The fossil fuel industry is not coping well with the idea that its days might be numbered. And even less so with the idea that it should no longer be entitled to the grotesque super profits it is making out of the Ukraine war that is ripping off consumers around the world.
But it might have to rethink some of the industry talking points rushed out in response to the price cap on gas, and the proposed additional price cap on coal. They are starting to make it look like a really good idea.
Late last week Exxon Mobil led the way in warning of blackouts and an investment halt in new fossil fuel projects, chorused by a conga line of smaller gas players and their stenographers in the mainstream media.
On Tuesday it was the turn of Woodside, the Australian oil and gas major still dripping in the super-profits and bonuses of the past year’s inflated prices, to trot out the same blackout and investment warnings.
“The unprecedented market intervention announced risks driving investment out of the system,” Woodside CEO Meg O’Neill said in a statement. “That investment, including in …  gas, is crucial to support renewable energy sources as we strive to decarbonise without the lights going out.”
Bingo!
Forget about the blackout threat – all major studies suggest gas might have a useful role in a renewables dominated grid, but not a dominant one. It will be relegated to a back-up role, and we will be using less, rather than more.
But an investment freeze in new fossil fuel projects is exactly what is sought by the world’s climate scientists, and even acknowledged by the fossil fuel industry’s own think tank – the International Energy Agency – as absolutely essential if the world is to address climate change and the 1.5°C target.
“If governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now – from this year,” Fatih Birol, the head of the IEA, the body set up to protect the supply of fossil fuels after the 1970s energy crisis, said earlier this year.
Of course, Birol talked about governments, not big oil and gas, so perhaps this can be filed under the Things You Might Say to Sound Concerned About the Climate. After all, he would never serious expect the fossil fuel giants to stop what they are doing.
But if the likes of Woodside are to be believed – and perhaps they are not – that will be exactly the result of the Australian federal government’s proposed price cap.
It’s possibly the best validation that the policy might be a good idea – along with the 30 per cent plunge in the price of “baseload” electricity futures over the last few days. Prices are now down to the level they were at before the global energy crisis became a thing and started to mess with Australia’s energy markets.
Most analysts and industry people think the price caps are not the best option because, frankly, high market prices provide a solid signal to invest in something less costly, which is obviously renewables and storage, and which has the advantage of being a lot less polluting too.
A better option would be to impose taxes on the super, or windfall profits of the rapacious fossil fuel industry, because those that don’t have to buy the commodity to power their machines on the spot market are making off like bandits.
Tim Buckley, from Climate Energy Finance, reckons an “obscene” $120 billion from the export market in Australia, just this year.
And smart policies do work. Just look at the ACT government, which had the foresight, and the cojones, to commit to 100 per cent renewables nearly a decade ago, and wrote a series of contracts with suppliers of wind and solar to meet that target.
They did that in 2020, and while it seemed at the time that they had paid through the nose for some of the output – the fate that befalls many early adopters – it has proved a master stroke.
By creating a mechanism known as a “contract for difference”, the ACT government provided a guaranteed return to ensure that the wind and solar farms it wanted built would be financed. And they were, and basically saved the entire Australian renewable industry at the time, given it was under attack from the Abbott regime.
But it also protects the ACT, and its residents, against soaring prices like we have seen in the last six months. The CfDs mean that any super profits are returned to consumers.
And over the last six months, ACT consumers have been the beneficiaries of an $82 million windfall from the deal. As electricity bills jump around the country, they are actually going down in the ACT.
State governments are now looking at that scheme, and the roadmap produced in NSW, to underpin the necessary investment in “firmed renewables” to replace the coal fleets that will be closed in the coming decade.
If sharing windfall profits is good enough for renewables, then there is no reason why it shouldn’t be good for the fossil fuel industry too. They are, after all, already dodging the costs of the climate and environmental damage they have inflicted on current and future generations.
Failing that, a price cap will have to do. And the constant bleating of the fossil fuel industry might just be one form of emissions that we can put up with. At least for a time.
