Inside Story

Here comes the sun

Are three multimillionaires about to break Australia’s political deadlock on climate?

Tristan Edis 7 January 2020 4818 words

Not a big jump: part of an existing 5B solar installation at Beverley in Western Australia. 5B

Amid almost daily complaints from industry about skyrocketing electricity costs, out drops an announcement so counter to the dominant flow of news that it seems beyond belief. Yet there it is in the business pages: Australian software billionaire Mike Cannon-Brookes and iron ore billionaire Andrew “Twiggy” Forrest are backing a project that will aim to supply a fifth of Singapore’s electricity needs — all of it from solar power — via a 3750 kilometre underwater cable from the Northern Territory.

The proposed solar farm, near Tennant Creek, would be the world’s biggest by a comfortable margin. It would stretch as far as the eye can see across an area equal to more than 20,000 soccer fields.

Despite Cannon-Brookes’s self-deprecating description of the project as “batshit insane,” it might actually make technical and economic sense. And it’s not the only mega-renewable energy project being pursued by credible Australian companies with the aim of powering the many hundreds of millions of people living to the north of us.

The scheme is a long way from a done deal, of course. Its commercial and technical challenges are enormous, and with a $20 billion price tag it would be one of Australia’s largest-ever construction projects.

Making sense: Mike Cannon-Brookes, chief executive officer of Atlassian. Karen Dias/Bloomberg via Getty Images

But people who know the man behind the project — David Griffin, chief executive of Sun Cable — talk in glowing terms about his ability to take an empty paddock and convert it into a power station fuelled by wind or sun. Griffin hails from one of Australia’s pioneering renewable energy companies, Infigen Energy. Most recently he sewed up a deal to provide Australia’s second-largest employer, Coles, with 10 per cent of its electricity from solar. As one former colleague says, whenever Griffin encounters a barrier — and there are plenty ahead — he manages to “go round, go over, or… blows [it] up.”

So how can Griffin go from powering a tenth of Coles to powering a fifth of Singapore? In terms of technology, it’s not a big jump. The Tennant Creek farm will use the same type of solar panel, just a heck of a lot more of them.

One difference, though, is that the project will use an ingenious Australian-made technology to simplify and accelerate the installation of the panels. Rather than construct the framing out in the field, an Australian company, 5B, in conjunction with former car-parts supplier IXL, will assemble the panels into a concertina-style kit in factories in Darwin and Adelaide. They will then be progressively transported to Tennant Creek in shipping containers on a staggering kilometre-long train. There, a forklift will simply unload and unfold the concertinas to create rows of panels arranged in A frames facing east or west.

Unlike the alternating current system that transports the vast bulk of Australia’s electricity, the cable to Singapore will use direct current, minimising the loss of electricity over those thousands of kilometres. While it isn’t common, this technology is already deployed at different sites across the globe, including under Bass Strait.

So how on earth does it stack up economically?

What is yet to sink into the minds of many Australian policy-makers and commentators is that solar panels have dropped so much in cost, and are so quick and easy to install, that they are approaching the point of being the cheapest-available source of electricity globally. Importantly, solar is already cheaper than the fuel Singapore gets most of its power from — imported liquefied natural gas, or LNG.

The cost of electricity from LNG lies somewhere between $80 and $120 per megawatt-hour. By comparison, Snowy Hydro says it has signed up several solar farms to supply power in the $40s. Given its scale and solar resource, it’s conceivable that the Tennant Creek project could get this down to a flat $40 or possibly as low as $35 prior to transmission to Singapore.

The difference between that figure of $35–$40 and the cost of LNG — a gap of at least $40 and as much as $85 — provides the room to pay for the cable to Singapore and, the project’s proponents hope, generate a profit.

Why wouldn’t Singapore install solar panels itself? The other factor that plays in Australia’s favour and counts against many of our northern neighbours is that we have lots of very sunny and sparsely populated space.

