Yesterday I was the token rationalist speaker at the Australasian Agricultural and Resources Economics Society’s “The Future of Australian Energy Symposium”.
Two other speakers were Tony Wood (from the ALP’s think tank Grattan Institute recently rewarded for the damage his advice has done with an AO) and Danny Price from Frontier Economics (also an ALP consultant).
In so far as their advice has been followed, these two prominent characters have been instrumental in forging the taxing policies on fossil fuel generators that have destroyed our energy market. They now acknowledge the market is broken, it being impossible to shrug off the line ball reliability and doubling soon-to-be trebling of prices that is illustrated here.
Not many attendees understood the importance of this graph demonstrating an international correlation (perhaps it is just chance!) between high wind penetration and high electricity prices.
But the politicians’ favoured consultants’ solution is one further attempt to get the interventionary policies right. Like the fans of socialism, they say its failure is because it has never been done properly!
The other speakers were operationally oriented – largely consultants – who proffered ways that the renewable target, now sanctified by the Paris Agreement few recognise as dead and buried, could be operationalised.
We have seen the wholesale price for electricity rise from under $40 per MWh with very little trend up until 2012, and was still $40 in 2015, to its present level of around $90 per MWh
Wind has risen from nothing in the early part of the century to a share of over 10 per cent today. All of that wind is dependent on subsidies currently around $85 per MWh. In addition, there is the roof top solar (subsidised at $40 per MWh plus advantageous export tariffs).
Due to its abundant coal supplies, Australia had perhaps the cheapest electricity in the world ten years ago. As a result of the renewable subsidies it is now among the most expensive. Aside from increased direct costs to households, this has immense adverse consequences for the competitiveness of Australian industries and hence the nation’s living standards.
We can reverse direction and perhaps the demonstration effect of the US will provide the catalyst.
Here is the address I offered.