Want an economic tonic, Mr Morrison? Use stimulus money to turbocharge renewables

The chaos of COVID-19 has now hit global energy markets, creating an outcome unheard of in industrial history: negative oil prices. With the world’s largest economies largely in lockdown, demand for oil has stagnated.

By Elizabeth Turbon, Hao Tan, John Matthews and Sung-Young Kim

Essentially, the negative prices mean oil producers are willing to pay for the oil to be taken off their hands because soon, they will have nowhere to store it.

Federal energy minister Angus Taylor has proposed a partial solution: Australia will spend A$94 million buying up oil, to bolster domestic supplies and help stabilise global prices.

That strategy is a fool’s path to energy security. Right now, the best way to shore up Australia’s future energy supplies is to invest economic stimulus money in renewables – essentially to manufacture our own energy security.

Prime Minister Scott Morrison with Angus Taylor, right, who wants Australia to buy surplus oil. Mick Tsikas/AAP

A flawed plan

Australia’s oil reserves have for years languished well below the International Energy Agency’s recommended 90 days. Taylor says his plan would address this, and help stabilise (read: push up) oil prices and restore faith in the global oil market on which Australia depends.

But the plan is undermined by a simple fact: unstable global oil prices have been a recurring problem for decades, largely for political reasons well beyond Australia’s control. We need look only to the price shocks triggered by the Yom-Kippur war of 1973, the Iraq war of 2003, and the Saudi drone attack of 2019 – to name just a few.

Read more: Making Australia a renewable energy exporting superpower

Price instability is all but guaranteed to increase in future, as climate change concerns drive insurers and investors away from fossil fuels and towards green energy.

The current chaos actually creates a much better opportunity for Australia: use the massive COVID-19 economic stimulus to manufacture real energy security in the form of renewables.

Buying large volumes of surplus oil will not ensure stable prices. Flickr

Renewables: a win-win

The price and supply of energy from fossil fuels is vulnerable to natural resource depletion, geopolitical tensions and climate change concerns. This is true not just for oil, but coal and gas too.

The only real path to energy security is manufactured energy such as solar panels, wind turbines, electrolysers, batteries and smart grids.

These technologies can turn infinite natural resources into energy, then store and distribute it to ensure stable supply.

Victoria and South Australia now enjoy higher levels of energy security thanks to large-scale stationary batteries that even out electricity peaks and troughs.

Read more: It might sound ‘batshit insane’ but Australia could soon export sunshine to Asia via a 3,800km cable

For example, a large-scale battery in Victoria stores energy produced by the Gannawarra solar farm. The battery provides energy during peak times when there is no sun.

Manufacturing energy is also important from an economic security perspective, promoting the creation of high-tech, high-wage industries.

These industries can create thousands of skilled jobs and open up massive new export markets – all while helping to mitigate climate change. This reality has been accepted by major East Asian economies, from China to South Korea, for more than a decade.

The Australian government must use its enormous stimulus to help local companies dramatically expand their wind, solar, hydrogen and energy storage investments. This would satisfy domestic energy needs and grow the new green export markets ready and waiting in Asia.

Asia presents huge export potential for Australia’s renewable energy. DAN HIMBRECHTS/AAP

A jobs boon

There is no shortage of projects waiting to be turbocharged. The government could start with Sun Cable, linking Australia’s and Singapore’s clean energy markets via an undersea cable.

It could also kickstart Australia’s clean hydrogen industry. According to the government’s own National Hydrogen Strategy, developing hydrogen would dramatically reduce Australia’s oil import reliance and energy costs and vastly expand its clean energy exports.

By simply following its own strategy, the government could create about 7,600 skilled and semi-skilled jobs and add about A$11 billion each year to Australia’s gross domestic product to 2050.

Read more: Australia could fall apart under climate change. But there’s a way to avoid it

The cheaper energy prices that follow could help Australia revive its techno-industrial base by making energy-intensive manufacturing a viable proposition once again.

According to leading economist Ross Garnaut, Australia could then bring home its long-lost materials-processing industries and re-emerge as a world-leading exporter of (clean) steel and aluminium.

