Energy

The Incoherent Roadmap to Net Zero

In 2021 we were confidently told that it would cost $78 billion to rewire the grid for renewables and that the average annual household electricity bill would fall by $275 under Labor because, as Anthony Albanese explained, ‘we have done the modelling’2.

Despite the Prime Minister’s assurances, the cost of transforming the grid by 2030 is estimated to be $1,500 billion (not $78 billion) and the full cost to 2060 is up to $9,000 billion[1].  Also, retail prices in Victoria are to increase by 25 per cent from July 2023, and more pain is in store for households and business when the hedging and contracts roll over and the doubling of wholesale electricity prices fully impact retail prices. As Nick Cater wrote “renewables vision is blind to the cost of calamity”[2].

It is time the Victorian public are made fully aware of the enormous cost of a reckless transition to renewables and the huge amount of land (up to 12 million ha) to become renewable infrastructure.

The Victorian default offer (DFO) price is set by an independent regulator to provide a simple, trusted and reasonably priced electricity option, for consumers who don’t engage in the market to find a competitive retail market offer. All electricity retailers in Victoria must offer residential or small business customers the option to take up the current Victorian Default Offer.

The DFO is expected to deliver households a $354 per year increase on 2022-23, or a 25% year on year increase, assuming there are no further increases in 2023-24. Further increases cannot be discounted, as while retail prices are up 25 per cent, wholesale prices are up 100%. Average households now face an annual electricity bill of $1,756 per year (Table 1).[3]

Note that the generation of electricity (wholesale component) only accounts for about a third of the cost and that network costs account for about another third of the total. Reaching Net Zero requires considerable investment in the two largest components of the cost of getting electricity to your home – wholesale costs and network costs. Unlike solar panels on the roof, which are ‘behind the meter’, utility scale solar and wind power in particular require a huge investment in new transmission networks.

Comparisons of renewables against existing coal- and gas-fired power typically ignore the new transmission costs for the renewables while also simplistically assuming costs for completely new coal- or gas-fired power stations, rather than the lower cost of continuing to operate the existing power stations. 

Victorian wholesale electricity prices have more than doubled, from an average of $40/MWh (1999-2015) to $88/MWh (2016-23) under the Andrews Government, even after some impact from COVID lockdowns in 2020-21 (Figure 1). South Australia, the most advanced in the transition to renewables, is the canary in the coal mine as its wholesale electricity prices have consistently been Australia’s highest.

Victorian wholesale spot electricity prices by financial year

The latest Net Zero Mobilisation Report[4] modelled linear reductions to net zero by 2050 for domestic emissions and 2060 for fossil fuel energy export emissions. Six scenarios were modelled – Reference, Rapid Electrification, Slower Electrification, Full Renewables Rollout, Constrained Renewables Rollout and On-shoring (domestic iron and aluminium).

The Reference scenario4 has no emissions objective. All other scenarios track in a straight line to net zero emissions by 2050 (domestic) and 2060 (export). None of the scenarios are forecasts, suggesting considerable uncertainty of outcomes. As Emeritus Professor Robin Batterham, Chair of the Net Zero Australia Steering Committee, has said “There are too many uncertainties to map a single path to net zero”.

The Net Zero Mobilisation Report4 highlights what actions Australia must complete by 2030 to reach net zero by 2050. The Mobilisation Report does not consider whether we should reach net zero, nor critique past or proposed actions by governments or companies, nor express preferences. However, the Net Zero Mobilisation Report does express one preference by explicitly excluding nuclear power.

The final Net Zero Modelling Report released in April 2023 illustrates the immense scale, extreme complexity, and breakneck speed required to transition to net zero by 2050. Net Zeros predict capital investment of up to $9 trillion ($9,000 billion) on the transition in the next 37 years to 20604.

Funding that transition cost of $9,000 billion over 37 years requires spending $243 billion per year. To put this in perspective, it represents 36 per cent of the entire federal government budgeted expenditure for 2023-24 of $684 billion and roughly equates to the annual federal government spend on social security and welfare of $250 billion per year and more than twice the federal government expenditure of $107 billion pa on health. Have those waiting months and years for critical surgery been told this.

Spending $243 billion per year on energy transition is equivalent to spending 17 per cent of Australia’s GDP, and so far without a business case nor final investment decision report.