Almost every skerrick of Singapore is taken up with buildings, and where that isn’t the case the island state has its highly prized parkland. Sure, they could install solar on top of the buildings, but the roofs of high-rises are often cluttered with building services equipment or shadowed by even taller buildings. And even if lots of solar panels were deployed — on floating pontoons, for instance — they would be subject to wide and rapid variations in cloud cover. Being almost right on the equator, the city is often subject to long periods of cloudy, rainy weather.

You couldn’t find a much greater contrast with Tennant Creek, a place almost completely devoid of people with an average annual rainfall of just 399 millimetres compared to Singapore’s 2340 millimetres. A satellite-eye view on Google Maps reveals that a solar farm at Tennant Creek would be situated just south of where the Northern Territory turns from shades of green and grey to a distinct red–brown colour, signifying a climate free of tropical monsoons. While the solar farm would take up an area even smaller than Singapore, the less frequent and less intense cloud cover means batteries could more easily manage the variation in solar output.

Ideal conditions: the proposed solar farm site near Tennant Creek. Google Maps

Garnaut’s pathways

Singapore represents a true extreme, but other parts of Asia confront similar challenges. Prime minister Bob Hawke’s economic adviser and former ambassador to China, Ross Garnaut, lays out the broader opportunity for Australia offered by cheap renewable energy in his book, Superpower: Australia’s Low-Carbon Opportunity.

Garnaut describes Australian renewable energy as “a path to low-cost reductions in emissions in the rest of the world.This can happen, he says, through three pathways. We can use direct-current cables to supply electricity to Southeast Asia. We can use the electricity from wind and solar plants to convert water into hydrogen and ship this to the “renewable-energy-resource-poor countries of Asia, notably Japan and Korea,” where land is scarce and energy demand high. And we can use both the electricity and the hydrogen from renewable energy to process ores into metals (or batteries) for export.

Beyond Tennant Creek, two other mega-renewable energy projects are taking shape to take advantage not just of Australia’s superior solar resource but also of our world-class wind resource. Both are located in Western Australia, one in the Pilbara and the other further south near Kalbarri.

The Pilbara project, which is by far the largest, had its genesis in disappointment. Several years ago the company behind the project, CWP Renewables, sought to expand into Indonesia. It was lured there by the country’s huge population, a government policy to expand renewable energy, and a demand for electricity that will massively expand over the next few decades. But finding good wind sites and negotiating some degree of security over development rights proved too difficult.

CWP Australia’s managing director, Alex Hewitt, wasn’t prepared to give up. For anyone passionate about combatting global warming, Indonesia is one of the big fish. Reliant on coal for electricity, it is going through a rapid process of economic development, much like China did two decades ago, with an accompanying growth in electricity demand. The fact that Japan has just half the population of Indonesia but consumes close to four times as much electricity gives an idea of how much demand could grow. What’s more, Japan is quite an energy-efficient economy. Powered by coal, Indonesia’s likely expansion in electricity consumption over the next few decades would be disastrous for containing global warming.

What Hewitt’s team found was that an area in the northwest of Western Australia, inland from the Eighty Mile Beach Caravan Park and the Pardoo Roadhouse in the Pilbara, experiences consistently high winds over an extraordinarily large area. It also receives among the highest level of solar radiation in the world. If you only had an eye to domestic needs, the location would be highly problematic: remote, without transmission infrastructure, several hundred kilometres from any major electricity demand. Getting people and materials to such a location would be an enormous logistical challenge. Only a gigawatt-scale project could be viable.

So two problems coalesced into an opportunity called the Asian Renewable Energy Hub. It is planned to combine the world’s biggest wind farm with the world’s second-biggest solar farm (Sun Cable’s Tennant Creek would be the biggest), all feeding zero-emissions electricity to Indonesia by high-voltage direct current cable. This single project would produce more power than all the wind farms and solar farms built so far in this country.

CWP’s Hewitt says this is the project that would allow him to die a happy man. He was smiling when he made the remark, but underneath you could sense a deadly serious ambition to make a major and lasting contribution to containing global warming.

