My colleague Ric Brazzale and I have been involved in Australia’s energy and climate policy deliberations for several decades. Over our time we’ve seen — and in a number of cases been directly involved in — an array of weird, wonderful, downright ugly and utterly hopeless policy initiatives in the energy and climate space. Yet the key searing memory for both of us has been constant arguments with people more powerful than ourselves to get them to recognise a legitimate role for energy efficiency and renewable energy in our energy market.
Today we released a report lamenting, while also explaining, how Australia ended up with some the highest wholesale electricity prices in the industrialised world. We’ve achieved this miraculous feat while at the same time producing the developed world’s second most carbon polluting electricity in the world, second only to Estonia. And it has transpired after the Abbott government abolished the carbon price and wound back the Renewable Energy Target by a fifth. All done on the promise Australia would become a low-cost energy superpower.
The people behind this sterling success are also many of the people who set up the regulatory rules that allowed electricity network monopolies to spend $40 billion on network capacity expansions. This doubled household electricity prices while demand flatlined.
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It has struck me over the years that Australian industry lobby groups, as well as senior bureaucrats at the controls of Australia’s energy policy, seem to all be very good at nodding their heads in favour of a long-term emission reduction policy. It’s just they seem to have an uncanny knack of rejecting or attacking any kind of significant emission reduction policy that has a good chance of actually being implemented.
The Renewable Energy Target and its state-based offshoots are the most significant single carbon abatement policy implemented in Australia. They have also been subject to withering criticism and almost endless attacks and government reviews. These have come not just from the usual subjects like lobby groups representing power generators or coal miners. They have also been repeatedly attacked by powerful officials within the energy policy making apparatus. This has included the Productivity Commission, the Australian Energy Market Commission, New South Wales’ Independent Pricing and Regulatory Tribunal, the Australian Bureau of Agricultural and Resource Economics, and the late head of the Australian Energy Market Operator.
Energy efficiency policies have also not escaped such attacks.
Even when the energy policy cabal got a policy almost perfectly matching their demands — which is what the Gillard government’s carbon price represented, with bucketloads of free permits, mild targets and lots of international credits — many cheered on Tony Abbott’s scare campaign to tear it down.
Recent remarks by Gary Banks, former head of the Productivity Commission, were incredibly revealing about a belief I suspect is pervasive among those who demand no climate policy until we get a perfect one:
“While Australia’s own actions can have no discernible impact on global carbon emissions, let alone on Australia’s climate, there is broad support for the idea that playing our part is a precondition for a joint international endeavour that could. This requires a leap of faith, but it is a legitimate policy objective, even if a particularly costly one for this country given its resource endowments.”
You can sense the disdain and cynicism with which Banks regards Australian efforts to reduce emissions. Australia should instead be a selfish freeloader. Indeed, perhaps a parasite on global efforts to avoid dangerous climate change as we persist in pushing the use of our great “resource endowment” in coal and gas.
Banks preceded these remarks in his speech by repeating an argument promoted by the Minerals Council of Australia:
“The inconvenient truth is that the increasingly high prices for increasingly unreliable electricity are a direct consequence of the increasingly high utilisation of renewable energy required by government regulation.”
This is wrong. But to appreciate it you need to rely on more than simple refrains like “when the sun doesn’t shine and the wind doesn’t blow the power doesn’t flow”. You need to understand that ageing coal-fired power stations like Hazelwood face bills of hundreds of millions of dollars to address safety and reliability problems. You also have to make the effort to familiarise yourself with the technological progress and reductions in costs achieved by wind turbines and solar module manufacturers. And of course you just have to take your nose out of a book to see and hear about the incredible prices Australian businesses are now paying for gas.
The report we released today, Overcoming ideology to support new power plant investment and reduce power prices — Could Judith Sloan and Chris Kenny hold the answer?, helps to explain just how wrong Gary Banks is.
Don’t get me wrong; Australian climate policies have been far from perfect. While at the Grattan Institute, I co-wrote a two-part forensic critique of all that has gone wrong with Australian climate policy from 1997 to 2011 — Learning the Hard Way. But unlike Gary Banks, I actually care about achieving the objective of avoiding dangerous climate change.
* Tristan Edis is director of analysis and advisory with Green Energy Markets, a firm that assists clients make informed investment, trading and policy decisions in carbon abatement markets.