According to Net Zero, the transition will be among the largest and fastest economic transformations in history, with major new infrastructure required, however, progress is slower than modelled and Net Zero call for accelerated action4. We also have a call for accelerated action for those awaiting critical surgery!

Nick Cater[5] described the enormity of the challenge as “the irrational pursuit of renewable energy as the antidote to planetary pain must eventually confront the immutable laws of physics and the scarcity of land”.

The report by Net Zero calls for a huge list of expensive strategic actions as follows (with my comments in italic):

♦ Accelerate all options that could make a material contribution to decarbonisation.
There is no rigorous cost benefit analysis, nor analysis of the opportunity costs, nor the risks of a reckless rapid transition.

♦ Clean energy and clean processed minerals should be pursued as export opportunities.
Australia’s electricity costs are now well above world parity such that Australia is unlikely to be internationally competitive processing of iron ore into steel and bauxite into aluminium.

♦ Considerable land use change will be essential and requires proactive management, particularly for indigenous communities and farming communities.
Up to 12 million ha of land may be required, equivalent to half of Victoria or 77 per cent of private land in Victoria. Many rural communities face acquisitions and easements, loss of scale economies in food and fibre production, and a plethora of ugly new transmission lines, wind turbines and utility solar panels.

♦ Benefit sharing must be prioritised based on principles of partnership, inclusion, and net gain.
Most households are more concerned about how the costs are to be shared.

♦ Net gain for environments and biodiversity should be pursued in parallel with net zero.
This suggests degrading the environment is OK provided it is in pursuit of the ideal of net zero.

♦ Minimising public impacts requires orderly asset closures, supported by multiple policy mechanisms.
Government has already locked in the exit of fossil fuel generated power, prior to development of a plan for orderly asset closures and the so-called policy mechanisms are not yet supported by rigorous strategies, feasibility studies, business cases and investment decisions.

♦ Low-income households and fossil fuel regions will need support to mitigate impacts.
The government will need to throw billions of everyone’s hard-earned taxes at income support and worker transition. This approach has so far failed in the Latrobe Valley where despite the Andrews Government spending hundreds of millions of your taxes, the number of jobs in the Latrobe local government area are down 8 per cent over the last decade.

♦ Private sector investment risk will be too high in many cases, unless mitigated by government.
This means that net zero can only be achieved by 2050 with huge government subsidies accompanied by huge opportunity costs – we will have to forego opportunities to fix our failing health, social housing, emergency services, triple 0 and education systems.

♦ Net zero supply chains require certain, large, and a long investment pipeline.
Unfortunately the current supply chain mostly traces to overseas, particularly to China where things like solar panels are made, using power derived from fossil fuels including huge imports of coal, gas and oil from Russia. Chinese imports of fossil fuels from Russia tripled immediately after the invasion of Ukraine. The reckless haste with the transition is just exporting or offshoring jobs and emissions. We need time to gear up for greater Australian domestic content of renewable components.

Options to achieve net zero

The Net Zero Mobilisation Report essentially calls for the development of wide ranging options including a couple of sensible options (that may not garner support from idealistic and powerful activists), such as gas-fired peaking generation and carbon capture, utilisation and storage4:

Strengthen deployment drivers of renewables, transmission, and electricity storage.

Build a large fleet of gas-fired peaking generation to help accelerate renewable growth.

Plan and develop clean hydrogen infrastructure, including hydrogen storage.

Determine whether bioenergy has a serious role to play through research.

Ambitious energy productivity standards for new buildings, and incentives for retrofits.

Decide the future of gas distribution to household and commercial customers.

Develop plans and mechanisms for industrial decarbonisation.

Implement mandatory emissions standards for all road vehicles, and support EV charging.

Prepare carbon capture, utilisation and storage (CCUS) networks and basins for large-scale use. Private investment in a CCUS industry will require targeted government support.

Research, develop, and scale up land sector abatement pathways, policies and technologies.

Do not factor nuclear power into renewable, storage, and firming targets.

Recent analysis shows that investment in utility solar and onshore wind has slowed, and the current pipeline of projects risks falling short of the Net Zero required build rate. Offshore wind has the most uncertain pipeline and faces the highest barriers, due to the need for large subsidies and long lead times to develop initial projects, establish supply chains and provide grid access4.

The Net Zero Mobilisation Report does not present a pre-feasibility analysis, nor feasibility reports, nor business cases nor final investment decision (FID) reports. Governments have locked in the transition timeline without completing all of these critical aspects that are vital in ensuring that your hard earned tax dollars are invested optimally, and without huge ‘opportunity costs’ – such as underspending on health, social housing, education, emergency services etc.

