Tensions emerge between state and federal governments over Australia’s energy grid roadmap

Exclusive: disquiet points to jockeying among jurisdictions and impatience over the rollout of renewables

Cracks in the unity of the nation’s energy ministers have emerged amid disquiet over a review of power grid plans and an effort by the federal government to force carbon offsets from big new gas fields on to the states.

Almost two weeks on from a gathering of energy and climate ministers in Tasmania, senior officials expressed concern about how the review of the integrated system plan (ISP) – the grid’s roadmap – would be handled. One concern was that the federal energy minister, Chris Bowen’s department would be handling the review.

“Any review has to align with the ambitions of each jurisdiction,” one official said. “We’re not there for the commonwealth to tell us what to do.”

At the meeting, Bowen also surprised state and territory counterparts with a plan for them to pay for the carbon offsets that will be required for the proposed Beetaloo and other new gas fields in the Northern Territory.

States, however, pushed back, with Western Australia and Queensland particularly opposed to the precedent of assigning offsets for the so-called scope 3 greenhouse gas emissions that would result, another official said.

“No one asked any of us” about the offsets plan, the first official said, adding the market for carbon credits would struggle to cope with existing demand without lumping in major new emissions sources such as Beetaloo. “It’s not our problem.”

The meeting’s communique merely stated ministers had “noted the Northern Territory and the commonwealth would undertake work to consider the management of indirect emissions”. The two will report back to a future ministers’ gathering.

Two officials who attended the ECMC meeting claimed there had been discussions at a dinner meeting of ministers about the commonwealth underwriting a pipeline to bring Beetaloo gas to southern states, a claim Bowen’s office strongly denied.

A spokesperson for Bowen said “there was not, and is not any proposal for the commonwealth to underwrite a gas pipeline from the Beetaloo Basin, or in fact any other gas pipelines. No proposal was put to ECMC because no such proposal exists.”

All states but Tasmania are run by Labor governments. Friction over possible outcomes of a “supercharged ISP” and responsibility for emissions offsets point to jockeying among jurisdictions and also impatience over the rollout of renewable energy.

The Clean Energy Council industry group said investors committed to only 400MW of new capacity in the first half of 2023. Some 5 gigawatts – more than 10 times that amount – was needed yearly if emissions reduction goals for the power sector were to be met by 2030, the council said.

A spokesperson for Bowen said the Albanese government was “working across the board to get cleaner, cheaper energy into our grid where and when it is needed after 10 years of federal energy policy chaos”.

The ISP review was “another piece of critical energy market planning to ensure we have the generation, transmission and storage infrastructure needed to support the national electricity market and east coast gas market throughout the quickening energy transformation,” the spokesperson said.

Queensland’s energy minister, Mick de Brenni, said the ISP “was a critical tool in coordinating national focus in the execution of the transition”, adding his state would be looking for future versions of the plan to factor in Queensland’s SuperGrid Infrastructure Blueprint and its renewable energy zone roadmap.

“Neither I, nor anyone that I know of in an elected position, has any doubt in the ability of a federal agency to deliver high-quality, independent advice,” De Brenni said.

The Beetaloo gas project proposal was the responsibility of the commonwealth and Northern Territory governments, he said.

A spokesperson for the South Australian government said that state “looks forward” to participating in the ISP review. “Now that there has been an end to internal squabbling over climate change in the commonwealth government – which resulted in a lost decade of failed energy policies – there is unity on co-ordinating planning for the net-zero emissions economy,” she said.

Dylan McConnell, energy expert at the University of New South Wales, said the ISP required an overhaul.

“The integrated system plan is still fundamentally a transmission planning document,” he said. “If it is to play a more significant role beyond that – in planning the energy transition more broadly – then it does need to be significantly reformed.”

“The ISP has historically been quite independent of energy ministers,” McConnell said. “A review of the ISP and institutional arrangements would ideally be held at arm’s length from government – given the potential perverse incentives and conflicts of interest.”

Bruce Mountain, director of the Victoria Energy Policy Centre, said the agencies running the ISP – led by the Australian Energy Market Operator – had struggled over the past five years to advance the transition away from fossil fuels at the necessary pace.

“To summarise my advice: when in a hole, stop digging, and look again at the whole thing,” Mountain said.

Previous ISPs, for instance, had significantly underestimated the cost of the major transmission it had identified as required.umeLink connection between the giant Snowy 2.0 project with the rest of the grid, for instance, had soared between $575m and $1.725bn, and would be completed by 2025.

Transgrid this week admitted the cost was now more than $5bn, excluding interest, and would be rolled on to the bills of NSW consumers years late. “Call it $6bn,” Mountain said.

Similarly, Project EnergyConnect linking NSW and South Australia in 2016 was estimated in 2016 to cost $1bn and be completed by 2021.

“They haven’t even started constructing it,” Mountain said, adding the revised figure two years ago had risen to $2.3bn. “It will almost certainly cost a good deal more.”

This article was amended on 23 July 2023 to make clear that Chris Bowen’s office denies there was any proposal for the commonwealth to underwrite a gas pipeline from the Beetaloo Basin. Bowen’s office was not approached for comment on that aspect of the article before publication.