What matters most to Australia’s leading economists about the future of Australia's energy system isn’t price and it isn’t reliability – it is cutting Australia’s emissions to net zero by 2050.
The preferred mechanism of the 40 top economists surveyed is a carbon price, and their least-preferred means of generation is nuclear.
Asked to pick the most important of three goals for the energy system of the future in the latest Economic Society of Australia poll, 18 of the 40 picked getting to net zero, 16 picked ensuring the power system was reliable, and only five picked minimising cost.
The survey comes as the Climate Change Authority prepares advice for the federal government on 2035 emissions reduction targets, and before that, sector plans for energy, agriculture, transport, resources, industry and buildings.
The 40 economists who took part are members of a panel of about 70 maintained by the Economic Society of Australia, among them experts in public finance, macroeconomics and economic modelling.
Several said they didn’t think the goals of net zero, reliability and price conflicted.
“Achieving net zero with reliability and at the lowest cost are all essential and not mutually exclusive,” said Climate Councillor Nicki Hutley.
“All three of these goals need and can be achieved,” said ANU professor of environmental and climate change economics Frank Jotzo. “It is not a choice of one or the other, or even a priority for one over the others.”
Jotzo said it was “crystal clear” that if electricity was to be affordable and secure, it would have to be created by the sun and the wind with backup from storage and a small amount of gas.
“More clean power allows low-carbon electrification in transport, industry and buildings,” he said.
Economist Melinda Cilento, chief executive of the Committee for the Economic Development of Australia, said Australia would need to get close to nailing all three goals – meeting two but being wildly off the third would not be sustainable.
Asked to nominate the second most important of the three goals, 13 of the 40 economists picked achieving net zero, 17 nominated reliability, and only 9 nominated minimising cost.
All up, 79% of those surveyed picked achieving net zero as one of the two most important goals, and only 36% picked minimising cost.
Economists are attuned to the potential costs of a failed energy transition.
“The ongoing and increasing costs of climate change are not being adequately recognised,” said Curtin University Emeritus Professor Margaret Nowak.
“In the short run, it is already contributing significantly to the cost of living pressures including through insurance costs, food prices and other agricultural product prices and through the growing costs of disasters- floods, storm ferocity, and fire,” Nowak said.
“Even though Australia is a relatively small contributor to the stock of global emissions, Australia is at particularly high risk of climate change damages through bushfires, drought, coral bleaching and other threats to biodiversity and agriculture,” said University of Melbourne environmental, energy, and industrial economist Leslie Martin.
“Australia is also in a unique position to show larger countries what can be done in terms of successfully integrating very large shares of renewable generation into the grid.”
Martin added that “net zero by 2050” was a target set by politics more than economics.
“Our goal should be to minimize the total cost of power generation, power distribution and power retailing, including the pollution costs of the electricity that we generate. To do that we want to phase out coal and dramatically ramp up renewables. Coal is only cheap when we ignore its social costs.”
Public policy specialist Rana Roy said what was important was minimising the total “social cost” of providing electricity, not merely the financial component of the social cost. That cost included the social cost of carbon emissions and the negative impacts of generation and transmission on air, soil, water and biodiversity.
Barely any role for coal, declining role for gas
Asked about the optimal power mix in 2040, the panel saw a much-reduced role for coal, supplying less than 8% of Australia’s power, down from 46% at present.
Renewables would supply 69% of Australia’s power by 2040 (up from 33%) and gas 14% (down from 17%).
Coal would generate only 7% of Australia’s power, down from 46%.
On average, the panel expected nuclear power to supply 5%, but the average hides sharp divisions. Only eight of the 40 saw any role for nuclear. The rest saw none.
Economist Saul Eslake said while he had no ideological objection to nuclear power, he was unpersuaded that it would end up being cheaper than a predominantly renewables-based system, even allowing for the cost of building new transmission lines.
He was concerned about the prospect of the very large Federal Electricity Commission he said would be required to build and run the reactors.
“It is relevant to me that the private sector is willing to invest in renewable energy generation infrastructure and the associated required transmission infrastructure, albeit with tax breaks and subsidies, but there is no commensurate willingness on the part of private investors to invest in nuclear generation,” he said.
Price carbon or expand the safeguard mechanism
Invited to pick up to three tools the government could use to get to the optimal power mix by 2040 from a list of six, 57% picked an economy-wide carbon price, and 40% picked extending the existing carbon price embedded in the so-called “safeguard mechanism” applying to heavy industry.