Enter the miracle molecule

In a sign of the challenges that might await Sun Cable, the Asian Renewable Energy Hub has now pivoted away from direct-current transmission to Indonesia. Instead, the project has focused on Garnaut’s second opportunity, an export industry built on generating electricity to produce hydrogen from water via electrolysis. It will also supply three of its fifteen gigawatts to the Pilbara’s iron ore and LNG producers.

Hydrogen opens the possibility of supplying not just electricity and not just Southeast Asia. We could provide zero-emissions fuel for heating and transport to countries as far afield as Japan and Korea, and possibly even to Europe. But the technology and economics are more challenging than supplying power via cable.

On the customer side, the equipment that would use hydrogen as a fuel to power cars or provide heat for industrial processes is still only small-scale. Further technological progress is required to bring down costs and ensure reliability. On the production side, savings are needed at all stages. In favourable circumstances, with renewable energy costing about $45 per MWh, hydrogen could potentially be produced via electrolysis for around $25 to $30 per gigajoule. This looks reasonably competitive: while petrol is around $17.50 to $23.40 per gigajoule, hydrogen fuel cell-electric cars are about double the efficiency of a conventional petrol car. But then there’s the cost of transporting the hydrogen to Asia. With present technologies, this makes it more expensive than petrol (ignoring carbon externalities), let alone LNG, which costs roughly $9 to $14 per gigajoule delivered to north Asia.

But a range of foreseeable innovations and greater economies of scale could bring down the cost of producing hydrogen to around $11 to $12 per gigajoule by 2030, and it could then be delivered to ports in North Asia for around $26 to $28 per gigajoule. Given the superior efficiency of fuel cells, that kind of price tag would make it an attractive option for decarbonising transport. This would be a massive market, although further cost reductions would be necessary to displace gas as well.

By shifting focus to hydrogen, in other words, the Asian Renewable Energy Hub has sacrificed speed in the expectation it will capture a far larger prize.

The high cost of transporting hydrogen shows why Ross Garnaut sees Australia’s biggest opportunity not in the direct export of renewable energy but in using cheap renewable energy to produce metal products for export. Transporting oil, coal or gas over long distances overseas has become relatively cheap and easy. Direct current power lines have also been demonstrated to work well, but they don’t come cheap if you want to run them thousands of kilometres through the ocean. And, as we saw with the extended Tasmania Bass Link outage in 2016, if these cables suffer a fault it can be hard to diagnose and fix. Hydrogen’s problem is that it takes lots of energy and expensive equipment to convert it into a liquid small enough in volume to viably ship overseas.

Producing metals in Australia would save on transport costs because Australia already produces a large proportion of the world’s metal ores. Refined metals weigh much less than ore but are worth significantly more. Garnaut’s partnership with the British steel tycoon, Sanjeev Gupta, to revive the Whyalla Steel Mill and build an energy company backed by renewables is an effort to realise this vision.

Glimpses of an alternative future: steel tycoon Sanjeev Gupta. Liberty2017/Wikimedia Commons

But that pathway is not without challenges either. Just like those Aussie men who have little to no involvement in construction yet somehow feel they must drive a hulking dual-cab ute, politicians the world over seem to think that if you don’t have metal smelters you aren’t a real economy. Consequently, metal smelters across the globe are heavily subsidised and the market burdened by excess production capacity.

Australia’s steel mills, aluminium smelters and other industrial plants are struggling, and Gupta’s Whyalla plant, which lost $185 million last year, is no exception While power from wind and solar in Australia is approaching world-competitive prices, we haven’t yet got the cost of storage and hydrogen technologies down to where they need to be. This is beginning to look possible by as soon as 2030, but we need to encourage other countries to accelerate their efforts in decarbonising energy.

How the economics is transforming the politics

What Ross Garnaut highlights is that the rapid decline in the cost of wind and solar, alongside further reductions in battery and hydrogen-processing costs, can slice through the Gordian knot holding back Australian climate policy.

