With the economy faltering during the COVID-19 pandemic and jobs in short supply, different solutions are being proposed to move the country towards a sustainable economic recovery.
To benefit all Australians, many of whom are struggling with job losses, health concerns and faltering businesses, the projects under consideration should fulfil two simple criteria: no reliance on ongoing subsidies and timely implementation.
The federal government's National COVID-19 Coordination Commission is pushing a gas-fired recovery as a solution, with subsidies for gas projects and infrastructure.
As an alternate pathway, the New South Wales government is embarking on development of Renewable Energy Zones.
The state's Renewable Energy Zone, centred on Dubbo in the Central West, has been met with an astounding response.
The government put out a call for just 3GW of wind, solar and storage projects for the Zone. It has received 113 registrations of interest, with projects submitted totalling a massive 27GW, valued at $38bn. The registrations of interest exceeded the capacity of the project ninefold!
This enthusiastic response by renewable energy developers was not aided by the promise of project subsidies. Instead, it was recognition that the New South Wales government is coordinating transmission investment to facilitate investment; a favourable environment for developers and investors.
This $38bn of proposed renewable energy investment suggests Australia is on the cusp of a new energy industry, ready to take off if the right market and regulatory conditions are set.
This sunrise enthusiasm stands in marked contrast to the pallor of the gas industry.
The global economic lockdown has had a marked impact on the gas industry and gas intensive manufacturing, which are both now in a slump that will last for many years.
Far from looking to increase investment in new projects, gas companies are slashing exploration budgets and withdrawing from expansion projects that a year ago would have been sanctioned.
Woodside has put its massive $50bn North West Shelf development of gas fields and LNG growth projects on hold, and Santos has deferred its final investment decision on its $7bn Browse field (offshore Northern Territory).
The gas industry is not only deferring new projects and slashing exploration and development budgets, it is also actively divesting from Australian gas assets.
At present there are approximately $11bn worth of Australian gas or LNG assets for sale, assuming a buyer can be found.
Major oil and gas companies are following on from ConocoPhillips' decision to exit gas in the Northern Territory. Shell is looking to divest of a 26.25% interest in its failed Gladstone coal seam gas (CSG) to liquefied natural gas (LNG) project in Queensland.
ExxonMobil has its Bass Strait assets on the block, and Chevron wants out of the North West Shelf.
A gas-fired recovery is simply not possible when the industry itself is actively divesting and gas prices are at historic lows. The hope of gas-fired manufacturing being able to pull Australia out of recession is a vain hope. There is a global glut of plastics and ammonia, ensuring no investment will occur for many years.
Renewables, by contrast, represent an area to which capital is attracted. Solar and wind are out-competing coal and gas in terms of price, build times and ongoing maintenance costs. Solar and wind farms have short lead times to project implementation. Gas is a much longer lead time investment.
Firming of solar and wind to garner 24/7 power can be economically obtained from pumped hydro and batteries. The development of Snowy Hydro means that firming of renewables is not an issue.
We are seeing a path out of recession that is achievable in the short term. The markets are telling us that renewables are the best solution for a faster recovery.
All that is standing in Australia's way to a healthy economic recovery is the federal government's proposed subsidies to a failing gas industry.
Bruce Robertson is a gas analyst with the Institute of Energy, Economics and Financial Analysis
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