50% opted for firm commitments not to extend the life of existing coal-fired power plants.
While only 22% backed direct government funding of the preferred forms of generation and transmission, 40% backed investment subsidies.
A supporter of direct government subsidies, University of Melbourne industrial economist David Byrne said that while direct subsidies were often a bad idea, in the case of the energy market, so-called ‘network effects’ gave the government a big bang for its buck. The more electrical vehicle charging stations and community batteries there were, the more Australians would feel confident about driving electric vehicles and installing solar panels.
Macquarie University innovation specialist Lisa Magnani said that whatever set of mechanisms the government chose to bring about net-zero by 2050, the most important thing was that they should be consistent. Changes could undo years of effort. Australia's success in the transition to date gave what it did an international significance.
Peter Martin is a former Commonwealth Treasury official who reported economics for the ABC for two decades before serving as economics editor of The Canberra Times, The Age and The Conversation. He hosts The Economy, Stupid on ABC Radio National.
Detailed responses from each of the 40 economists are available here:
https://esacentral.org.au/polls
Responses (996)
Garry Barrett.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: 10
Gas: 15
Renewables: 75
Nuclear: 0
COMMENT:
Move toward renewables. Coal and gas are needed to support the transition.
Nuclear is not economically feasible in that timeframe.
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Carbon pricing through a cap and trade scheme
Harry Bloch.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 20
Renewables: 80
Nuclear: 0
COMMENT:
Renewables are the cheapest alternative available as well as being environmentally sustainable without requiring substantial modifications in lifestyles.
As they are intermittent sources of energy, supplementary supply is necessary to meet demand at times when the sun isn't shining or the wind blowing.
Batteries and hydro storage can meet the bulk of this demand with low carbon emissions, especially as the cost of batteries drops with competition and mass production. Some peaking gas supply will likely be necessary until 2040 to ease the transition to a fully renewable energy production system.
HOW TO GET THERE:
Carbon pricing through an extension of the safeguard mechanism to most industries and firms, Production tax concessions for preferred forms of energy generation, Planning regulations that preference energy efficiency
Adrian Blundell-Wignall.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 10
Renewables: 60
Nuclear: 30
COMMENT:
Nuclear is the missing element. Clean and efficient. Living in France I see none of the negatives that Australian critics focus on.
HOW TO GET THERE:
Carbon pricing through a cap and trade scheme, Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Direct government funding of preferred forms of energy generations and/or transmission.
Alison Booth.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 0
Renewables: 100
Nuclear: 0
HOW TO GET THERE:
Investment subsidies for preferred forms of energy generation/transmission, Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Production tax concessions for preferred forms of energy generation
David Byrne.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 20
Renewables: 80
Nuclear: 0
COMMENT:
We will become an economy powered by rooftop and grid-scale level solar, wind, and batteries by 2040. Some degree of 'backup' power and the need to quickly ramp up production will likely be needed to ensure a power supply when the sun doesn't shine and the wind doesn't blow.
It is probably unrealistic at this stage that by 2040, we will have affordable batteries adopted by consumers at scale (both power walls and V2G storage from EVs) or grid-scale level battery storage to store and smooth sufficient energy supply to overcome the intermittency of solar and wind. This probably means gas needs to remain in the mix for backup capacity and smoothing by 2040 but remains on a path to exit the mix as batteries scale.
We risk prolonging climate change with coal-based production.
And nuclear is not economic, given their cost, long lead time to launch, and the current path of technological progress with renewables and battery storage.
Regarding 'how to get there' and 'what should be done,' carbon pricing remains the most efficient approach to targeting and achieving this transition (even if politically contentious). Network effects with, e.g., community batteries and EV charging, create rationales for direct government investment akin to industrial policy to unlock network economies and investment toward electrification of the grid and transportation (a huge emitter).
HOW TO GET THERE:
Investment subsidies for preferred forms of energy generation/transmission, Carbon pricing through a cap and trade scheme
Lisa Cameron.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply PER CENT OF GENERATION BY 2040:
Coal: 15
Gas: 5
Renewables: 85
Nuclear: 0
COMMENT:
Ideally, 100% of Australia's energy would come from renewables but it will take some time to phase out coal and gas and consumers will need time to be able to adjust their consumption patterns.
