Roadmap to nowhere?

The Coalition continues to walk the tightrope of looking like it doesn’t care about emissions reduction to parts of its base while looking like it does to the rest of the country. The latest iteration of this two-faced policy is the technology investment roadmap. This document does the usual dance that governments do when they are picking winners while trying to look like their choices have been fully rationalised as the only possible options.

The document is centred around a handful of key industries and some cost-based stretch goals. The costs are supposedly backed out from what would be needed to make the low emissions equivalents competitive with today’s technologies, but its anyone’s guess whether these benchmarks will still be applicable in a decade or so when the stretch goals may become achievable. Even so, the focus on cost-competitiveness injects a dose of realism into the Roadmap that is often missing from the breathless optimism of other “zero emissions plans”.

First off is “green” hydrogen (i.e. produced from renewables) at $2/kg. This is more a repackaging than a new idea given that there is already a national hydrogen strategy as well as several state-based initiatives. The strategy is based around an expectation that Australia can become a major hydrogen exporter, with a view to having a major energy commodity export as coal and then LNG decline over time. While a possible outcome, this aspiration glosses over the fact that pretty much every other major developed economy is in the green hydrogen game. Even if we find ourselves at the lower end of the cost scale, the challenges of safely and cheaply transporting hydrogen to East Asia are material. Plus, the first step appears to be stimulating domestic demand from various sources, which looks likely to require governments putting their thumbs on the cost scale to induce potential users to sign offtake agreements.

Next, we have electricity from storage for firming under $100/MWh. This is pretty much a statement of the obvious. As renewables deployment ramps up and coal exits, storage is going to eb key technology alongside gas peakers for balancing electricity systems. While this section starts out studiously technology-neutral, by the end the only technology getting a mention is battery storage. Given that the putative technology of modular pumped hydro storage remains an academic’s fantasy, this is not surprising. Site specific pumped hydro, like Snowy 2.0 may be worth developing (although plenty disagree) but it is sui generis, and has no real relevance for the Roadmap. But battery costs are fundamentally going to be driven by global deployment trends far more than anything that happens in Australia – although balance of system costs tend to be more locally-driven. In any case, the target here appears to be based on financial contract costs, which will be a function of market dynamics a much as underlying technology costs.

Next on the list is green steel and aluminium at $900/tonne and $2,700/tonne respectively. While today’s focus is on keeping existing smelters like Tomago and Portland open, this target realistically assumes new facilities are built. As with hydrogen, we are already playing catch-up with the rest of the world here.

A potential complement to the green metals target is the capturing and storage of carbon dioxide (CCS). The target here is $20/tonne, including up to 100km transport to a storage hub. The elephant in the room here is that there is no incentive for CCS without a carbon price, the policy that dare not speak its name under the Coalition. The Roadmap implies that the carbon price may come from the activities of the emissions reduction fund. But $20/tonne is above the clearing price of previous auctions and is it credible that the fund will have enough money in the future for large scale purchase of CCS? Especially in a post-COVID world where budget repair will loom large in government thinking.

Finally, there is soil carbon, with a target of $3/hectare for measurement. That’s right, the target is not for how cheaply we can sequester carbon in the soil, but for how much it costs to even know whether or not that is what is happening…

While none of the “big 5” are inherently bad ideas, they are all pretty big bets on the way the future unfolds. Curiously, the later part of the document contains – almost as an afterthought – a longer list of “emerging and enabling” technologies. This includes broad categories such as “energy efficiency” and “waste recycling”, EV chargers, microgrids, fugitive methane capture, animal feed, demand response, amongst others. Many of these use fairly mature technologies and so their place here is not clear. Does the government think deployment of these technologies could help reduce emissions (and costs, in many cases)? If so, they represent lower hanging fruit than the big 5 targets. If the government thinks deployment should be “left to the market” then what are they doing on the list at all?

Despite the critique above, the technology roadmap is at least something, and something is better than nothing. Critically, however, the funding engine for the proposed activities to kick-start the roadmap are via an expanded mandate for the existing agencies ARENA and CEFC. This will require some allies in the Senate, so expect the usual round of horse-trading with the crossbench to get it through. And don’t hold your breath waiting for the Coalition to admit they may have been wrong wanting to abolish these agencies for the last seven years.