Senior policy-makers, including many on the Labor side, have long seen emissions-reduction efforts as a major economic threat — after all, Australia is the world’s largest seaborne exporter of coal and gas. And while industrial manufacturing in Australia is often sub-economic in scale, far from end users and weighed down by relatively high labour costs, it could defend itself using low-cost energy built on plentiful supplies of coal and gas. As a consequence, Australia has not only been reluctant to implement emissions-reduction policies at home, we’ve also tried to sabotage global efforts.

Yet it turns out that aggressive efforts by governments overseas to push down the cost of wind and solar have delivered Australia a potential competitive advantage. For this advantage to be fulfilled, though, two more things need to change. We need other countries to accelerate their efforts to increase the scale and reduce the cost of battery and hydrogen technologies. And we need them to enact tighter emission controls that will increase the cost of using fossil fuels and shift them towards renewable energy.

If these two things happen then renewable energy becomes the dominant fuel for energy and Australia moves into the box seat. What is often forgotten by policy-makers and commentators is that while Australia is the biggest exporter of coal and gas by sea, our exports are small relative to the amounts of coal and gas other countries produce domestically or import via pipeline. China has plenty of coal; India has plenty of coal. Russia and the United States have plenty of coal and gas. Yes, these countries also have plenty of renewable energy resources, but theirs aren’t nearly as rich and plentiful as Australia’s.

Meanwhile, the alliance between fossil fuel producers and industrial manufacturing in Australia has broken down. While manufacturers’ industry associations were busy in Canberra helping fight the Renewable Energy Target and the carbon price, energy companies were planning the price increases that made the impact of the carbon price look like a rounding error. In 2013, when the price was operating, wholesale gas prices were $4 per gigajoule; by 2018, with it long gone, wholesale gas prices had risen to anywhere between $9 and $15. Wholesale electricity prices duly followed, rising from around $55 to around $90 per megawatt-hour.

Manufacturers’ only hope for energy price relief turns out to be the fuel source their lobby groups fought against with the fervour of a Christian evangelist from America’s deep south. Interestingly, mining companies, except if they’re digging up coal, are also looking to cheap wind and solar to improve their competitiveness. Twiggy Forest’s iron ore operation in the Pilbara is about to replace a large chunk of its gas-fired power with a solar farm. Goldmines in Western Australia that have been paying large premiums to truck diesel and gas thousands of kilometres to their mines have noticed that lower-cost energy sources — sun and wind — exist right above them. Australia also hosts some of the richest deposits of the resources required to produce batteries.

The interests of Australia’s big business groups are beginning to split, with the potential to decisively shift the political dynamics. It is becoming apparent that the long-term financial interests of Australia’s industrial manufacturers, and also of some miners, are best served by strong global action to reduce emissions and to progress renewable energy, hydrogen and battery technology.

Morality meets economics

Politics, though, is taking a while to catch up. When the man who abolished the carbon price, Tony Abbott, lost his seat to Zali Steggall, an advocate of climate action, he delivered a message not of contrition but of celebration. What mattered, the former PM said during his concession speech, was that the Coalition as a whole had won government. While it had suffered losses in stronghold seats like Warringah, it was doing well in working-class seats. “Where climate change is a moral issue we Liberals do it tough,” said Abbott. “Where climate change is an economic issue, as the result tonight shows, we do very, very well.”

After preferences, the Coalition had indeed gained significantly in pivotal Queensland marginal seats where mining and industrial manufacturing are important. There, the message to blue-collar voters from the Coalition, as well as from Pauline Hanson’s One Nation, was that Labor’s climate change policies would put them out of work and drive up the cost of living.

The problem for the Coalition is twofold: gas prices are stuck at levels at least twice what they used to be, and financiers aren’t interested in sinking their money into building new coal-fired power stations. Energy prices will consequently remain high, and industrial manufacturing on tenterhooks. While coalmining and gas extraction are fine, they don’t actually support very many jobs once the necessary infrastructure is built.

Until recently the environmental movement and the Labor Party have tended to talk about solutions to climate change in terms of policy settings or broad technological solutions, like renewable energy. When it came to specifics, environment groups usually focused on the Adani coalmine, the Hazelwood power station and the other things they want to shut down.

