Doomed Planet

The Bill Comes Due for Renewable Energy

Australia’s excessively high energy prices are undermining our competitiveness and cutting our standards of living. Since 2002 Australian governments have introduced climate policies to reduce carbon dioxide.  This has caused high cost and low reliability wind and solar to displace cheap coal and gas power. Our electricity prices, once the lowest in the world, have become one of the most expensive.

It is readily acknowledged that regulatory measures bring about costs to consumers by forcing energy retailers to incorporate growing shares of wind and solar energy into the electricity they provide. For the average household consumer, the commonly quoted additional cost to electricity bills is $90 per annum or about 6.5 per cent.

But this estimate, carefully assembled by the Australian Energy Market Commission (AEMC), only counts about one sixth of the total cost. It comprises only those costs directly attributable to Commonwealth and state regulatory requirements, mainly cross subsidies on grid-supplied wind and solar as well as on rooftop solar. Currently, these facilities, which are approaching 20 per cent of total supply, get a subsidy of $40 per MWh.  That is roughly the same as the total market price three years ago, prior to the renewables forcing out major generators, thereby causing prices to double.

In addition to the direct regulatory cost as estimated by the AEMC, the average household annually pays for:

# government subsidies to renewable electricity, paid by the taxpayer, through soft loans and direct grants, which amount to about $151;

# Consequential increases to wholesale prices (temporarily low at present due to COVID-19) as a result of forced closures and cost impositions on coal generators, wholesale prices have more than doubled to $92.5 per MWh; the renewables’ cuckoos, in forcing coal plant out of the energy nest, bring an impost of $219;

# Additional costs, about $70, for transmission and the Snowy2 scheme, which are being introduced to offset some of the unreliability that the variable supply of wind and solar generation entails; and

# Further administrative costs of about $5.

Once all effects of the renewable energy measures are counted the cost becomes 39 per cent of household electricity bills, not 6.5 per cent that the government typically quotes.  The cost of these climate policies to the average household’s electricity bill is an extra $536 per annum, significantly more than the touted $90.

For all households the total cost of the $536 subsidies within electricity bills is $6.6 billion. But households consume only half of the electricity supply.  Businesses account for the rest of the costs which are incorporated into the prices for goods and services.  Either consumers pay those prices or the additional costs detract from the profits that firms would otherwise have earned on exports. Hence the overall cost to households is $13 billion.

In addition to these sums, as a nation we are spending around $8 billion a year on new wind and solar facilities.  In a true market economy wind and solar power are spectacularly unviable. Even with nearly two decades of increasingly favourable policies and subsidies, the renewables industry has yet to mature and show itself beyond a dependent infant, acting as a parasitic malinvestment on our energy system.

The justification for these economically debilitating policies is that they help to fight climate change.  But, irrespective of the merits of this goal, as the Chief Scientist has confirmed, Australia’s efforts to reduce carbon dioxide will have virtually no effect on global temperatures, since we contribute a minuscule share of global emissions. Moreover, notwithstanding lofty claims by some nations, the fastest growing emitters responsible for 70 per cent of the total — China, India, Indonesia, now joined by the US – have no real commitments. Hence any emission reductions that Australia and other countries make are dwarfed by increases in those from Third World countries and the US.

California is about five years ahead of Australia in the rush to replace reliable and manageable coal, gas and nuclear electricity with nature-dependent electricity. It is planning ‘net carbon neutrality’ and already renewables provide 33 per cent of supply. But that is when the sun is shining and the wind is blowing.

Last week during a heat wave California’s system started to collapse, bringing about rolling blackouts. California’s governor, Gavin Newsom, has presidential aspirations and is as woke as the next Democrat. He has been solidly behind the state’s support of renewables, with subsidies and regulations. But the state has a history in replacing Governors who preside over energy failures. Twenty years ago Governor Gray Davis, another presidential hopeful, saw the state’s energy supply fail and had to face a recall election which resulted in him being voted out of office, ending his political career. Newsom, to the howls of his supporters, is now urging that gas generation be retained.

For our part, Australia is needlessly sacrificing its living standards and jeopardising the future viability of our vital energy-intensive industries that leverage off agricultural and mineral wealth.  The way forward must involve the termination of all regulatory favours, which uniquely reward renewable energy supplies, and the cessation of budgetary support for all energy supplies. Such reforms include ceasing to subsidise transmission links and other grid measures that are being introduced to compensate for the inherent deficiencies of the weather-dependent wind and solar.

