That Labor has put aside billions for a niche and unproven sector of the green economy is unsurprising given their abysmal history of picking winners when it comes to energy, writes Nick Cater.
Jim Chalmers said his number one priority in Tuesday’s budget was responsible, targeted relief for struggling Australians.
He also managed to squeeze in a little help for battlers like Andrew Forrest who was one of the biggest winners from the announcement of $2 billion in subsidies for green hydrogen.
The subsidy was less than a quarter of Fortescue Metals Group’s after-tax profit last year, but Forrest graciously acknowledged it would at least be enough “to get the ball rolling”.
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Green hydrogen, according to Forrest, an unripe technology that is far from proven at scale, is a sector that will one day be worth trillions and generatejobs and economic growth for decades.
Energy Minister Chris Bowen has bought the pitch.
The Hydrogen Headstart program announced in the Budget is part of the Albanese Green New Deal, a package of subsidies and incentives aimed at developing green technologies in Australia.
Global competition for capital was hot, even before US President Joe Biden introduced his $US369 billion Inflation Reduction Act and launched a global green subsidies arms race.
In March, US ambassador Caroline Kennedy challenged Australia to match and “beat” Biden’s subsidy-driven green new deal and Labor has risen to the challenge.
The fact is that Australia, like the rest of the developed world, has little choice but to compete with subsidies of its own if we want to keep up with the rest of the world in the race for zero emissions by 2050.
Resources billionaire Andrew Forrest is set to be one of the primary beneficiaries of Labor’s decision to set aside $2 billion in subsidies for green hydrogen. Picture: NC NewsWire / John Gass
Resources billionaire Andrew Forrest is set to be one of the primary beneficiaries of Labor’s decision to set aside $2 billion in subsidies for green hydrogen. Picture: NCA NewsWire / John Gass
Even so, taxpayers are entitled to ask why the government is handing out billions in green welfare to highly profitable companies.
They might also query why Energy Minister Chris Bowen has chosen to support such a niche sector of the green economy when there are further developed technologies to choose from.
Investing in green hydrogen is speculative to say the least. Producing hydrogen of any colour at a competitive price would be an achievement enough given its many technical and industrial challenges.
Producing green hydrogen requires a daunting investment in industrial-scale wind and solar plants across vast swathes of the Australian landscape along with transmission lines and batteries.
Talk that Australia can become a green hydrogen superpower is somewhat prematue.
It is not that government are particularly good at picking winners.
Quite the opposite, since businesses seeking a leg-up from the state are frequently those that struggle to raise private capital.
Does anyone remember biochar?
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It is charcoal produced from the slow, oxygen-free burning of plants that can theoretically capture atmospheric carbon dioxide which can be buried in the soil.
Kevin Rudd’s government put a lot of money into that one as part of its $4.5 billion Clean Energy Initiative.
It hasn’t been heard of since.
Then there was Rudd’s obsession with solar-thermal generation which he supported under the $1.5 billion Solar Flagships program.
It remains a commercial failure.
The Rudd government’s $2 billion Carbon Capture and Storage Flagships program was arguably more successful.
Just as CCS technology is beginning o show promise, however, the current Labor government has withdrawn its support.
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At the 2007 election, Rudd said nuclear power plants were “not an option. They don’t represent a sensible case on economics.”
Official assessments at that time said that nuclear power plants would take 15 years to build.
Hindsight is a marvellous thing.
Had Rudd committed to nuclear power, instead of his ill-fated 20 per cent renewable energy target, Australia could by now be sitting pretty with some of the most reliable emissions-free power in the world.
Yet even now Labor is foolishly ruling out nuclear even though the technology has developed in leaps and bounds making it cheaper, quicker and even safer to install.
Canada’s centre-left prime minister Justin Trudeau has no such hang-ups.
He insists that fighting climate change is so important that all zero-emissions tchnology must be on the table.
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Under Trudeau’s version of the green new deal unveiled in Canada’s March budget, the government is offering $7 billion in tax credits for investment in “non-emitting electricity generation systems” which includes nuclear.
Trudeau has already committed $1 million towards the country’s first nuclear small modular reactor at Darlington, Ontario. It is scheduled to be up and running by 2028 producing 360MW of reliable base-load power.
“As we look at what baseload energy requirements are going to be needed by Canada over the coming decades … we’re going to need a lot more energy,” Trudeau told a gathering last month.
“We’re going to have to be doing much more nuclear.”
Ironically, nuclear power could be the key to making Forrest’s green hydrogen dreams come true.
The key ingredient of hydrogen is not water, as its proponens frequently misleadingly claim, but energy.
Yet Bowen remains stubbornly opposed to nuclear power.
Peter Dutton made a cogent argument why the government should change its mind in his Budget in Reply speech on Thursday.
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“In the 21st century, any sensible government must at least consider small modular nuclear as part of the energy mix,” Dutton said.
“Thirty-two countries, including Canada, China, France, the United States and the United Kingdom, use zero-emission nuclear power today, including to firm up renewables.
Fifty countries are exploring or investing in next-generation nuclear technology.”
He pointed out that while Labor was happy for similar technologies to power our future submarines, it was refusing to consider its benefits onshore.
Bowen has taken to Instagram to justify his intransigence claimig, without solid evidence, that nuclear is too expensive and that development is too slow.
The question is: more expensive and slower than what?
A week after the announcement of another delay for Snowy Hydro 2.0 pushing completion out until 2029 at a cost of up to $10 billion plus the cost of transmission lines, Bowen’s argument is getting harder to sustain.
Nick Cater is senior fellow at Menzies Research Centre
