The fossil fuel industry must have hoped to keep its dirty laundry private a little longer: the Australian Energy Market Operator has confirmed that a switch to 100% renewable electricity by 2030 is technically viable. What the report neglected to mention is that the investment bill of $220 to $250 billion is pretty close to the $240 billion needed by 2030 if we rely on gas and carbon storage instead.
Other hidden costs of fossil fuels are also coming to light. A new report released by the Centre for Policy Development estimates electricity price spikes could add $250 to the average household bill if fossil fuels continue to dominate. Prices for gas-fired electricity are now linked to volatile international fuel prices. East coast gas prices have already doubled and could treble by 2015. Water scarcity also reduces supply from water-cooled coal plants. This pushed short-term wholesale electricity prices up to five times their normal levels in the last drought.
Yet a myopic debate on electricity prices has ignored the risks of continuing with business as usual. Electricity prices are understandably a politically charged issue. Household prices jumped over 60% between 2007 and 2012, and they are projected to rise a further 20% by 2015. Network charges were the main driver and have already added almost $300 a year to the average household bill. The carbon price adds far less, and households are fully compensated for its costs. The cost of support for renewable electricity is also modest and is offset by its downward pressure on wholesale electricity prices.
The falling costs of rooftop solar have led over a million Australian households to control their electricity bills and insure themselves against future price rises. Solar costs plunged by 85% over the last four years, before considering government support. Two million households — or one in five voters — are likely to have rooftop solar before 2020.
“The real question is how to get the best value from renewable energy by redesigning our electricity system and markets.”
Opponents point out a transition to renewable energy mean our electricity networks need to become more flexible. The costs to achieve this remain unquantified. More importantly, so do the benefits rooftop solar can provide by delaying network investment in some areas. However, we do know that rooftop solar consumers are more actively engaged in managing their energy demand than the average Joe or Jane. This will be important for making more productive use of the existing network infrastructure Australians have already paid so much for. It may well become critical to minimising network costs if climate change leads to more heatwaves and peak demand from air-conditioners.
Others will argue that we will always need gas as a backup. Yet renewable technologies are proving able to reliably supply large amounts of energy to electricity systems. Experience in South Australia shows that large amounts of wind and solar can supply reliable power, if interconnected with adjacent electricity systems. In the long term, with lots of renewable energy, we may need to pay higher prices during peak demand to ensure reliability. However, this would be offset by lower prices when the sun is shining and the wind is blowing.
The real question is how to get the best value from renewable energy by redesigning our electricity system and markets. The rapid expansion of rooftop solar in Australia is pushing this question into the bright sunlight. Regulators and networks will have to find answers fast or be left blinking in the glare. Research and development of simple technical solutions could increase grid flexibility to support high levels of decentralised generation. Given our high levels of rooftop solar and the lack of international research, this could be an industry development opportunity for Australia.
Solar consumers and voters understand that the direction of our electricity system is toward more renewable and decentralised energy. Of 1000 Australians surveyed, 53% believe support for solar is definitely a good idea, compared with only 14% who definitely support subsidies for the natural gas industry, and 6% for the coal industry.
Politicians need to base their decisions on where the electricity system is going, rather than backing legacy technologies and ignoring growing community desires for renewable energy. Otherwise they may find themselves being put through the wash in the next election cycle.
*Laura Eadie is research director for the Sustainable Economy Program at the Centre for Policy Development and author of the paper Going Solar: Renewing Australia’s electricity options