What many are coming to realise is that they should be talking about specific projects they want to build. For a concreter or electrician in Gladstone or Townsville, an emissions-trading scheme sounds suspiciously like something that makes a Sydney banker rich. Even a Renewable Energy Target or a slogan like 100 per cent renewables is probably too remote from everyday financial worries. And shutting down a mine — well that sounds like it’ll end in the dole queue. But a huge hydro–wind–solar hub in North Queensland with a new transmission line to support mining expansion in Mt Isa sounds like employment and cash for them.

Of course, this is not what economists would recommend. They would say governments should set the overarching emissions target and leave it to the private sector to work out which projects should proceed. They’re right, but strangely it was the party of free enterprise that rejected this advice. Tony Abbott managed to demonise such an approach and good economic theory became a political albatross for Labor.

An opportunity is emerging for a talented politician to sell voters an alternative vision of economic security, one aligned with the need to contain global warming. Sun Cable and the Asian Renewable Energy Hub provide a picture of what’s possible over the long-term. But blue-collar workers need to be offered not just a vision of Australia becoming an energy exporting superpower in a decade’s time, but also shovel-ready projects for the next term of government. As a rich country we also need to demonstrate leadership in the here and now if we want other countries to accelerate a shift away from fossil fuels.

Coalition contradictions

Oddly enough it is the Coalition, not Labor, that has stumbled on half the answer. For all their talk of free enterprise and small government, the Liberals and the Nationals have converted energy policy into something like a showbag. They continue to proclaim that it would be a disaster if we were to shut down a single coal-fired power station — even one like Liddell that’s badly limping and well past retirement age. But whenever things start to get difficult in the energy or climate arena, they pluck out a new, impressive-sounding energy project.

Snowy 2.0 was just the beginning of what has become an array of projects extending all the way from Darwin Airport to Einasleigh, inland from Townsville, then stretching all the way south to Roseberry in Tasmania and plenty of places in between. Most of these projects involve energy storage via pumped hydro or a big battery, or new power transmission lines.

What the feasibility studies for these big-ticket projects show is that they only make economic sense if you plan on shutting down much of Australia’s existing coal-generating fleet and replace it with wind and solar. The Coalition knows it needs to be doing things to replace ageing coal power plants and increase competition in the electricity market, but it also wants to continue using Labor’s climate change policies as an instrument of fear. This half-hearted approach to transforming our energy system leaves it in danger of tangling itself in a net of contradictions.

Those contradictions are set on a collision course in Tasmania. Along with Queensland, the Coalition owes its unlikely election victory in May to two seats in northern Tasmania, Bass and Braddon. Scott Morrison led Tasmanians to believe that his government would deliver a major expansion of the state’s hydroelectricity system through a series of pumped hydro projects — essentially turning Tasmania into what is billed as the Battery of the Nation. This expansion hinges on the construction of a second direct-current transmission interconnector with the mainland — the Marinus Link — which would send excess electricity to Melbourne during peak-demand periods. Morrison claimed that this interconnector could be built as soon as 2025, although this has since shifted to 2027.

The problem facing the federal government is that the Australian Energy Regulator will only sign off on the plan if the new transmission line passes what is known as the regulatory investment test, an economic cost–benefit evaluation. But the feasibility study for the second interconnector made it very clear that the project made no economic sense unless several mainland coal generators closed down. According to the study, the Marinus Link’s benefits are likely to outweigh its costs only when around 7000 MW of the National Energy Market’s present coal-fired generation capacity retires.

To put that 7000MW into perspective, Victoria’s entire coal fleet is equal to 4775MW. After the closure of Liddell, New South Wales’s remaining coal fleet capacity is 8160MW. In other words, the Coalition is incredibly enthusiastic about building the Battery of the Nation yet has a conniption about the shutdown of the Liddell power station (from which we can only count on 1000MW at peak times), claiming they’ll build a brand new coal-fired facility in Queensland and keep Yallourn operating in Victoria.

