How the coal industry hoodwinked us all into higher electricity prices

Next time a media company produces one of those “power” issues, a list of people who effectively run the country, perhaps it should think laterally and include a picture of a coal-fired power station. Any old one will do, but the bigger and the more polluting the better.

In Australia, the fossil fuel industry appears to hold absolute power. A decade ago it succeeded in stopping John Howard’s mandatory renewable energy target in its tracks, and it then helped kill Kevin Rudd’s Carbon Pollution Reduction Scheme, the mining tax and Julia Gillard’s carbon price. Now, it has another victory, winning endorsement for a plan to bring the Renewable Energy Target to a halt for the same reason that the MRET was stopped a decade ago: it was way too successful.

After failing to convince former Reserve Bank of Australia governor Bernie Fraser and his team of experts at the Climate Change Authority in 2012, the fossil fuel industry finally got from Tony Abbott the judging panel it had craved — a mix of climate change deniers, fossil fuel executives and lobbyists under the leadership of sceptic and pro-nuclear advocate Dick Warburton, and under the close supervision of the policy zealots within Abbott’s inner advisory circle.

The recommendations of the RET review panel for an immediate closure, or a massive scaling back, of the hitherto bipartisan 41,000GWh target will have massive implications for the renewable energy industry in Australia. Bankruptcies are inevitable, and according to Bloomberg New Energy Finance, the market for large-scale renewable projects — either wind farms, solar farms or other —  will be dead for up to a decade.

The roll-out of rooftop solar systems on households will be slowed dramatically as prices for rooftop systems rise by about one-third. Installations on businesses and farms could be severely curtailed if it follows through with recommendations to cut eligibility from 100kW systems to 10kW systems. The new metering required of systems bigger than 10kW would offset any benefits.

All in all, the recommendations will deliver a massive windfall to the fossil fuel generators. Independent analysis suggests $10 billion to $13 billion — mostly at the expense of consumers.

But while the generators have won a key battle, it is by no means certain that they will win the war. Each of the big three retailers have recognised that their own “Kodak” moment is looming as the cost of rooftop solar and other technologies fall, threatening a mass defection from the grid that would be catastrophic for their business models, as well as social equity.

They will feel that the RET ruling will give them time to adapt and refine their business models to include battery and storage. They will be confident that regulatory rulings — often staffed by people of similar views as Warburton — will afford them regulatory protection for years to come. But time is not on their side. UBS has warned that mass grid defections could happen as early as 2018, and that centralised generation could be largely extinct in a decade.

To make matters worse for the utilities, they have the worst brand loyalty of any customer-focused business. Analysts repeatedly warn of the perils of artificially protecting their assets. Even the International Energy Agency said overnight that utilities should be doing all they can to remove barriers to these new technologies.

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3 Responses

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  1. the market for large-scale renewable projects — either wind farms, solar farms or other —  will be dead for up to a decade”

    mass grid defections could happen as early as 2018, and that centralised generation could be largely extinct in a decade”

    It seems exceedingly unlikely that both these statements can be true. Any chance that Parkinson might actually deploy some dispassionate critical analysis to tell us which, instead of relentless tendentiousness?

    by Mark Duffett on Aug 29, 2014 at 3:29 pm

  2. A beautiful synopsis Giles.

    It costs the consumer bugger all, it deepens and broadens the market, it destroys much of the worst of rent-seeking by entrenched industries.

    And it costs the government nothing.

    I may well find myself working to get off the grid by 2018. I resent mightily my electricity bills, the electricity market, the huge social costs which will become more apparent and their undeniable ability to socialise the costs and privatise the profits.

    These are the most government dependent industries in Australia. Who else receives so much?

    I’ll stand side by side with you pissing into the wind as this government just bends us all over in front of the rich and powerful and old white male led industries. I’ll bring the raincoats.

    But as soon as I can get off the grid I’m going to give it a red hot go.

    Declaration, I am a not quite but well on my way to becoming an old white male.

    by Dogs breakfast on Aug 29, 2014 at 5:43 pm

  3. Hear hear, dogs breakfast. As others have said the government is not open for business unless it’s their backers in the coal industry. Stranded assets anyone?

    by Brian Melbourne on Aug 29, 2014 at 7:23 pm

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