I have an article in the AFR today which argues that two studies of the RET have independently placed its net present value cost at $29-$37 billion. Even if it were closed today its costs would be $6-$16 depending on the assumptions. Addressing the latest piece of self-serving research the renewable industry and its stalking horses have commissioned I add
An analysis for the Climate Institute estimates the abolition of the RET would bring gains to coal-fired generators of $25 billion by 2030. Although coal would regain market share from not facing subsidised renewables, electricity supply is highly competitive and increased revenues to coal-fired generators would not involve any form of super-profit.
In terms of the direct impact on electricity consumers, the burden of renewable requirements this year is estimated by the energy regulator to add 12 per cent to the average household’s electricity costs. That’s about $260 per year.
The cost of renewable programs for typical households could rise as much as fourfold. The article continues,
In research IPA commissioned last week from Galaxy, people were asked whether they favoured retaining the present level of support, increasing support in line with current policy or scrapping all assistance to renewable energy. Only 14 per cent favoured increasing support along the lines of current policy. Twenty-three per cent favoured scrapping the scheme entirely.
While 62 per cent said they would be content to see the subsidy costs kept at present levels, people are rarely as profligate as they say they would be when it comes to their actual spending decisions. This is readily seen in the small take-up of consumers’ voluntary top-up sales of green energy at premium prices, which amount to only 0.7 per cent of the annual sales of electricity.
Moreover, the direct costs of renewable energy through electricity prices is only half of the costs that consumers bear – the rest come about through consequent higher costs of goods and services. And for businesses, the renewable requirements are much greater, as a share of total energy costs, than they are for consumers.
The renewable energy subsidies fail all tests. Consumers resent paying for them and they represent a dead weight on industry competitiveness and economic growth.
Restoring consumer sovereignty and allowing people and firms to make their own choices about trading off their sources of energy and price preferences is the appropriate course.
The AFR itself has a well-reasoned editorial that unfortunately stops short of the logical conclusion of immediate abolition. New MP Matt Canavan has a very good piece in The Australian calling for abolition with similar shortcomings.
Unfortunately too many people are spooked by the ridiculous notion that if we don’t continue paying three times its worth for a product for the next 15 years nobody will ever invest here again. Those of this view are oblivious of the outcome from retrospective wind-backs of Spain’s renewable subsidies, or indeed of the regulatory measures taken in the UK and elsewhere that have retrospectively devalued coal based generators.
Waste is waste and investors should be wary of putting money into unviable projects that are dependent on ongoing government favours.