Some non-renewable energy may continue to be necessary for the stability of supply.
Nuclear power takes too long to come on line and is excessively expensive.
HOW TO GET THERE:
Carbon pricing through an extension of the safeguard mechanism to most industries and firms, Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Carbon pricing through a cap and trade scheme
Melinda Cilento.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 3 (9 of capacity
Renewables: 1
Nuclear: 0
COMMENT:
For the optimal mix in 2040, I am as uncertain as anyone, but pretty certain that what we predict as ?optimal? now will be different by then. So until then, I lean to AEMO?s ?most likely? step change scenario in its Integrated System Plan.
By the way, don't forget about storage when thinking about energy sources and mix.
Ps - on the multiple choice above, we are going to have to get as close as possible on all three goals, nailing two but being wildly off the third will not be sustainable in my view.
HOW TO GET THERE:
Carbon pricing through a cap and trade scheme, Carbon pricing through an extension of the safeguard mechanism to most industries and firms
Melinda Cliento.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 3 (9 of capacity
Renewables: 1
Nuclear: 0
COMMENT:
For the optimal mix in 2040, I am as uncertain as anyone, but pretty certain that what we predict as 'optimal' now will be different by then. So until then, I lean to AEMO's 'most likely' step change scenario in its Integrated System Plan.
By the way, don't forget about storage when thinking about energy sources and mix.
Ps - on the multiple choice above, we are going to have to get as close as possible on all three goals, nailing two but being wildly off the third will not be sustainable in my view.
HOW TO GET THERE:
Carbon pricing through a cap and trade scheme, Carbon pricing through an extension of the safeguard mechanism to most industries and firms
Deborah Cobb-Clark.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: 25
Gas: 10
Renewables: 65
Nuclear: 0
COMMENT:
Nuclear energy makes no sense. It will be harder (more costly) to reduce our reliance on coal than reducing our reliance on gas, so the optimal mix will include more coal than gas. The optimal mix must contain more renewable energy options.
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Production tax concessions for preferred forms of energy generation, Carbon pricing through a cap and trade scheme
Brian Dollery.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: 10
Gas: 30
Renewables: 10
Nuclear: 50
COMMENT:
Nuclear energy makes no sense. It will be harder (more costly) to reduce our reliance on coal than reducing our reliance on gas, so the optimal mix will include more coal than gas. The optimal mix must contain more renewable energy options.
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Production tax concessions for preferred forms of energy generation, Carbon pricing through a cap and trade scheme
Craig Emerson.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 20
Renewables: 80
Nuclear: 0
COMMENT:
Coal-fired power stations burn coal 100% of the time, whether or not they are generating electricity.
By 2040 they will be very old and would need government-sponsored refurbishment. Gas can provide firming capacity for renewables when needed.
Nuclear is incredibly expensive and would not be ready by 2040.
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies
Saul Eslake.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 20
Renewables: 80
Nuclear: 0
COMMENT:
I have no ideological objection to nuclear power, but I am unpersuaded that it will end up being cheaper than a predominantly renewables-powered electricity system (even allowing that the transmission infrastructure required for a nuclear-powered generation capacity is less than that required for a predominantly renewables-fired system).And I am concerned about the prospect of a very large Federal Electricity Commission being imposed on the Australian market. It is relevant to me that the private sector is willing to invest in renewable energy generation infrastructure, and the associated required transmission infrastructure - albeit with tax breaks and subsidies - but there is no commensurate willingness on the part of private investors to invest in nuclear generation.
HOW TO GET THERE:
Carbon pricing through a cap and trade scheme, Investment subsidies for preferred forms of energy generation/transmission, Carbon pricing through an extension of the safeguard mechanism to most industries and firms
Allan Fels.
"WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 5
Gas: 20
Renewables: 75
Nuclear: 0
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Carbon pricing through a cap and trade scheme, Carbon pricing through an extension of the safeguard mechanism to most industries and firms
Gigi Foster.
WHAT MATTERS MOST:
1. Minimising the total cost of power generation, power distribution and retailing
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 0
Renewables: 0
Nuclear: 0
COMMENT:
I don't like the premise of this question, which is that some bunch of future-tellers have any place predicting the precise energy mix that will be optimal in 15 years' time.
What I am confident about is that renewables have no chance of replacing fossil fuels; that we should use more of our wealth of gas reserves and also keep coal going for reliable base-load generation; and that we should consider nuclear.
