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Australia’s Energy Crisis

Australians, especially those on the east coast, have been plunged into an energy crisis with electricity and gas prices skyrocketing in recent weeks. As everyone grapples with the rising cost of living, what does the power price crisis mean for climate justice?

Source: Petroleum Australia

Why is this happening?

  • A decade of missed opportunities from consecutive federal Coalition governments who supported fossil fuels instead of boosting the renewable energy industry
  • Russia’s war on Ukraine, which is seeing many countries look for alternative sources of fossil fuels
  • Gas policies that do not secure enough supply for local consumption, and enable Australian gas producers to sell domestic gas at global prices irrespective of how much it costs to produce it here. The Coalition government aggressively pursued a massive export industry of Liquefied Natural Gas (LNG), which means that domestic consumers wanting to use gas in their homes are effectively competing on the international market
  • Cold temperatures have brought on the annual spike in energy use forward by several weeks
  • Old, unreliable coal power stations keep going offline for maintenance, requiring increased gas for electricity generation - the most expensive way to produce electricity in Australia.

Case study: ACT

While residents in other states and territories are expected to be hit with price increases of up to 18 per cent, the average household in the ACT can expect a decrease of 1.25 per cent. This is due to its transition to 100 per cent renewable energy, while states like New South Wales and Victoria are still heavily reliant on fossil fuels for electricity production.

What should NOT be done

  1. Australia should NOT increase its oil and gas production. We are already one of the world’s largest exporters of fossil fuels, and this industry should be winding down, not ramping up. It’s also important to note that of all the fossil gas that is extracted in this country, over 70% of it is exported. Even if we wanted to see more oil and gas production, the nature of production means it would not help bring down prices in the short term and hence does not provide a solution to our current cost crisis.

    Image: Flow of gas produced in Australia for financial year 2019-2020
    Source: Australian Energy Statistics 2021, Figure 2.3 (and supplemented by table F)
    Credit: Tim Baxter

  2. Australia should not reopen the question of using nuclear energy to transition away from fossil fuels. Recently, the federal Opposition has increased its rhetoric about nuclear energy as being a ‘solution’ to the energy and climate crises. This is just another tool in the culture war to halt the urgent transition to renewable energy. Nuclear power is far too costly to be able to compete with renewables and storage in Australia and would take well over a decade for a new plant to be commissioned and built. For more information about nuclear power in Australia follow this link.

  3. Australia should not let the invisible hand of the market sort itself out. This type of thinking leaves the most at risk in our community even more vulnerable. The energy system needs to be run for the public good, not private profit.

What should be done

There isn’t a silver bullet to fix this problem immediately. But on the scale of governments, here is what would help:

  1. A windfall gains tax should be put on the extra gas profits being earned during this crisis by the gas corporations which are 95.7 per cent foreign owned. This increased revenue could be spent directly on providing relief to households and small businesses struggling to pay for their utilities. This is something that the British government has just enacted - if they can, why can’t we?
  2. Increase the speed of the transition to renewable energy for electricity production. The Australian Labor Party was just elected with a strong mandate for climate action, most notably the Rewiring the Nation policy. This $20b policy aims to make Australia a leader in renewable energy by growing the sector and updating the electricity grid. This policy should be one of top priorities for the government’s first year.
  3. Provide more subsidies and incentives for people to electrify their homes and businesses, including products such as induction stoves, heat pumps and split system air conditioning, rooftop solar and batteries.

How can I help?

Ongoing Development

As we are writing this blog, the Australian Energy Market Operator (AEMO) has taken the reins from coal and gas providers and suspended the normal process for operating the National Electricity Market (Australia’s largest grid) until further notice. Amongst other things, it will set fixed prices instead of allowing competition to create astronomical prices for electricity. This unprecedented event further highlights that our energy system currently works to serve the interests of the big coal and gas companies, not consumers and that our transition to renewable energy needs to strengthen the role of community owned assets and nationalised systems.

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