Fund maintains “there is no sane reason for companies to continue to explore for new sources of hydrocarbons”

Mr Fairclough said these groups were professional, politically astute and well-resourced.

The Menzies Research Centre has calculated anti-free market interest groups spend around $300 million per year on campaigns – and that’s expected to increase. This is up to four times more than business groups (according to analysis published in The Australian newspaper).”

Activist groups were working methodically, in a coordinated way across many like-minded organisations in multiple geographies, with a handful of goals measured to enhance their own standing while disrupting industry:

  1. Disrupt and delay key infrastructure;
  2. Constrain the space for project development;
  3. Increase investor risk;
  4. Increase costs; and
  5. Withdraw the social license of the industry

So what is the counter to this approach? According to Mr Fairclough, oil and gas has just as much right to assert a moral argument for the existence of the industry as those who claim a right to immediately tear it down.

“It is central to our lifestyle and standard of living and will continue to be for many, many decades. It is also the vehicle to improved lifestyles for billions of people in developing nations.”

Mr Fairclough describes a three-point response plan:

“Firstly, the industry must recognise and accept it is not business as usual. Fortunately, I think this is happening.

“Secondly, we must define our industry in terms of purpose and adopt the activist playbook.

“Thirdly, we must accept building community trust and support will not happen overnight. It will require a singular commitment from the industry and strong community engagement.

“And finally, we must operate in a social media world – the invisible echo chamber. Traditional communications, in isolation, just won’t cut it.”

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