This week’s Essential poll included the following question:
- The Labor Party recently announced their policy to tackle climate change which includes a target of reducing Australia’s carbon emissions by 45% by 2030 (compared to the Coalition Government’s target of 26-28%) and introducing an emissions trading scheme. Do you approve or disapprove of this policy?
Total approve: 57%
Total disapprove: 21%
So almost a three-to-one ratio of voters are happy with massively increasing renewable energy, to 50% of the electricity generation mix according to the ALP policy. That raises the obvious question: what does 50% renewable electricity generation do to retail electricity prices? For that matter what would the LNP’s policy of increasing renewable energy to 26-28% do?
No one seems to have said much about it but some useful information exists. I have seen two empirical graphs of electricity prices and renewable energy generation. You can find them here and here. Both are coming from the same original data, but the latter article has more analysis including a comparison with nuclear energy capacity.
Very interestingly the graphs show a straight-line empirical relationship between renewable energy and the residential electricity price in each country. Neither of the articles include Australia. So I grabbed the same original data and added some extra points:
– Australia today
– Australia in 2030
I was curious to see how the US would look in comparison since the original graphs are for mainly EU countries, and there is extensive data easily available for both the US and Australia. Here is how it turned out:
The black regression line includes the US and AUS 2014 points but not the two points for 2030. Some assumptions I made were:
– That the LNP would target 27% renewable electricity and the ALP 50%.
– The Australian retail price is from May 2014, which is just before the removal of the carbon tax.
– All data points include taxes: in Australia the 10% GST and an average 8.45% sales tax for the US.
– Exchange rates were assumed to be AUD/EUR 0.65 and AUD/USD 0.75.
– Australian electricity generation in 2030 was assumed to be 350 TWh, which is from a Climate Change Authority report, and Australian population in 2030 was assumed to be 29 million.
As you can see the regression coefficient is pretty good, although a little lower than for the corresponding Europe-only graph. The US is notable for having the lowest electricity price, and Australia is relatively high for the current renewables generation factor. Both are as you would expect. Australia is fairly highly regulated and is a large sparsely populated country with relatively high poles and wires costs. The US by contrast is about the same size as Australia but with 13 times the population, and is also much less heavily regulated than EU countries.
To get the numbers for 2030 I used the regression equation, then added the difference that our 2014 retail price is ‘above the line’. That retains the local high costs that poles and wires, and sheer distance, add to our prices. The red dashed line has been drawn in to show that gap.
The gap also reflects the carbon tax as it was in early 2014. Without it the price would fall perhaps 2c/kWh, but since the ALP has promised to bring in an ETS, and there is speculation the LNP will do likewise, it has been left in for this rough comparison. The numbers are in constant 2014 dollars so the only difference is the result of the respective policies.
So what are we up for? A lot:
– the LNP would raise residential prices from 28 to 34 c/kWh, or 20%.
– the ALP though would increase retail electricity prices by 53% to 43 c/kWh.
As a comparison it is worth noting that Denmark already has about 50% renewable electricity. It has the highest retail price and almost the highest renewable MW/million people. The ALP policy is also for 50% renewable electricity generation. So that suggests my estimate is low, and that in practice we could reach 50 c/kWh, or even higher.
I wonder if the voters who approved of the ALP policy in the Essential poll would still say that if they knew they were voting to increase prices by 53%?