A piece of mine in the AFR this morning explored the costs of the carbon tax, according to the latest policy zig zag soon to be linked to the EU carbon price, and the renewable subsidies.
If the carbon price stays low – likely with Europe in permanent recession – the renewable regulations will be even more costly. The piece calls for scrapping the whole array of measures now that even the thickest of commentators must realise in the fog of the Doha failure that the world (other than the EU and Australia) has rejected the economic suicide of forcing renewables and de-industrialisation.
That spells the end of the subsidy dependent renewable energy.
A slightly modified version of the AFR piece is below.
This year has seen thousands of pages in government reports addressing electricity supply policies. In addition, electricity is at the eye of the carbon emission restraint storm which continues to blow notwithstanding the latest fiasco at Doha.
Having started the current century with deregulatory and privatisation measures that elevated the Australian industry to world leadership in low cost supply, the electricity sector is now reverting to its over-regulated condition prior to the Kennett and Keating reforms of the 1990s.
The new regulatory morass of controls together with taxes has increased wholesale electricity prices by 60 per cent. Added to this are increases in network charges, many of them government-mandated, together with additional paperburden costs.
Though the carbon tax remains the highest profile measure, its cost-boosting effects may be reduced if the government links it to the European Union’s (EU) carbon price. The EU price is likely to stay as depressed asEurope’s economy. Over the longer term the carbon price impact will also be diminished by increased electricity generation from low carbon emitting gas which is becoming cheaper due to shale and coal seam technologies.
Even so, unless repealed the carbon tax will continue to damage Australian industry and consumers. But its effects will be eclipsed by those of other carbon restraining measures which are progressively throttling the industry with cost add-ons.
Chief among these are the requirements to use expensive renewable energy to displace low cost coal. The Commonwealth’s energy regulations nominally require 20 per cent of electricity to be sourced from non-commercial renewable sources, which are high cost and, due to their uncontrollable and intermittent nature, poor quality. In last month’s Energy White Paper the Commonwealth boasted that it had forced $9 billion of Australian investment in windmills. Dubbed byLondon’s Lord Mayor Boris Johnson as “white satanic mills” foisted on Britain’s hills and dales, windmills cost three times as much as conventional sources to generate electricity.
Even more expensive is the electricity sourced from roof-top photovoltaics, on which over $3 billion has already been squandered through subsidies. Photovoltaics benefit from a Commonwealth subsidy that has been fivefold that of wind. Although having been reduced, the price remains excessive and is paid up-front for the 15 years that the installations are deemed to produce electricity.
In addition, households with rooftop photovoltaics are subsidised by state regulations. These require energy retailers to buy back any energy generated and not used in the house itself. Though also being reduced, that buy-back price remains over-generous.
The extravagance of the photovoltaics subsidy regime was so successful that sales boomed forcing Canberra to split the 45,000 GWh 20 per cent renewable target into two: the small scale installations which were to be ramped up to 4,000 GWh by 2020; and the large scale facilities set at 41,000 GWh. But the Clean Energy Regulator, which has previously under forecasted the photovoltaics take-up, now estimates that they and other small scale facilities will actually be running at 11,000 GWh by 2020. This increases the 45,000 GWh target to 52,000 GWh.
All these measures mean the renewable cost subsidy is likely to exceed $7 billion a year by 2020, probably twice the impost of the carbon tax. At the same time, government-induced price increases have started to suppress demand, by forcing some of our most productive enterprises to reduce their outputs. As some energy producers have noted, this brings an incidental effect of further increasing the renewable share beyond the 20 per cent envisaged by Parliament.
Carbon taxes and requirements to use exotic renewables have undermined productivity and cost competitiveness inAustralia’s electricity industry. Australia has moved from having among the lowest cost electricity into having one of the most expensive.
None of this has nor can have any effect on global emissions of carbon. Even if such emissions have the malevolent role activists and gullible politicians ascribe to them, the farcical conclusion of the Doha meeting surely hammers the final nail into the carbon suppression coffin. Only the stagnating juggernaut that is the EU and Australia are imposing emission restraining costs. It’s time for Australia to clean the entire slate and get our economy growing again.
Interestingly, an article by George Goreham in the Washington Times shows how the renewable energy stocks have collapsed in price. The world top thirty stocks are now worth only one tenth of what they were valued at the heart of the Al Gore inspired boom four years ago. Australia’s major green stock, Pacific Hydro, is unlisted because it is owned outright by the union super funds. If its value has collapsed in line with that of other green stocks there is a major loss to be booked somewhere and a major incentive to keep open the gravy train of subsidies on which it, like other green stocks, floats.