An Op ed piece in the Australian today by renewable energy lobbyist Kane Thornton points out that the renewable energy requirement currently adds only 3-5 per cent to household energy bills. Another way of saying this is that renewable energy presently comprises 3 per cent of electricity and, as its costs are more than treble those of conventional electricity, and most of the costs of supplying household energy are in the networks the requirement that it be used adds 3 per cent to total costs.
Once the planned 20 per cent renewable requirement is in place and assuming the best wind farm sites are not yet taken, the costs would amplify.
(Addendum: It is double or more of households’ 3-5 per cent share of costs for energy intensive businesses where the energy component of costs is much higher. The proportion of excess costs derived from renewables will also rise for all users when the carbon tax is repealed)
Thornton’s argument is equivalent to those that could be used to justify on-going subsidies to car assembly. After all, if the cost premium for an Australian built car is, say $3500, that might mean an ex-factory subsidy of 20 per cent. And given the manufactured price of a car comprises less than one fifth of a consumer’s annual running costs, voila! the subsidy means a mere four per cent a year to the consumer.
The impositions derived from renewable energy requirements rise year by year and the scheme’s costs are set to become over $5 billion a year by 2020. Overall, renewable requirements would add about 40 per cent to the wholesale electricity price and would have imposed a total cost of some $23 billion and the program costs are planned continue at least until 2030.
The ALP/Green alliance tried lock-in future spending on renewable energy. To this end it set up the ALP/Green friendly Climate Change Authority (CCA) to provide a report before any modification of the renewable requirements can be contemplated.
Unsurprisingly, CCA’s December 2012 Review found that there was an on-going need for renewable subsidies, pretty much in line with the existing arrangements.
A major consideration was the CCA’s view that this would avoid increased uncertainty on the part of investors. One CCA member, Elana Rubin, the head of a union super fund, unblushingly, said that such certainty was essential to provide good investment opportunities to super funds. Investor certainty on the back of a government guarantee? Nice work if you can get it – and by lobbying hard the wind industry proves they can get it and make the rest of the community pay.
And this undermines another string to the Thornton bow as he claims that the subsidy has generated $18 billion in investment. That $18 billion in investment needs a price three times its market value to be viable. Such mandatory dilution of the return on investment is the road to poverty.