Like many environmental lobbyists, the Climate Council has a clear goal: stop fossil fuels and push Governments to mandate a taxpayer subsidised switch to 100% renewable energy.
As a clear, simple goal, it works well: a vision of complete elimination of carbon emissions. What is not so simple is the economic and social impact inherent in this shift, especially if it is on the rapid ACT timetable loudly applauded by the Climate Council.
In the ACT, they plan to switch to 100% renewables within the next four years – despite the fact they ‘import’ their power from NSW.
So what portion of the economic cost of this transition to 100% renewables will be borne by businesses and consumers? Quite a lot, if the experience in South Australia is anything to go by.
The Climate Council this week released a ‘report card’ on the so-called “race to renewables”. Getting the gold star at the top of the report card was South Australia, courtesy of its mandated adoption of wind power.
The flipside of this pseudo-accolade is that electricity prices in SA are rising because of the cost of funding wind power and then having to buy power at spot prices when the wind is not blowing.
Because of this, SA now has the highest cost of electricity, compared to other States, who are actually enjoying price reductions, not rises.
A saving grace for South Australians is that the cost of gas is falling – as confirmed this week by a gas network regulatory ruling from the Australian Energy Regulator (AER). In fact, the distribution cost of gas for businesses and consumers is expected to drop 23% next financial year and continue to fall in 2017-18.
The AER estimates this will translate to an average $144 benefit for SA’s 425,000 residential customers and a $750 cost reduction for the State’s 10,000 small business customers.
This represents a great relief for SA power users, but perhaps a puzzling one, given the contrasting rising cost of electricity. (Incidentally, it also follows recent news that Australia has the lowest wholesale gas prices of any country in the Asia-Pacific region – most other countries have prices which are double or more, according to the International Gas Union)
So therein lies the quandary for this and future State and Territory Governments: What price are they prepared to expect consumers to pay for their greener power. And how fast do they want the transition to renewables to occur, when they have the opportunity to use cheaper, more reliable gas resources, which are better for the environment as a substitute for coal-fired power.
In the ACT, the Government says the answer to ‘how quickly?’ is ‘very quickly’. It plans to move to 100% renewable energy within four years, though it does not attempt to quantify the likely consumer price impact.
However, if they are to achieve the 100% goal, there will need to be some sleight of hand. While the ACT legislators take pride in their laudable and ambitious plan, what they don’t say is that the 100% goal is a little illusory. The truth is continuity of power supply simply can’t be achieved without use of fossil fuel sources to complement renewables when the hydro is not delivering, and the sun is not shining.
The ACT relies on power generated in NSW, complemented by Snowy Hydro renewable energy, and in future, from large-scale solar plants under construction in the region. These are great sources of renewable energy, but they do not provide continuous power, and need coal or gas fired back-up.
Back in SA, the State Opposition says worse news on electricity costs is likely to come, following the closure of the Port Augusta power station.
Opposition leader Steven Marshall says SA “endures the highest prices in the country and the gap between SA and the rest is set to increase significantly by 2018”.
And he predicts this will occur at the same time as power prices fall in NSW and Victoria – two States which are nearer the bottom of the Climate Council report card.
Another interesting sidebar to the Climate Council report is its enormously exaggerated statement of the current position in renewable energy consumption.
As exposed by the Commonwealth Chief Economist, actual energy consumption is very different to the claims made by environmental groups, who routinely assert that renewable energy is now about 15% of our national consumption.
What the Chief Economist reported was that in terms of actual consumption (as opposed to purchase of renewable energy permits under Federal and State consumption mandates and offset programs), renewable energy is actually at less than 2% – as we noted in February.
This makes laughable the unsubstantiated Climate Council claim that SA is now running at no less than 40% renewable energy.
If only it were that easy.