HOW TO GET THERE:
Bring some French engineers over to Australia and pay them to advise us on the feasibility and optimal location and design of nuclear power generation in Australia. Also, wipe out all the special subsidies to "renewable" technology that are based on the net zero madness.
john Freebairn.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 5
Renewables: 85
Nuclear: 10
COMMENT:
Assume all current coal-fired generators are retired by 2040, and no replacements.
Gas, and preferably with some carbon capture and storage, to provide backup for the volatility of the supply of renewables (including battery, hydro and pumped hydro storage).With most other countries planning nuclear with its base load and reliable supply attributes developing lower costs, a role for nuclear in Australia to balance the increasing marginal costs of reliable supply as renewables plus backup storage share approaches 100%.
HOW TO GET THERE:
Carbon pricing through a cap and trade scheme, Subsidies to internalise some of the external benefits of R&D to find lower cost and carbon free energy products
Lata Gangadharan.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 10
Gas: 25
Renewables: 65
Nuclear: 0
COMMENT:
In 15 years, it is unlikely that the economy can completely separate itself from fossil fuels, so one expects they will still be in the mix.
However, reducing this to the lowest possible level, while keeping energy security and reliability high is an important goal.
Moving to natural gas from coal will also have environmental benefits.
HOW TO GET THERE:
Carbon pricing through a cap and trade scheme, Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Production tax concessions for preferred forms of energy generation
RICHARD HOLDEN.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 15
Renewables: 85
Nuclear: 0
COMMENT:
The likelihood that Australia will have a functioning nuclear power industry by 2040 is close to zero. We lack the expertise, have not resolved the waste management even for the Lucas Heights reactor, and recent experiences have new nuclear power stations taking 20 years to come into production once construction starts. So unless we decide to contract China to build them, run roughshod over local community concerns, and start investing now in training nuclear engineers, 2040 is 'dreaming'.
That leaves old coal power stations, which are very expensive to keep operating, and a bad choice when there are renewable projects that can supply lower-cost power. This will need substantial grid investment and faster approval processes. Gas will be an important peaking provider - excess capacity will be needed, but use should be minimised as unlike renewables generating power from gas is also expensive.
HOW TO GET THERE:
Investment subsidies for preferred forms of energy generation/transmission, Carbon pricing through an extension of the safeguard mechanism to most industries and firms, Firm commitments not to extend the life of existing coal-fired power plants through subsidies
Nicki Hutley.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 6
Renewables: 94
Nuclear: 0
COMMENT:
Achieving net zero with reliability and at the lowest cost are all essential and not mutually exclusive. So it makes little sense to ask which one should be prioritised.
As to the mix, coal is already retiring quickly from generation and is expected to be gone by 2040 under AEMO's ISP step-change scenario.
Renewables, (including transmission and firming), already make up 40% of the NEM and are the cheapest way to replace coal. A small amount of peaking gas will also be required in 2040.Nuclear makes absolutely no economic sense in Australia on any reasonable evidence-based assumptions. Current subsidies for fossil fuels should be reallocated to clean energy generation.
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Carbon pricing through an extension of the safeguard mechanism to most industries and firms, Investment subsidies for preferred forms of energy generation/transmission
Frank Jotzo.
WHAT MATTERS MOST:
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 5
Renewables: 95
Nuclear: 0
COMMENT:
I'm not answering the choice about "what matters most" because all three of these goals need and can be achieved. It is not a choice of one or the other, or even a priority for one over the others.
It is crystal clear that the future of an affordable, secure means mostly wind and solar power, supported by energy storage and some gas fired power. More clean power allows low-carbon electrification in transport, industry and buildings.
Nuclear power would be far more expensive than the alternatives, costing hundreds of billions of dollars for only a small share of future power supply. It would need enormous subsidies, probably through government ownership. Deployment would inevitably be a very long time off. Many years would go by before any actual investments could be made.
The near term effect would then be to delay the renewables transition, requiring subsidies for coal plants, and keeping emissions higher for longer.
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Investment subsidies for preferred forms of energy generation/transmission, De-risking of power sector investments, esp solar and wind, through underwriting schemes like the Capacity Investment Scheme. (This option is the current mainstay of electricity investment support, and it should be on the list of options to choose from.)
