I have a piece in the Spectator coffee club on the raft of new measures the government has announced to shore up the electricity and gas supply industries, they and their predecessors have destroyed.
A slow fuse was lit in 2001, when Prime Minister John Howard Mandatory Renewable Energy Target (MRET) requiring electricity retailers to include two per cent of exotic renewables (wind and solar) into their electricity supply. This gave a 50 per cent subsidy – paid for by customers — to these renewables. Things only got worse until we now pay the equivalent to $13 billion a year. Aside from this cost, these measures bring about highly volatile prices an d destreoy the economics of intrinsically low cost coal generators.
The new energy policy announced on Tuesday is a recognition of the problem but offers poor solutions while flaunting developments that have actually caused it.
The government has recognised that, having been stampeded into an energy supply based on boosting the high-cost unreliable renewables component, it has to engage in ever-increasing interventions if the system is to avoid a Californian style permanent crisis.
First government tried to force AGL to keep the Liddell coal generator on line. That having failed it threatens to build a new gas generator to replace it if nobody stumps up the cash to do so and it canvasses a new subsidised transcontinental pipeline to supply gas that state governemnt reegulations forbid to be supplied iocally
Fatuously claiming that “renewables like solar and wind don’t need subsidies but do need integration”, the energy plan earmarks $250 million “to accelerate three critical projects -– the Marinus Link, Project Energy Connect and VNI West interconnectors”. Yet AEMO estimates these will cost $8720 million. And that spending will trigger further operational problems that will be costly to fix. Papering over the cracks from 20 years of bad policy costs does not come cheap!
Oblivious to these contradictions, the Prime Minister boasts that Australia invested $30 billion in renewables over the past three years and will add 12.6 GW of renewable capacity in 2019 and 2020 – that’s eight times the capacity of the Hazelwood Power Station that was forced to close.
All renewable energy is subsidised and poisons the entire system.
The competition reforms and privatisations that took place from 1990 brought Australia to world leadership in low-cost energy. At first gradually then rapidly, tinkering by politicians has undermined this.
Ministerial hubris and denialism will mean increased centralisation, political fixes and perhaps re-nationalisations, giving us excessive costs and unnecessary unreliability.