Geopolitical benefits would also flow from Australia becoming a green hydrogen superpower, such as reducing our worrying export dependence on China.

An investment injection in renewables would be a huge jobs boost. Flickr

Seize the moment

The idea of using the COVID-19 stimulus to turbocharge Australia’s clean energy shift is not pie in the sky. Indeed, doing so is the explicit recommendation of the International Energy Agency, which this week noted:

These huge spending programmes are likely to be once-in-a-generation in scale and will shape countries’ infrastructure for decades to come… Governments can … achieve both short-term economic gains and long-term benefits by making clean energy part of their stimulus plans.

COVID-19 has undoubtedly been disastrous for Australia and the world. But it creates new opportunities in energy, economic security and climate action.

To seize these opportunities, the Morrison government must chart a new industrial course for the nation by manufacturing Australia’s energy security.

Elizabeth Thurbon is Scientia Fellow and Associate Professor in International Relations / International Political Economy, UNSW; Hao Tan is an Associate Professor, University of Newcastle; John Matthews is Professor Emeritus, Macquarie Business School, Macquarie University and Sung-Young Kim is Senior Lecturer in the Department of Modern History, Politics & International Relations, Macquarie University.

First pubished at The Conversation, Friday 1 May 2020. See; https://theconversation.com/want-an-economic-tonic-mr-morrison-use-that-stimulus-money-to-turbocharge-renewables-137074

Published under a Creative Commons licence.

3 thoughts on “Want an economic tonic, Mr Morrison? Use stimulus money to turbocharge renewables

  1. It’s a no-brainer!
    Australia is shackled by blinkered leadership of the kind that has seen us place all of our trade eggs in one basket. In the absence of a diverse global market place, which should have been developed over recent decades, we are threatened by our dependence upon China, a market governed by madmen.
    We need pollies who can think laterally.
    Big Business will eventually drive the move to renewables as the profit opportunities increase. At least one oil company is moving into solar at this moment. A smart government can get ahead of the wave and surf, instead of being drowned in the eventual competition.
    Coal is slowly dying, and with it jobs for industry workers who will need to retrain in order to move into diverse new jobs. Many of our coal mine dependent towns exist in areas of abundant sunshine and open spaces. Why not spend recovery dollars in beginning the transition for workers in these places into solar and wind generation, and even into the manufacture of storage batteries, an industry which could be developed to take advantage of our apparently abundant raw material resources?

  2. Don’t all the solar panels and wind turbine components come from China?

  3. Seize the moment ,how appropriate, this is an opportunity for our government and opposition to address many problematic issues in our economy.
    Australians are angry that we have been selling off everything for low prices overseas, the lazy country, mining ,tourism and foreign students. This pandemic has shown how exposed we are to global economies with no tariffs and free trade,especially China, we cannot compete.
    The writer E F Schumacher in his book “Small is Beautiful” covered this years ago. Where are our government economists or the Reserve Bank? Just reducing interest rates, its just laughable and too little too late, with their economic ‘tonics’?
    We have “enjoyed ” low prices and no tariffs for imported products of dubious quality for years,at the cost of blue collar local jobs and our economy. As Benjamin Franklin was quoted as saying in the 1700s; “The bitterness of poor quality remains long after the sweetness of low price is forgotten.”
    We have a chance to possibly bring back some good industries and jobs to Australia, we cannot compete so change the playing field. Introduce a turnover tax on large global corporations, offer a tax incentive to our massive superannuation industry to invest in Australian industry, with a focus on areas we can compete and research properly like renewables ,recycling and processing raw products.
    I could name ten companies that could be encouraged to return to Australia,we don’t even make Paddle Pops ice cream in Australia any more, they are made in China!
    Why are we selling LNG for ridiculous low prices to overseas and yet it it is ten times the price here and we import fuel and only have reserves for a month? It could easily be a cleaner fuel for Australia. I would like the government to start considering Australians first in everything and consult them, we may have to start paying more for some products. But the alternative is grim, a jobseeker allowance for life and higher taxes and importing everything.
    Is the government capable of making some really tough decisions?

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