- The Guardian
- Issue #2194
Photo: Peripitus – commons.wikimedia.org (cropped) (CC BY-SA 2.5)
A new report from the McKell Institute, supported by the Electrical Trades Union (ETU) is suggesting a sovereign power company to provide reliable and affordable power for Australia’s manufacturing sector. Here’s what the report says:
Australia’s shallow industrial base is exposed to extreme volatility and higher energy costs, threatening over 200,000 direct and indirect jobs, tens of billions of dollars in economic benefits in wages, local supply chains, as well as the production of critical products needed for Australian construction and manufacturing.
Other countries are moving to protect their domestic productive capacity, and Australia must do the same.
Renewable power is the cheapest and most stable form of generation. Unlike coal and gas, its ‘fuel’ is free and its price can be insulated from destabilising global commodity price shocks. But private incentives are preventing sufficient investment in renewables from occurring, exacerbating Australian industry’s exposure to an increasingly unreliable and aging coal fleet prone to damaging shutdowns and price spikes.
The federal government has developed new mechanisms to drive the energy transition, and private investment has delivered 42 per cent renewable penetration. But it is not enough to support industry. Under a market-driven system, there is no mechanism to match the supply of renewable energy to the demand of energy-intensive manufacturers at a price they can afford. Major industry investments are not materialising because there is no long-term energy security. This failure is the gap that government must close.
The market alone has never delivered a national energy and industrial transition. Quebec, Norway, Iceland, New Zealand, and the United States all provide industrial electricity through public entities with long-term contracts. Australia did the same 40 years ago when public investment surged into coal generation, laying the foundations for today’s smelter fleet and decades of economic benefits.
This is why the federal government must establish Sovereign Power, a new Commonwealth entity to build and own firmed renewable generation, offering long-term power purchase agreements to Australia’s strategic industrial facilities. Anchored by the Commonwealth’s lower cost of capital and longer investment horizon, Sovereign Power can deliver electricity at a price that makes Australian heavy industry globally competitive in service to the nation’s industrial future.
Sovereign capability means controlling the inputs that are fundamental to the functioning of an economy. Australia exercises control over raw materials and labour. But Australia lacks control over the third critical input – electricity. Foreign strategic industries tend to receive support from their governments in the form of lower cost power, forcing Australian industry to compete with their hands tied behind their back.
By providing affordable clean power itself, the federal government can secure sovereign heavy industry capability, increase overall investment in renewables, and attract new investment for a high-productivity, high-skill, and high-wage economy that builds new industries, creates good jobs and revitalises regional communities.
Full report available from mckellinstitute.org.au
