The RBA’s Cock and Bullock Climate Myth

In recent years, getting promoted to the most senior ranks of the bureaucracy has been conditional upon the candidate being either immersed in the ruling polity’s ideology or proving willing to subordinate “frank and fearless” advice to political pragmatism. Those climbing to the top in economic or environmental policy areas have had to assure their political masters they are on board with human-induced catastrophic climate change and that wind/solar (and the hydrogen fantasy) are the only antidotes. 

Michele Bullock showed this in titling her first speech as governor-designate as, “Climate change and central banks”. Her previous public statements made no mention of the issue. These included this before the Senate and this in June (when she had her hat in the ring), and Eric Johnson found nothing to mention about her and climate change even when her appointment had been announced. Then, suddenly, she delivers a speech in Canberra with the issue front and centre!

In the course of that address she repeated this canard, “Recent years have been warmer than any multi-year period on record, with more days of extreme heat and intense rainfall events” and followed it up with this: “[Human-induced] climate change will have implications for price stability, employment and the stability of the financial system”.

Ms Bullock could have offered a more accurate grounding in the climatic pressures facing the economy had she read work by Ian Plimer or Will Happer (this month touring Australia) or acquainted herself with recent addresses of John Clauser, whose dismissal of the notion that we face dangerous climate change is from the lofty podium of a Nobel Prize physicist.

To have questioned the prevailing ideology would have seen Ms Bullock likely scratched from the short-list for the position. Indeed, there were reliable warmista candidates, including former deputy Reserve Bank governor Guy Debelle, whose dedication to green energy brought him to a disastrous career change working for Twiggy Forrest. Also in contention were current Treasury Secretary Steven Kennedy (former head of the Climate Change Department) and a previous head of Treasury, Martin Parkinson, who was fired by Tony Abbott for his championing of green causes. It is little wonder, given that pedigree, that Treasury in its latest Intergeneration Report applauds Australia’s rapid “transition” to renewable energy, erroneously claiming that it is bringing lower costs and is a strong positive for the nation’s economy.

Those credentials as a true believer in human-induced global warming are even more essential for being selected to head up one of the “independent” energy regulatory agencies (there are three of these at the Commonwealth level alone). However, like all public servants, these agency heads know they are vulnerable to carrying the can for any disaster because politicians have greater access to the media and are always willing to blame the consquences of their poor decisions on the advice they were receiving.

Some years ago, Matt Zema, the then Australian Energy Market Operator (AEMO), became very concerned at the injection of intermittent renewable energy into the South Australian system and the consequent scrapping of more reliable coal generation. Having been appointed before the currently fashionable emissions/renewables policy axis had become dominant, and conscious that he would be blamed for the catastrophe he foresaw, he publicly warned of an impending disaster.  Sadly, he died of a heart attack shortly before this took place with the September 2016 collapse of South Australia’s wind/solar based electricity supply system.

The current AEMO chief, Daniel Westermann, previously headed National Grid Renewables, a US-based subsidiary of Britain’s transmission monopoly and is less encumbered by scepticism about the merits of wind and solar. Unsurprisingly, therefore, AEMO has issued a string of reports extolling the progress towards net zero and, using CSIRO’s discredited costings for future alternative supplies, to claim this will bring lower prices. AEMO’s data is however threadbare. Thus, in the 173 pages of its latest Inputs and Assumptions  only one of the 106 tables and figures offers a picture of future electricity prices. This sparse treatment of the central feature of demand and supply rather diminishes the credibility of a report purporting to be a plan covering the next 50 years.

Moreover, that single depiction of prices further undermines the report’s authority. Aside from the most fanciful assumptions, like Australia becoming a hydrogen superpower, AEMO envisages prices remaining at or above those prevailing in 2021/22, as illustrated below.  

The wholesale component of electricity prices were at record levels in 2021/22 but have been since been exceeded by 2022/23 prices and, ignored by AEMO, are on a serious upward trajectory.

Compounding AEMO’s rosy scenario is that its forecast is for retail prices. These also have to accommodate the costs of the massive augmentation of power lines concomitant with the more dispersed, less dense wind/solar system for which AEMO is planning. And then there are the costs of Snowy 2 and the battery support! 

The vacuous nature of the AEMO forecasts has brought disillusion even among some formerly strong advocates of the renewables “transition”. Thus, the AFR‘s Economics Editor, John Kehoe, last week declared, “The big fib that the rush to net zero carbon emissions will lead to ‘cheaper’ energy prices is being exposed.” He added, “the indisputable reality” is that the transition to renewable energy will be very, very expensive for consumers and taxpayers.

For its own part, AEMO is more concerned about reliability. Conscious that politicians will seek a scapegoat for power failures, it is seeding its fantasy future reports with increasingly shrill backside-covering statements about the vulnerability of the network to blackouts due to a lack of firming power.

Subsidies to renewables are destroying the economics of capital-intensive coal plant and forcing their closure. At the same time, politicians are resisting replacing coal with new gas plant that can be despatched to cover the inevitable shortfalls in intermittent supplies. The energy regulators’ fantasy reports would be harmless if they were just ideological daydreams but they condition public policy and expenditures in ways that contribute to the politically induced undermining of future living standards.

Alan Moran, of Regulation Economics, wrote the chapter “Current trends and perspectives in Australia” in Local Energy Markets edited by Tiago Pinto et al and published in 2022 by Elsevier