Guyonne Kalb.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Minimising the total cost of power generation, power distribution and retailing
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 10
Renewables: 90
Nuclear: 0
COMMENT:
We are already well on the way with renewables, aiming for about 80% of all energy production by 2030, so 90% by 2040 seems achievable. Cleaner energy production is going to be crucial for a livable future. Nuclear is way too expensive and slow to get up to speed, and it also generates dangerous slow-decaying waste that would need to be safely stored for countless generations (further increasing the already high price of this option).The 10% gas is there to support the households dependent on gas for heating, hot water, and cooking who cannot easily transition to electric appliances within the next 15 years. However, the aim should be to reduce it as quickly as possible.
HOW TO GET THERE:
Production tax concessions for preferred forms of energy generation, Firm commitments not to extend the life of existing coal-fired power plants through subsidies, support for low-income households to make the transition from gas to electricity; and investments in low-income households' housing to reduce their energy needs.
Michael Keating.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: 15
Gas: 20
Renewables: 65
Nuclear: 0
COMMENT:
Nuclear is clearly uneconomic. No private business will invest in nuclear. Renewables should be maximised, and my not well-informed guesses are that means a fall in coal and the gas used should be consistent with the amount needed for firming the electricity supply.
HOW TO GET THERE:
Carbon pricing through a cap and trade scheme, Investment subsidies for preferred forms of energy generation/transmission, Carbon pricing through an extension of the safeguard mechanism to most industries and firms
Michael Knox.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Minimising the total cost of power generation, power distribution and retailing
PER CENT OF GENERATION BY 2040:
Coal: 10
Gas: 30
Renewables: 30
Nuclear: 30
COMMENT:
The International Energy Agency says the biggest proportionate upward shift in generation this year is in nuclear.
Our combination proves a stable balance of energy sources reducing vulnerable exposure to price and cost variation to a minimum.
HOW TO GET THERE:
Direct government funding of preferred forms of energy generations and/or transmission
Guay Lim.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Minimising the total cost of power generation, power distribution and retailing
PER CENT OF GENERATION BY 2040:
Coal: 20
Gas: 20
Renewables: 40
Nuclear: 20
HOW TO GET THERE:
Investment subsidies for preferred forms of energy generation/transmission, Production tax concessions for preferred forms of energy generation, Carbon pricing through a cap and trade scheme
Elisabetta (Lisa) Magnani.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Minimising the total cost of power generation, power distribution and retailing
PER CENT OF GENERATION BY 2040:
Coal: 0-5
Gas: 3
Renewables: 95
Nuclear: 0
COMMENT:
The ongoing energy transition is a challenging process and requires the mobilization of public and government sectors, the private sector and all communities across Australia. Clear and consistent policies and appropriate enforcement mechanisms will be fundamental for this ongoing process.
Government investments in the form of subsidies for preferred (renewable) forms of energy and direct funding to support our energy transition are essential policy mix. We have already achieved good results in terms of the transition to electrifying Australia through the use of renewable energy sources. This process needs to be supported to achieve states? targets.
The consistency of policymaking in this respect is particularly important now as major economies in the world aim to undo years of effort. Australia's policies in terms of energy transition and the underlying commitments to target have now a major international significance.
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Investment subsidies for preferred forms of energy generation/transmission, Direct government funding of preferred forms of energy generations and/or transmission
Leslie Martin.
WHAT MATTERS MOST:
1. Minimising the total cost of power generation, power distribution and retailing
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas:n 15
Renewables: 85
Nuclear: 0
COMMENT:
Climate change is an existential threat. Even though Australia is a relatively small contributor to the stock of global emissions, Australia is at particularly high risk of climate change damages through bushfires, drought, coral bleaching and other threats to biodiversity and agriculture. Australia is also in a unique position to show larger countries what can be done in terms of successfully integrating very large shares of renewable generation into the grid.
That said, ?Net zero by 2050? is a target set by politics more than economics. Our goal should be to minimize the total cost of power generation, power distribution and power retailing, including the pollution costs of the electricity that we generate. To do that we want to phase out coal and dramatically ramp up renewables. Coal is only cheap when we ignore its social costs.