Something doesn’t compute, and by the time of the next federal election Labor will have an opening to win back these Tasmanian seats. It simply needs to point out that the expansion of the Battery of the Nation, and the extra jobs it brings, hinges on electing a government that will transition Australia out of coal.

Winning over Queensland seats is trickier because there will be losers as well as winners there from the transition (although most of that state’s coalmining jobs are in coking coal, which is not immediately and directly threatened by renewable energy). Yet a power scheme rivalling Battery of the Nation in scope and ambition — the kind of project Joh Bjelke-Petersen would be proud of and Bob Katter is enthusiastically backing — is already on the drawing board. Like Battery of the Nation, it involves a major new transmission line, this one running inland from Townsville to Mt Isa and linking the main national grid with major mines in the North West Minerals Province to provide the mines with much cheaper electricity. It would also open up access to one of the world’s best solar resources. Further transmission lines would be necessary to link the 1000 megawatt Kennedy Wind Farm, pumped hydro plants and other major renewable energy projects with the industrial city of Gladstone.

The end result would be a triangle linking wind, solar and hydro projects with large mining and industrial electricity consumers across central and north Queensland. Power would be provided at a cost that would encourage mining in the northwest to expand, and would retain, or possibly attract, minerals-processing plants along the coast. The potential increase in jobs would dwarf those that might flow from the Adani Coal Mine.

For this to happen, the government needs, at a minimum, to act as underwriter and facilitator of long-term contracts between power suppliers and major mining and industrial customers. This would bring down the risk, allowing low-cost finance from superannuation funds and banks to flow in. The total investment would be significant, but in line with the Snowy 2.0 scheme once you include its supporting transmission.

If Labor were to promise such a scheme, the Coalition would face difficult choices. So far it has had some success by talking favourably about coal projects in the knowledge that Labor would struggle to do the same. But it hasn’t had a hand in seeing anything built. The Queensland electricity system is already oversupplied with coal-fired baseload power stations: more than 8000MW of coal-powered capacity for just 6000MW of average demand. Justifying more coal-fired stations is difficult unless you accept that you have to shut some of the existing ones down. And no credible power companies are lining up to build any new coal power stations.

The LNP’s talk-a-lot-about-coal strategy isn’t likely to win a battle for hearts and minds once it’s pitted against the far larger set of renewable energy and transmission projects already under development, backed by credible power project developers. (Note that the Collinsville coal power plant cited by resources minister Matt Canavan as worthy of government support is proposed by a company that appears never to have financed or built a major power station.)

It might be hard to imagine now, but if Labor promised such a scheme the Coalition would probably not be far behind. Self-preservation has a habit of winning out over ideology. This would represent a watershed moment: the Northern Queensland tail has been wagging the entire country’s energy and climate policy for the past few years.

Making possible the impossible

Sun Cable, Pilbara’s Asian Renewable Energy Hub and the Gupta’s plans for metal manufacturing provide tangible glimpses of an alternative future tied to renewable energy rather than fossil fuels. Lots of hurdles have to be overcome to convert it into a reality.

But some steps have already been taken. Over the space of just five years, between 2016 and 2021, the contribution of renewables to Australia’s electricity supply will have risen from 15 per cent to 30 per cent. A number of major manufacturers and mining companies are signing up to new renewable energy projects in order to lower their energy costs. Research company Green Energy Markets estimates that wind and solar projects already under development could produce more electricity than Australia currently consumes. Partly thanks to Malcolm Turnbull, Scott Morrison and Liberal state energy ministers, the energy storage and transmission projects already under way can take the country well beyond 50 per cent renewables.

While Tony Abbott may have been right about the last election, he could be very wrong about the next one. Who knows, we may even have a bipartisan approach to renewable energy and climate change. Nelson Mandela once said, “It always seems impossible until it’s done.” Thanks to an unlikely alliance of three billionaires — Mike Cannon-Brookes, Twiggy Forrest and Sanjeev Gupta — we can now see how it can be done. The economics are moving in the right direction. Let’s hope the political will is not far behind. •