Australia is undertaking a gigantic socioeconomic and environmental experiment on a scale that is unprecedented, and cannot be justified given the many unknowns, the uncertainty, and considerable risk associated with the total costs and benefits. Australia’s reckless transition is unwarranted given our miniscule impact on global climate. This is particularly the case while large consumers of fossil fuels such as China, India and Russia pursue only token transitions.

As Mark Lawson puts it in his book, Dark Ages, “In order to avoid a climate crisis that never seems to arrive, activists and governments are about to plunge us all into a very real power crisis”[6].

John Cameron is a forestry and business consultant.

 

 

[1] Net Zero Australia (2023). Mobilisation Report, July 2023.

[2] Nick Cater 2023. Renewables Vision blind to the cost of calamity, Australian, 17 July 2023.

[3] Source: AER; AEMO 2023. Annual flat tariff bill for domestic customers assuming an annual usage of 4,000 kWh.

[4] Net Zero Australia (2023), How to make net zero happen – Mobilisation Report July 2023. The Mobilisation Report has been prepared by academics at the University of Melbourne, The University of Queensland, Princeton University, and management consultancy Nous Group. Net Zero Australia is funded by gifts and grants from its sponsors: Worley, Dow, Future Fuels Cooperative Research Centre, Future Energy Exports (FEnEx) Cooperative Research Centre, APA Group and Minderoo Foundation).

[5] Nick Cater (2023). Victoria’s energy policy is all at sea. Menzies Research Centre Report, 29 March 2023

[6] Mark Lawson (2023). Dark ages, the looming destruction of the Australian power grid. Connor Court Publishing.

21 thoughts on “The Incoherent Roadmap to Net Zero

  • STD says:

    Interesting.
    Albanese promised at the last election a $275 cut in electricity prices.Inference- electors and the electorate at large, are fool’s. I had this comment clarified in real terms when listening to a chap being interviewed on 2GB- Albanese promise-is a $275 cut- only thing Albo didn’t mention in this Statement to U, is to have your Red Cross first aid kit handy as well.
    .
    All this renewable palaver when paraphrased is really the growth of a new industry and the FREE ADVERTISING that accompanies it, supported by the renewables mantra. Renewable ideology is actually the perfect capitalist good and it’s continued consumption is the perfect model of raw capitalist consumption- RENEWABLE PROFITS.
    In that light the GREENS and LABOR are actually market capitalist advocate’s – hyp-oc-r-it -es.
    In fact we in Australia are consuming more energy in order to use less of it so we can be freely charged (guilt) more for It.
    The global warming and climate change ideological chants raise the spectre of the one certainty, the uncertainty that drives market volatility and therefore forces the now deceived ‘rebated’ conscience (snake oiled) to react, thereby allowing and driving market share away from fossil fueled market stability. This ironically increases the price of fossil fuel which raises the ‘take’ of the governments fuel excise takings which presumably subsidises the renewable subsidies and recyclable taxation breaks for the Con-glomerate that is Corporate Big Biz, Bankers and centralised government, and that of EV manufactures to dump and acquire market share in order for the UN mandate to save the world (‘planet’) with a retrograde manoeuvre.

  • ianl says:

    This recent publication from AEMO is yet another panic call on the head-on faceplant we now cannot avoid:

    https://aemo.com.au/newsroom/media-release/urgent-and-ongoing-investment-needed-to-maintain-energy-reliability

    There are various graphs in that report where the data points on the high end of the y-axis are deliberately truncated. AEMO thinks these high points are too scary for us to know. The current CEO of AEMO is very slippery, seemingly a requirement for management with younger promotions, and he offers apparent enjoyment of playing both good and bad cop roles simultaneously. A novel updated management technique.

  • STD says:

    ‘un’mandate.

  • Hugh Jaase says:

    If all of this comes to fruition it will all be for nought as there will be no small businesses left, fertile farming land will be decimated, industries will be sending all manufacturing off shore because the cost of production in Australia will be prohibitive.
    All this because carbon dioxide is seen as a destructive force instead of plant food.
    Goodnight Australia. It’s been nice knowing you.

    • STD says:

      Hugh don’t go-you haven’t finished your pain.

