By Cameron O’Reilly, Energy Retailers Association of Australia Executive Director
Think of a vast, hot, arid land with 25 million people living mostly in cities. A place built on fossil fuels, experiencing a recent boom in unconventional gas. An economy heavily exposed to a price on carbon seeking to grow its renewable energy industry. A market in which electricity utilities have been disaggregated and competition principles applied in generation and energy retailing.
It sounds uncannily like Australia, but in reality it is Texas.
Australians who visit the US often find themselves at home in the ‘golden state’ of California, with its beaches, good wine, liberal views, green politics and cosmopolitan cities. As if to make the point, a recent edition of The Economist magazine even had a golden map of Australia on its front cover comparing the economic potential of our nation with that of the US’ largest state.
The renewable energy lobby loves California for its deep venture capital, ambitious clean energy targets and world-leading energy efficiency policies. Its recently departed, now somewhat tarnished Republican Governor, Arnold Schwarzenegger was a global pin-up boy for action on climate change.
Whatever his recent sins, when it comes to measures such as vehicle fuel efficiency standards, California’s reputation for ‘green’ leadership is, in many cases, deserved. That does not mean it’s the model for Australia.
Australia’s urban residents may like to see California as a kindred spirit, but in an economic sense we are closer to Texas. We may have California’s wine and financial services, but there is no Hollywood or Silicon Valley in this country.
What we are, in reality, is an economy built on cheap fossil-fuel electricity and enormous exports of fossil fuels. For us it has been ‘king coal’ and in Texas, oil. A new bonanza is on the way in both Australia and Texas in the form of unconventional gas. In Australia it is coal seam methane from Queensland and New South Wales and in Texas, shale gas from the Barnet near Fort Worth.
In both places, the gas industry will have to manage environmental concerns associated with the extraction process if the boom is to be realised. They must do so in environments where the farming lobby is powerful, and where water is scarcer than energy.
The comparisons with Texas go beyond fossil fuels. With established renewable energy targets that favour wind generation, Australia and Texas must manage the integration of increasing amounts of intermittent generation from remote locations requiring massive transmission build. We jointly face increasing summer peaks driven by air-conditioning load. We have households and businesses used to cheap electricity, making the implementation of any price on carbon a massive political and economic challenge. And whatever adjustments must be made in response to carbon policy, must take place in a deregulated, private sector-dominated electricity market.
It was with all these shared challenges in mind, that the United States Studies Centre at Sydney University recently sponsored an Australia-Texas energy dialogue. The second leg will take place in Texas later this year. From this dialogue it is hoped that a range of research and policy collaborations across areas such as unconventional gas, the water-energy nexus, remote wind and carbon capture and storage will be identified. It may not appeal to some to think of Texas as a partner in facing a carbon challenged world, but in looking for ideas it is more sensible to start with the economy we have, rather than one we admire.
Cameron O’Reilly is the executive director of the Energy Retailers Association of Australia and was a Fulbright Scholar at the University of Texas in Austin.