Australia’s energy transition has become a test of its energy security. With global fuel markets increasingly volatile, the pace of the transition will help determine how exposed Australian businesses remain to international energy shocks, and how competitive our industries can be.
Slowing the transition won’t make Australia more energy secure. It is a reason to press go.
Australia has made significant progress building renewable generation and is emerging as a global test market for batteries and flexible electricity systems. The results are starting to show.
In the June quarter, AEMO reports that renewables supplied 42 per cent of electricity, up from 37 per cent a year earlier, while wholesale prices fell 47 per cent to $74/MWh year-on-year, helped by increased renewable generation and battery output.
One quarter doesn’t establish a trend, and lower wholesale prices don’t immediately translate into lower bills. But we are starting to see what more abundant renewable electricity can deliver for consumers and industry.
We now need to put that increasingly affordable clean energy to work.
This is where the next economic gains lie. Cheaper electricity can help businesses cut their operating costs, but only if they can make the investment in new equipment and infrastructure to use it. And the case for doing so grows stronger with every disruption to global fuel supplies.
According to the Institute for Energy Economics and Financial Analysis, Australia is the world’s largest diesel importer, shipping in about 90 per cent of our diesel supplies. This year we’ve seen diesel price spikes flow through freight, agriculture, construction and industrial sectors, pushing up costs across the economy. The institute also identified oil shocks as a primary contributor to all six episodes this century when inflation exceeded the Reserve Bank’s 2-3 per cent target. It is clear that interest rates cannot insulate businesses from disruptions to global oil supply.
The best way to reduce that vulnerability is to use less imported fuel in the first place. Electrifying trucks, mining equipment and industrial processes, where the economics stack up, gives Australian businesses a way to do it.
The economics are already shifting. Recent modelling from consultancy Cyan Ventures suggests battery-electric mining haul trucks in the Pilbara could be about 5 per cent cheaper to operate than diesel equivalents at late-September fuel prices. A year earlier, diesel trucks were modelled to be 13 per cent cheaper. These remain estimates, rather than realised fleet-wide savings, but the turnaround shows how quickly the investment equation can change.
That raises an awkward policy question. Australia’s Fuel Tax Credits Scheme reduces the effective cost of diesel for eligible businesses, potentially weakening the commercial incentive to electrify. As electric alternatives become more competitive, why are we maintaining incentives to subsidise diesel that make it harder for them to compete?
Australia’s Fuel Tax Credits Scheme reduces the effective cost of diesel, potentially weakening the commercial incentive to electrify.
For Australian businesses, reducing dependence on imported fuel can make them less vulnerable to global price shocks. It would also create demand for reliable domestic electricity supply.
But infrastructure investment alone will not deliver these benefits. Regulation must keep pace with technology.
The Productivity Commission’s recent heavy vehicle reform report shows how smarter regulation can accelerate electrification while improving productivity.
Freight productivity has stagnated for more than a decade. The commission estimated that improving road access through changes to mass limits could add up to $2.7 billion to long-run GDP. The broader package of reforms could deliver up to $4.4 billion in annual GDP gains in the long run.
Electric trucks are a case in point. Battery-electric trucks can be heavier than diesel equivalents, limiting their legal payloads. More consistent mass allowances, clearer charging infrastructure rules and flexible delivery curfews could improve utilisation and make electric freight more commercially attractive.
Quieter electric trucks, for example, could make deliveries outside hours currently restricted by noise regulations, allowing operators to get more out of their vehicles while easing congestion.
These are practical changes that could make a real difference to the economics of electrification. They don’t require a technological breakthrough, just rules that keep pace with the technology already available.
Australia’s next challenge is to connect the progress in electricity generation with investment decisions like these across the wider economy. That means building reliable renewable electricity supply and storage faster. Businesses need the certainty to invest, without outdated regulations making electrification harder than it should be.
We’ve made a start on changing how Australia generates power. Now we need to change how we power the economy. Every business that switches from imported fuel to electricity leaves Australia a little less exposed to the next global fuel shock.
Extracted in full from: https://www.afr.com/policy/energy-and-climate/put-the-pedal-down-on-electric-trucks-to-dodge-global-oil-shocks-20261019-p615hz