      • Hugh Jaase says:

        STD, I’m over it. It’s my children and grandchildren who will bear more of the pain than me. Makes you wonder why we have children in the first place because it used to be that we would leave them a place that was better than when we found it. I obviously underestimated how stupid our politicians are and how greedy the rent seekers and the subsidised are.
        Off to the fridge now to get another painkiller.

    • Libertarian says:

      The trade unions don’t think it’s for naught.

      When the CCP takes over they will reproduce what they have done in their own country (except for the waterfront residential housing they already own) there will be mines, dams, coal and nuclear power stations and heavy industry built all over the place.

      But the trade unions think they will be put in charge and allowed to take their cut.

      I think they’re dreamin’…

  • Alistair says:

    The Brits, at least, seem to have realised that, since since there are NO Carbon Capture and Storage technologies that are either efficient or economically viable, then Net Zero actually means Absolute Zero. Now that’s a whole new ball game! I wonder how long it will be before our great minds come to the same and blatantly obvious realisation! And factor that into their calculations?

    https://dailysceptic.org/2023/04/13/no-flying-by-2050-is-the-world-finally-waking-up-to-what-net-zero-really-means/

  • ianl says:

    This recent publication (August 30, 2023) from AEMO is yet another panic call on the head-on grid collapse we now cannot avoid:

    https://aemo.com.au/newsroom/media-release/urgent-and-ongoing-investment-needed-to-maintain-energy-reliability.

    There are various graphs in that report where the data points on the high end of the y-axis are deliberately truncated. AEMO apparently thinks these high points are too scary for us to know, but they map out grid failure on a large scale. NSW, Vic and SA are particularly critical.

  • Bush1958 says:

    Net-Zero will be Catastrophe of our own making!

    See: Net-Zero catastrophe beginning?

    https//doi.org/10.30574/wjarr.2022.16.1.1035

    And “Definitive proof that CO2 does not cause globaL Warming”. An update.

    https://doi.org/10.30574/wjarr.2023.19.2.1660

    Those pushing Net-Zero will be responsible for millions of deaths.

  • STJOHNOFGRAFTON says:

    Zero I understand. But tacking the word Net to the front of it as a modifier nullifies the concept of Zero and makes it any number between zero and any other number suitable for the purposes of climate anarchists. Far more realistic to call this climate propaganda NetZeroSum.

  • Tony Tea says:

    Our 2022 gas bill for May 6 – Aug 30: $1342.13

    Our 2023 gas bill for May 3 – Aug 28: $2142.06

  • PeterBalan says:

    I think that it has been clear for some time that our decision-makers do not understand the notion of “basedload” power. I have done the best I can to “insutate” my suburban home with a generator that is wired into my switchboard. You are welcome to contact me for a document describing this setup. p.balan@live.com

  • Watchman Williams says:

    “Climate Change” is just the latest vehicle for transferring public wealth into private hands, with the added advantage of keeping the plebs under control.
    Fuel rationing will keep them at home and power rationing will keep them occupied.

  • Daffy says:

    Add to these comments the sheer economic vandalism represented by the unstated opportunity costs. But more: the opportunity costs would not recognize the long term implications of investing in something that is not an investment, but an anti-investment: investing in something that is more deleterious than productive, needing in effect a second network to handle the unreliability of the to become primary network.
    |
    One of the direct consequences is true productive investment will be vastly diminished both for directly productive activities and for ‘humanitarian’ investment in the means of wealth production for the world’s poorest: cheap reliable safe energy.

  • STD says:

    Furthering my comment atop. I made an error in my analysis of Albanese in regard to the $275 figure. The intention, was to acquire political power, no matter the cost. Insulting peoples intelligence just follows.

  • Farnswort says:

    It gets even worse. Labor expects to undertake this ‘net zero’ transformation while deliberately engineering a huge population expansion through mass immigration. Most sensible people understand that a greater population equals greater emissions. But this reality doesn’t seem to bother policy-makers in Canberra.

    As a 2016 University of Adelaide-led study observed, Australia’s future greenhouse gas emissions are, in large part, tied to the country’s immigration policy.

    The study concluded:

    “More population growth driven by immigration will hamper Australia’s ability to meet its future climate change mitigation commitments and worsen its already stressed ecosystems, unless a massive technological transformation of Australia’s energy sector is immediately forthcoming.”

    https://www.spectator.com.au/2022/08/albo-and-chalmers-a-plan-for-big-australia/

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