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Garnaut predicts renewables to boom on cheap money as coal loses out

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Leading environmental economist Professor Ross Garnaut has predicted the current economic crisis will lead to growth in renewable energy at the expense of coal, and has argued Australia should not fear taking on debt to fuel a green economic recovery from the coronavirus pandemic.

The global economic crisis spurred by the pandemic means “interest rates are now permanently very much lower than they used to be”, which Professor Garnaut argued “will actually lead to an expansion of renewable power generation”.

Last week the International Energy Agency (IEA) forecast global energy demand would fall by six per cent this year, and for coal to bear the burden of losses with an eight per cent drop in demand.

The low operating costs of renewable energy generation had enabled it to expand market share as electricity demand declines during the coronavirus pandemic.

The high operating costs of coal-fired power, however, have caused its market share to shrink.

“Only renewables are holding up during the previously unheard-of slump,” the IEA’s executive director Dr Fatih Birol said.

The global downturn had put “great pressure on coal-based generation which is experiencing very low prices in the wholesale market,” Professor Garnaut said.

“The natural economic thing is for early closures of coal-fired power stations.”

The expected long-term reduction in interest rates would reduce the cost of capital, the key barrier to investment in renewable energy, which spelled bad news for coal, Professor Garnaut said.

“Cheap interest lowers the cost of transition from fossil fuels and makes it very unlikely that, without government intervention of a perverse kind, we will see investment in a new coal power.”

Professor Garnaut made the case for public and private investment in renewable energy to the Smart Energy Council online conference, ahead of addresses from the state premiers of Queensland, South Australia and Western Australia.

Queensland Premier Annastacia Palaszczuk said she was “extremely confident in the outlook for renewable energy” in her state, and announced her government was backing construction of Australia’s largest solar farm, near Chinchilla.

The Queensland government will underwrite private developer Neoen’s $570 million in the Western Downs Green Power Hub with a commitment to buy 320 megawatts (MW) of power through the state-owned energy company CleanCo.

Ms Palaszczuk said “new economy minerals” such as copper, cobalt, zinc and lithium, which are needed to build wind turbines, solar panels and batteries, could boost the state’s mining sector and lead to new manufacturing jobs.

“I want to see batteries manufactured here in Queensland because that means more secure long-term jobs,” she said.

Chief executive of employer representative Australian Industry Group Innes Willox said there is “immense scope” for public investment to support a transition to net-zero emissions and “getting started during the crisis will contribute to faster recovery”.

“Public debt is not an immediate crisis, especially not for the Commonwealth, but responsible management of public and private debt is going to be a big long term challenge,” Mr Willox said.

Mr Willox said priority areas to help transition to low-emissions technologies and generate economic stimulus at the same time are heavy industry, transport, agriculture and the built environment.

The 2011 Garnaut Review stands as the most comprehensive analysis of the impacts of climate change and opportunity for transition to an emissions-free economy.

Professor Garnaut’s 2019 book Superpower outlines how Australia can become a renewable-fuelled energy exporter.

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About Zohe

Environmentalist, Futurist, Lightworker, Wannabe naturalist. The way we are treating our world and environment is not going to end well! We need to change course NOW.

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