I see natural gas still in the mix in 2040 because it is currently one of the most affordable ways to balance the intermittency inherent in solar and wind power. Other ways to balance the intermittency are hydro (already at max) and storage, where batteries are still very expensive, though rapidly getting cheaper, especially at the utility scale. The crucial other component to dealing with intermittency is cost-reflexive pricing, especially for loads with a lot of discretionary timing, like that of some large industrial and commercial users and most future EV users.At the extreme level of cost-reflexive pricing, we should be talking more about plans where users can express a willingness to be curtailed, or partially curtailed, at critical system times in exchange for significantly lower prices the rest of the year. The more users switch to cost-reflexive pricing, the more we can reduce overall system costs in the transition to cleaner fuels and the less we will need natural gas to balance predictably-intermittent solar and less predictably intermittent wind.Nuclear generation may be appropriate in the long run but with two big caveats.First, the decision to adopt nuclear should not be rushed, especially not on the timescale that would be required for it to be online by 2040. Given the social costs involved in the safe processing and storage of nuclear waste, and the time scale of the risks, nuclear needs to be the result of na ational process of community understanding and buy-in before being potentially included in the mix.Second, wind/solar + batteries is the true competitor for nuclear, not coal. When all private and social costs are considered, I doubt nuclear will be more economical in Australia than wind with next-gen batteries. Australia might better support global climate goals by exporting uranium to countries with less favourable renewable resources.
HOW TO GET THERE:
Carbon pricing through an extension of the safeguard mechanism to most industries and firms, Carbon pricing through a cap and trade scheme
Flavio Menezes.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 20
Renewables: 80
Nuclear: 0
COMMENT:
These numbers align with AEMO?s 2024 step-change scenario, which outlines a pathway to achieving net-zero emissions by 2050. There is very little room for procrastination if we are to avoid catastrophic outcomes. In the electricity market, state governments and mechanisms like the Commonwealth Investment Scheme will need to do the heavy lifting in the energy transition in the absence of an economy-wide carbon price.
I am optimistic that distributed energy resources such as EVs, home batteries, and rooftop solar, along with utility-scale and community batteries, can manage the evening peak under appropriate regulatory and market governance settings. However, the existing wholesale market design fails to incentivise efficient investment in long-term storage, flexible loads, or gas peakers, which may only be used during prolonged periods of low renewable generation or extreme demand conditions.
While I am agnostic about the role of nuclear energy in a net-zero economy post-2050, I believe it is unlikely to play a significant role in the actual energy transition. My view is based on three factors: the cost compared to alternatives, the generation profile, which does not align with variable renewable generation, and the feasibility of having a working nuclear reactor by 2035 or 2037 as per the Coalition?s energy policy.
HOW TO GET THERE:
Investment subsidies for preferred forms of energy generation/transmission, Carbon pricing through an extension of the safeguard mechanism to most industries and firms, A NEM-wide mechanism for managing the staged exit of coal; market governance and regulatory arrangements for distributed energy and more broadly demand response; reinventing retail competition for the transition; and redesign the NEM for the transition from variable cost technology to fixed costs/zero marginal costs technology.
James Morley.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Minimising the total cost of power generation, power distribution and retailing
PER CENT OF GENERATION BY 2040:
Coal: 15
Gas: 10
Renewables: 75
Nuclear: 0
COMMENT:
Nuclear appears way too costly.
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Carbon pricing through a cap and trade scheme, Investment subsidies for preferred forms of energy generation/transmission
John Quiggin.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Minimising the total cost of power generation, power distribution and retailing
PER CENT OF GENERATION BY 2040:
Coal: 0
Gas: 5
Renewables: 95
Nuclear: 0
COMMENT:
Nuclear is not a serious option, and all coal should be phased out by 2040. So, the only question is how much firming of solar and wind is done by batteries and hydro (classed as renewables) and how much by gas. Given rapid progress on batteries, the role of gas is likely to be small.
HOW TO GET THERE:
Carbon pricing through a cap and trade scheme, Carbon pricing through an extension of the safeguard mechanism to most industries and firms, Investment subsidies for preferred forms of energy generation/transmission
Mala Raghavan.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply PER CENT OF GENERATION BY 2040:
Coal: 10
Gas: 25
Renewables: 60
Nuclear: 0
COMMENT:
I would like to see Australia's energy mix lean more toward renewable sources, ideally aiming for at least 80% renewable energy penetration in the near to medium term.
However, this transition appears challenging given the current pace of change and some of the policy and infrastructure bottlenecks. Grid upgrades, energy storage capacity, and coordination between federal and state governments pose significant hurdles.
