Unusually, Energy Minister Angus Taylor has some pre-politician expertise in the sector and is fully aware of the deficiencies of renewables (the exotic wind/ solar ones, not hydro) and the damage done to Australian prices and reliability by subsidised wind/solar.
Back in August of last year, as a newly minted minister, he basked in the PM’s invested title of Minister for electricity prices down. Conceptionally, the task this entails is not very difficult in the context of Australia having an abundance of cheap well-situated coal that has in the past allowed us to have the cheapest electricity in the world and could again do so. However, timing is of the essence and the program had to be achieved in the nine months gestation period ending in this year’s May election. This was a tall order, seeing as the collapse of the low prices occurred in 2016/17 (when Hazelwood closed) some 15 years after the renewable subsidy venom started to be introduced.
By November of last year Angus Taylor was trying to jaw-bone electricity retailers to reduce their prices. The pressure was intensified and by January this was converted into a rather more prescriptive form of price regulation followed by censorious comments about electricity company profits; these have grown tumescently not because of retail margins but as a result of the high wholesale prices caused by renewables (plus state government actions) knocking out Hazelwood and the SA Northern Power Station.
Finally the white flag has been hoisted. Unable to address the cause of high prices, the government has instead decided to subsidise consumers with Energy Assistance Payments to pensioners, veterans, single parents and the disabled.
Far from addressing root causes, Minister Taylor is not proposing removing the support for renewables. Perhaps this illustrates the impotence of any politician operating in an environment where voters are deemed to want cripplingly costly subsidies that wreck reliability and politicians are unable to persuade them of the deficiencies this policy brings.
However, the Minister himself suggests the subsidies are becoming less important.
This may be the case with the subsidies for wind farms and large scale solar. Due to a supply glut, the subsidy for these, as reflected in the price of LGC’s, has fallen from the equivalent of $80+ per MWh to a present price of around $35 per MWh and a 2023 forward price of $10 per MWh. The pre-crisis average price of electricity in the national market was about $40 per MWh and, though costs have fallen, it is difficult to see how wind/large scale solar can be profitable at less than $80 per MWh once they have an increasingly expensive “firming contract” that retailers will need to marry with intermittently available renewable energy. That means either the subsidies will continue or the electricity price will remain high.
Regarding the second subsidy scheme, that for roof top renewables, even the hyper-interventionist Rod Sims of the ACCC, Angus Taylor’s former colleague at Port Jackson Partners, favours removal. The cost of this subsidy (like that for wind farms paid for by consumers rather than the Budget) is estimated at $1.5 billion this year – astonishingly, four years ago, prior to the renewable induced tripling of wholesale prices, the national market turnover cost of electricity was under $8 billion.
One crumb of comfort is that collateral benefit from the Berejikliean victory in NSW is that Energy Minister Don Harwin is tipped to be relieved from inflicting additional poisonous policies on the sector. Harwin, with his personal crusade for low emissions, brought unwanted further dimensions to the already formidable task Taylor faces.
But the latest retail subsidy on top of those for renewables, the Clean Energy Finance Corporation, and a host of additional state taxes, (cross subsidies to renewables, energy saving requirements and regulatory restraints on fossil fuels) leaves the industry utterly marooned from the market forces that created its low cost competitiveness. It will not recover under the even more aggressive renewables policies an ALP government would introduce and it is difficulty to see how the Coalition, should it be returned to power, can reverse the current direction.