Alan Moran is with Regulation Economics. Among his many publications are chapters on the Australian energy industry in four books covering energy markets across the world. This article is based on a report “The Hidden Cost of Climate Change Policies and Renewables”, which was commissioned by Senator Malcolm Roberts

5 comments
  • pgang

    During the past 8 years (in the same house, in NSW), our average electricity cost rates have increased overall by 85.7%.
    .
    This is complicated somewhat by our ‘dumb meter’, with the highest rise being in off-peak rates by 99% over the period, closely followed by the most highly used ‘shoulder’ at 91%, and ‘peak’ at a mere 67.4%. Clearly there is a move afoot to close the gap between peak and off-peak.
    .
    The annualised growth rate averages out to 8.1% per year. I bet that they don’t include that in the official inflation figures.

  • T B LYNCH

    The rot started in 1966 when Menzies retired. Menzies took an opinion page in The Sydney Morning Herald a year later [1967] to explain that the Liberal Party had gone bad, and was no longer the party that Menzies had founded.
    The rot became visible in 1971 when the liberals rolled Gorton and cancelled a quarter built Nuclear Power Station at Jervis Bay where the ruins remain today – a presage of our current decay.
    In 1948 the Soviet Academy of Science adopted Lysenkoism as Marxist genetics and ruined USSR agriculture for the next half century, culminating in the implosion of the Soviet Union in 1989.
    A society can make only so many schoolboy errors before it suddenly finds itself beyond the limit of damage tolerance, and spontaneously and unexpectedly collapses.

  • T B LYNCH

    Schoolboy errors:-
    [1] Glorification of Sodomy – not the cause of AIDS – but the Cause of the AIDS Epidemic.
    [2] Vilification of Carbon Dioxide – the union of carbon and oxygen – the only way to power aerobic life.
    In 1860 Pasteur showed that yeast can grow without oxygen, but it grows 15 times faster if you give it oxygen to make carbon dioxide. Civilization has likewise progressed faster making carbon dioxide, and getting it back up to geologically and biologically normal levels.
    [3] Denigration of Nuclear Power, which is really just applied electrostatics, whereby a million times more energy is available from protons 100,000 times closer together than the electrons of chemistry.
    [4] Normalization of the ultimate party drug, with dissolution of the family, and a below replacement birth rate.
    None of these errors were a problem before Menzies retired.

  • Geoff Sherrington

    The Australian Bureau of Statistics gives us this graph.
    http://www.geoffstuff.com/cpielectricity.jpg

  • lhackett01

    The Archbishop of Brisbane, The Most Reverent Mark Coleridge BA DSS,
    is to make a public statement next Monday, the 14th September 2020, according to The Australian newspaper today, that will include raising the matter of climate change as important to voters in the upcoming State election. I have today sent the Archbishop the letter following:

    “I respectfully draw your attention to a paper I have written about climate change. I believe your understanding of the content of my paper to be important before you issue any statement to the public about climate change.

    The many scientists who dispute the IPCC position that mankind is responsible for climate change continue to be emasculated by the media, politicians and others who too readily believe man must be responsible for calamities. The ready response of those who do not want to hear from scientists and others who have substantial evidence to dispute the anthropogenic basis for climate change is to say they will rely only on ‘the scientific consensus’; that is, essentially the IPCC position. This is akin to the matter of Copernican heliocentrism and Galileo’s championing of it during the 16th and 17th Centuries. Galileo met with opposition from astronomers, who doubted heliocentrism. The matter was investigated by the Roman Inquisition in 1615, which concluded that heliocentrism was “foolish and absurd in philosophy, and formally heretical since it explicitly contradicts in many places the sense of Holy Scripture”. Of course, the “consensus” believers were wrong then and are likely wrong now. Science must never be judged by consensus, which might be only the noise issuing from the echo chamber of a self-congratulatory group.

    In 2018, I publish a paper entitled, “Global Warming Misunderstood” that I have updated recently. It contains sufficient evidence from reputable sources to show anthropogenic causation of climate change to be highly doubtful. It has been applauded by Dr Peter Ridd, the Barrier Reef scientist who has been maligned for failing to agree with the ‘consensus’, and by Professor David B. Collum of Cornell University in the USA, amongst others.

    My paper can be read at https://www.scribd.com/document/383385011/.”

    Will he understand?

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