Despite these challenges, I remain hopeful that Australia can achieve at least 65% of its energy needs from renewables within the next decade. As we make this transition, I see a role for natural gas as a bridging fuel, as it is considerably cleaner than coal and more flexible in balancing supply with demand.
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Production tax concessions for preferred forms of energy generation, Direct government funding of preferred forms of energy generations and/or transmission
Sue Richardson.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Minimising the total cost of power generation, power distribution and retailing
PER CENT OF GENERATION BY 2040:
Coal: 5
Gas: 10
Renewables: 75
Nuclear: 0
COMMENT:
Nuclear is not feasible in that time frame. Coal plants have limited lives, are a poor fit with renewables and should not be replaced, both because that is too expensive and because they are too dangerous for the climate. Some gas will probably be needed to firm a system that is predominantly powered by renewables.
HOW TO GET THERE:
Production tax concessions for preferred forms of energy generation, Carbon pricing through a cap and trade scheme, Carbon pricing through an extension of the safeguard mechanism to most industries and firms
Rana Roy.
WHAT MATTERS MOST:
1. Minimising the total cost of power generation, power distribution and retailing
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: Below 46
Gas: Above 17
Renewables: Above 33%
Nuclear: 0
COMMENT:
First, I need to clarify that my precise answer to the first question above is this: the most important goal here is to minimise the total social cost of power generation, power distribution and power retailing ? not merely the financial component of this social cost. This includes the social cost of carbon emissions in the electricity sector as well as other sectors, and the social cost of other environmental variables such as the negative impacts of air, soil and water pollution, negative impacts on biodiversity, and so on.
In contrast, I do not regard hard and fast targets for a politically-determined future date a quarter-century or a half-century or a century away from today as a relevant goal. In theory, it is almost a category error. In practice, it is at best a distraction from the task at hand and at worst a recipe for poor decision-making.
Hence, although I remain deeply engaged in work in this field ? including as a member of the French Government's Green Bond Evaluation Council ? I leave the language of 'Net Zero by 2050' to politicians. It is not a determining quantum in the daily work of practising economists.
On the basis of the same reasoning, I am disinclined to name an optimal set of numbers on energy sources for Australia in the year 2040. Rather, what I have offered above is an indication of what I think is likely to be the optimal direction of travel for each of the nominated sources. My reasons are spelt out below.
Re nuclear: I can state with high confidence that the optimal share of nuclear in the Australian electricity grid ? today, tomorrow, and in 2040 and beyond ? is greater than zero! Of all major countries in the world, France has the cleanest, greenest grid of all. This is primarily thanks to the high share of nuclear power, at 67%, and, secondly, the rich legacy of hydro-electric power, at 14%. To be sure, there are some small and remote islands in our world, such as Iceland and Tasmania, where renewables ? primarily, hydro-electricity ? supply close to 100% of the grid. But almost all major countries include nuclear in the mix. Indeed, I suspect that the world will leave nuclear fission behind only when we arrive at nuclear fusion ? and that is unlikely to happen before 2040.Re gas: given that it will take some time to develop and expand the use of nuclear power in Australia, even if there were a decision to do so today, an optimal mix of sources tomorrow, and perhaps up to 2040 and beyond, is likely to include a much-expanded use of readily available Australian gas beyond its current 17%. For the present, gas is the obvious lower-emissions alternative to coal as a source of baseload power.Re coal: although coal is indeed a reliable source of baseload power, an expanded use of gas and the introduction of nuclear into the grid should enable a carefully-paced transition out of coal. Notwithstanding its historical contribution to the development of the modern world, the production and consumption of coal entails a high social cost in terms of carbon emissions, air pollution, and the lives and limbs of mineworkers, inter alia.Re renewables are here, there are counter-acting forces at work and contrasting points that need to be made.On the one hand, it needs to be said that the present share of renewables in Australia ? in particular, solar and wind ? is inefficiently high. Feed-in tariffs are by far the most inefficient means of decarbonisation available in terms of the financial cost per ton of CO2 equivalent removed ? as has been shown by several successive OECD studies over the better part of two decades (see here: https://www.oecd.org/en/topics/environment.html) and as has been recently confirmed in a major study on renewables approved for publication by the French Green Bond Evaluation Council (see here: https://www.aft.gouv.fr/en/green-oat).Moreover, the subsidies for feed-in tariffs in Australia have been, and continue to be, socially regressive, with the more affluent third of Australian households gaining at the expense of renters and poorer homeowners (see here: https://www.abc.net.au/news/2025-04-07/labor-battery-subsidy-scheme-risks-worsening-social-inequity/105143902). Finally, in regard to wind power, there is at least prima facie evidence to suggest that the approval process for wind farms has shown an insufficient regard for their negative impacts on biodiversity.On the other hand, if we fast forward to 2040, there is good reason to suppose that continuing and accelerating progress in solar technologies, a more thoughtful development of wind power, and an increase in the use of hydro-electric power (rising imports from Tasmania, new small-hydro schemes elsewhere in Australia, and so on) will raise the justified, optimal share of renewables in the Australian grid to above 33%.
