Australia’s Energy Security ‘Own-Goal’

It’s hard to fathom just how big a mess Australian energy policy has become.

In the most strategically challenging environment internationally in decades, Australian governments are deeply compromising our energy security. Really - you couldn’t make it much worse if you tried.

As a key regional energy producer, Australia could be about to turn a real strategic and economic natural advantage into a huge ‘own goal’.

On one hand, we are imminently poised to become the world’s biggest exporter of LNG. That is a very good thing. It is important to Australia’s national security and economic interests that it becomes and remains part of the energy security solution in Asia. It presents us with a real political and economic opportunity in a region returning to great power politics.

But on the other hand, due to political and other interests, a lack of leadership and courage, this could occur at the risk of our own domestic energy security and economic growth. That’s because over recent years governments have locked-up vast swathes of Australia from further gas exploration. What’s worse, that may well turn out to be more detrimental to broader environmental concerns than actually having allowed exploration to occur here.

That’s why it is so ironic that, on the cusp of Australia becoming the leading LNG exporter, one of our own leading utilities is conducting a feasibility study around building an LNG import terminal in Sydney. As state and territory governments progressively lock-up new gas reserves under moratoria and outright bans on arguable environmental grounds, that gas which is produced domestically will increasingly follow the money. It will be exported given the higher prices LNG attracts. 

While governments prevent further gas exploration here on environmental grounds, our utilities are forced to consider importing gas from countries with much weaker or non-existent environmental regulation.  So our restrictions of gas exploration under our own very strict environmental regulations may actually encourage gas exploitation in places where similar standards just don’t exist. 

It’s perverse.

Added to this environmental irony is the farce that is our climate policy. This week, yet another federal government has again failed to take steps to implement an emissions intensity scheme. It is broadly acknowledged that these schemes are the most economically efficient way to encourage investment in renewable energy and decrease emissions. In terms of energy security, we could also benefit from broadening the diversity of our energy supplies that this helps to achieve. And that would allow us to maintain our base-load electricity generation capacity while reducing emissions and increasing renewable supply. 

But the effect of current policies on domestic gas supplies, both for power production and industry is already beginning to show. The market is becoming increasingly tight. It will be most acutely felt in our hip pockets.

Energy security is not a buzzword, trend or meme. It is the comfort of knowing that energy consumers, be they government or private, have reliable access to affordable and quality energy from diverse sources during peacetime or in war. As such, it goes to the very heart of our economic and political bottom line. It underwrites our stability, our prosperity and so, ultimately, our political independence.

As we pass through this pivot of history, it’s just so important that we get this balance right. 

But we’re not.

The implications for Australia’s own gas market, power production (and prices), and industrial and retail consumers will be profound. Ultimately, if we don’t fix these policy settings quickly, we stand to lose in terms of energy security, economic growth and the environment.

In the end, when this political failure inevitably causes power and gas prices to rise and our domestic energy security is compromised, our leaders will pay the political price. The knee-jerk reactions and policy reversals that quickly follow will mean that this price will be exacted by both side of the equation – from consumers and conservationists. There will be nowhere in the electorate to hide.

But ultimately, the real price will be paid by all of us. And it will be measured both in real terms and a tremendous opportunity cost.