Tony Wood joined Grattan Institute to lead the Energy Program in mid-2011. Since then he and his team have delivered major reports on energy and climate change and he has developed a strong profile with governments and industry, and is a regular contributor in major media on key energy issues.
From 2009 until October 2014, he also retained a role as Program Director of Clean Energy Projects at the Clinton Foundation, advising governments in the Asia-Pacific region on effective deployment of large-scale, low-emission energy technologies such as solar and CCS.
Prior to these roles, he spent 14 years working at Origin Energy in senior executive roles covering retail and LPG line management and corporate affairs. In 2008, he was seconded to provide an industry perspective to the first Garnaut review.
1. How has Australia’s energy landscape been impacted by the decline in oil prices?
The decline in oil prices over the past six to nine months has had two significant consequences for us here in Australia, despite the fall in the exchange rate over the past year. The first is the drop in liquid fuel and petrol prices, which has been clearly welcomed by a wide range of industries and consumers. The second is the downward pressure on LNG companies and government royalties.
We have several new, very large, liquefied gas projects starting on Australia’s east coast. The contracts for these LNG plants are linked to oil prices, and as oil prices fall, companies like BG (now Shell) have been forced to reduce their share prices over the last six months. As a result, expansion of LNG facilities beyond the first commissioned plants is very unlikely.
The public sector has similarly been affected. The Queensland state government, for example, gets royalties from these energy projects. Because of the oil price decline, we have seen a significant reduction in these royalties, to the amount of hundreds of millions of dollars a year.
2. What is your outlook for clean energy Australia, given the abolition of the carbon tax and the current stalemate over renewable energy targets?
The pending agreement over renewable energy targets will provide much needed clarity and predictability around renewable energy investment – especially around solar and wind farms. If the final agreement looks as expected, then we will be able to build on the 5,000 megawatts built between 2001 and 2014, with an additional 6,000 megawatts between now and 2020.
The next big step for clean energy in Australia will be when we set post-2020 targets. This must happen before the United Nations Climate Change Conference happening in Paris in December 2015. The resulting strategy will lead to a more credible and predictable renewable outlook in the next 12 months, and this will be good for policy and investment.
3. How will the increase in solar uptake and the move towards distributed generation impact Australia’s utility industry?
The rise in solar and distributed generation has already had an impact. The renewable energy target – combined with the flat or falling rates of Australia’s electricity consumption – has resulted in a significant oversupply of electricity, despite consumption by LNG plants. This has put significant pressure on traditional coal and gas.
There’s also our generous set of state-level tariffs for household solar, which have put our solar uptake at the highest in the world. This has come at a price – almost all of the tariffs have been withdrawn because they are so expensive – but there is a long term future for the energy.
Regulators in Australia are requiring network businesses to introduce tariffs that are more reflective of cost. As a result, solar PV savings will be smaller in the short-term with the potential to be very attractive in the long-term if combined with solar storage.
4. With Asia’s rising energy demands and Australia being a leading energy exporter, especially in coal and LNG, what are the opportunities present for energy collaboration between Australia and the region?
Asia’s rising energy demand presents both challenges and opportunities for Australia. The first opportunity is that major Asian utilities, oil and gas companies are taking equity stakes in Australian projects. This is helping our initiatives become commercially viable and providing more secure roads for imports. The second is that we are seeing more technology sharing. The Australian market is small but we have seen quite a number of developments around solar technology and policy. This creates significant opportunity for collaboration with Asia.
The main challenge for us will be navigating the ways in which China, Vietnam, Thailand, and other countries in the region meet their differing energy demand growth. Right now it is difficult to see exactly how it will play out, as meeting demand is often at odds with limiting emissions. If you look at IEA’s New Policies Scenario, there is reasonable growth in demand for coal and gas. But, if you look at the IEA's 450 Scenario, in which the world acts to constrain global temperature increases to less than 2 degrees, then you see a real reduction in coal demand and a significant reduction in the growth in natural gas demand. Even as Australia is emerging as the world's biggest exporter of LNG by volume, these changes could challenge Australia with a fall in export revenue of as much as $100 billion per year by 2030-40.
5. What role do you see Asia playing on the global energy stage in the future?
Asia will play an important role on the future energy stage, but it is difficult to predict the specific impact. Countries across the region will be ramping up energy consumption to support economic growth and this will create significant opportunity for Australia, Indonesia, and other exporters. The unknown that remain, however, is the extent in which these countries are willing to commit to greenhouse gas emission caps and evolve their market mechanisms and subsidies accordingly.