There are those who say if you force people to invest in horses and buggies and use these for half of their road trips we would all be better off. Not for them the superficiality that this would reduce real incomes as a result of investing in technology that is higher cost, prone to breakdown and can only operate when the horses are not resting, eating or carrying excessive weight.
And so we come to the ‘Credible pathways to a 50% renewable energy target for Queensland’ Draft Report
The report concludes that if Queensland jettisons half its coal derived electricity and replaces the output with wind at three times the cost and greatly inferior reliability the state is $6 billion or so better off.
This magic pudding is the outcome of arcane economic modelling.
About 20 per cent of the estimated beneficial effects are due to an assumption that all the coal generators will keep operating in the face of having half of their output taken off them by subsidised wind and solar. But, even without this unrealistic notion, the gains to Queensland are palpable.
The main driver is from diverting national government supplied helicopter money (or its regulatory equivalent) from other states into Queensland. This is explained on page 108 where we see the darnedest statement,
“These results are consistent with expectations as the subsidisation of renewable energy into Queensland in effect diverts more efficient investments (from both the electricity and other sectors) from other states and territories to Queensland resulting in a gain in Queensland GSP but a loss of economic activity across the rest of Australia. Under the modelling outcomes, these subsidised investments in effect reduce capital and labour productivity over time, leading to lower incomes, investment and GDP.”
What this convoluted language says is that base case has the national measures already incorporated (though it vastly understates the damage that replacing cars with the horse and buggy and stagecoaches). The base case assumes a $40 per tonne national carbon tax, that wind/solar increase their efficiency and other technologies don’t, and that the gas price is an elevated $7 gj. These suppositions lift commercially supplied electricity costs up to their renewables level (assuming also that the tricky business of reliability can be solved).
The Queensland panel’s report shifts the inherent reduction in GDP that the carbon tax causes around the nation in ways that are thought to be more efficient for Queensland (and marginally less efficient for the nation as a whole). So the economics is smoke and mirrors to show that, given economic amputation is coming at a national level, Queensland can reduce its own in-state costs. That’s not quite how the hapless Energy Minister, Mark Bailey, explained it
My own analysis is that economic amputation is economic amputation even if politicians support it to pander to green mysticism and donation-rich renewable energy businesses. I have a piece in the Herald Sun and its sister publications. Among the points it makes is
The Andrews government has set a 40 per cent renewables goal by 2025.
That’s up from the existing 14 per cent and represents a doubling of the target set only last year.
One indicator of the expense this entails comes from Germany, where a renewables goal of only 30 per cent is estimated to cost $37,000 per household.
Victoria’s target would require over 2,000 giant wind turbines in addition to the 600 presently operating.
But, attracted to the idea of winning back green voters and at the same time tapping into political donations from renewable energy businesses, the Andrews government is seeking to replace the highly reliable low cost electricity supply system based on four giant coal plants in the La Trobe Valley.
Annual spending on renewable programs in Australia is $3.7 billion by the Commonwealth and $1.2 billion by state governments (about $440 million for Victoria). That’s nearly $5 billion a year being spent to actually reduce the electricity system’s reliability.
This is set to rise. Commonwealth programs aim to get a 23 per cent renewables share of electricity supply by 2020. Additional hydro is prohibited so this means raising the current share of wind and solar to about 15 per cent from the present level of 6 per cent.
In addition to the expense the Commonwealth’s own policies entail, energy minister Josh Frydenberg estimates that if the states (primarily Victoria and Queensland) were to achieve the additional goals they have set, this would add another $41 billion in worthless capital expenditure.
It is unfortunate for Australia that energy policy sacrifices the public interest for political gain.