HOW TO GET THERE:
Investment subsidies for preferred forms of energy generation/transmission, Carbon pricing through a cap and trade scheme, Increased public investment in R&D to raise the efficiency of new technologies aimed at decarbonising the grid.
Jeffrey Sheen.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Achieving net zero carbon dioxide equivalent emissions by 2050
PER CENT OF GENERATION BY 2040:
Coal: 5
Gas: 15
Renewables: 65
Nuclear: 15
HOW TO GET THERE:
Carbon pricing through an extension of the safeguard mechanism to most industries and firms, Investment subsidies for preferred forms of energy generation/transmission, Direct government funding of preferred forms of energy generations and/or transmission
Hugh Sibly.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Minimising the total cost of power generation, power distribution and retailing
COMMENT:
It is impossible to make an informed assessment as to the optimal mix of energy sources in Australia in the (decades-long) transition to net zero emissions of greenhouse gasses. To do this one would need accurate, comprehensive and objective estimates of the total cost of supplying households and industry with electricity from all potential sources over several decades. As far as I can tell, there is simply no such reliable information publicly available. All estimates I have seen have been incomplete and tinged with private interests, ideology, politics, or some combination of these.
Wind and gas generation needs to be matched with appropriate firming capacity, whether gas, storage or some other such readily dispatched power. The choice of such technology will influence the mix of sources of power that is actually delivered to industry and households.
Reliable and low-cost energy is a fundamental requirement for a productive and prosperous community. To achieve this, sound engineering and economic decisions need to be made in the development of the energy system(s).Unfortunately, in the (desirable) attempt to lower greenhouse gas emissions, energy generation technology has become a political football. This threatens to undermine the efficiency of the energy system, thereby under-achieving greenhouse gas emission reductions and economic growth.
The only way I can see that this poor outcome can be avoided is by overhauling and improving energy market regulation and systems with the explicit aim of increasing incentives for investment in the most appropriate cost-minimising generating capacity (including the optimal firming capacity for renewables). A stable regulatory environment is also essential, in order for the spectre of sovereign risk not to deter the required private investment.
HOW TO GET THERE:
Carbon pricing through a cap and trade scheme, Market driven electricity generating capacity
Joaquin Vespignani.
WHAT MATTERS MOST:
1. Ensuring the reliability of power supply
2. Minimising the total cost of power generation, power distribution and retailing
PER CENT OF GENERATION BY 2040:
Coal: 20
Gas: 30
Renewables: 30
Nuclear: 20
COMMENT:
Global decarbonisation requires Australia's substantial investment in critical minerals essential for the energy transition.
Although mineral extraction is carbon-intensive, these minerals enable global clean energy production.
With Australia's CO? emissions representing just around 1% globally, focusing excessively on domestic clean energy over critical mineral production risks slowing worldwide decarbonization (Australia have more than 20% of the world's proven reserves of critical minerals and the best mining practices in the world).Australia's strategic advantage lies in responsibly supplying critical minerals, accelerating global emission reductions.
HOW TO GET THERE:
Production tax concessions for preferred forms of energy generation, Direct government funding of preferred forms of energy generations and/or transmission
Elizabeth Webster.
WHAT MATTERS MOST:
1. Achieving net zero carbon dioxide equivalent emissions by 2050
2. Ensuring the reliability of power supply
PER CENT OF GENERATION BY 2040:
Coal: 10
Gas: 10
Renewables: 80
Nuclear: 0
HOW TO GET THERE:
Firm commitments not to extend the life of existing coal-fired power plants through subsidies, Carbon pricing through a cap and trade scheme, Carbon pricing through an extension of the safeguard mechanism to most industries and firms