Getting mail from the power company typically isn’t good news. Billions spent needlessly upgrading poles and wires has led to steep rises in bills. Add to that increasing gas prices and the (modest) carbon price and it’s easy to see why two million Australian homes have some form of solar power.
But if the fossil fuel power companies and the Federal Government succeed in tipping the energy market away from renewable energy, household power bills could be about to skyrocket.
Over a decade ago, John Howard introduced a mandatory renewable energy target. Howard’s vision was good but his target woeful. Thankfully that target was increased from 2 to 20 per cent.
Despite Treasurer Joe Hockey’s dislike of wind power – he recently called wind turbines ‘utterly offensive’ – for a country like Australia, renewables make sense.
Untapped potential
According to the Department of Resources, Energy and Tourism, Geoscience Australia and the Australian Bureau of Agricultural and Resource Economics and Sciences we have the highest average solar radiation per square metre of any continent, our wind supply is among the best in the world and our wave and tidal potential is world-class.
The Abbott Government’s distaste for renewable energy sits in stark contrast to Howard, and is bad news for families. Take the renewable energy away and our power bills are going to skyrocket.
According to the Government’s own modeling households will be worse off if the renewable energy target is lowered or removed.
By the way the Government’s modeling is consistent with the findings of five other, independent energy market modeling experts (ROAM Consulting, Sinclair Knight Merz, Intelligent Energy Systems, Schneider Electric and Bloomberg New Energy Finance).
In fact removing the current requirement that 20 per cent of our national electricity comes from renewable sources would see the average family in NSW pay more for on their electricity bill per year than the entire cost associated with the carbon price.
Just like when you buy a fuel efficient car, or a pair of good solid RM Williams boots that you’ll never need to replace, sometimes an up-front investment can be a big dollar saver in the long run.
The reason why renewable power is so good for power bills is that unlike coal and increasingly expensive gas, energy from the sun, wind and waves is free, from nature.
Like many leading countries, the RET means that Australia requires that some of our national electricity supply comes from clean sources. Recent polling shows that almost three quarters of Australians want to keep or even expand the RET.
But the dominant fossil fuel generators don’t like competition from renewables because it reduces their profit. Companies like Origin Energy have invested heavily in gas. Getting rid of the RET would help their business, but it won’t help their customers.
New analysis released by independent electricity experts at Intelligent Energy Systems confirms abolishing the Target will increase household power bills while handing $12.8 billion to the fossil fuel generators.
Saving in the long run
The fossil fuel generators and some energy retailers argue that scrapping the RET will actually save on household bills.
This depends on what one means by ‘save’. Just like when you buy a fuel efficient car, or a pair of good solid RM Williams boots that you’ll never need to replace, sometimes an up-front investment can be a big dollar saver in the long run.
At first, consumers may benefit from no longer having to contribute to the upfront cost of building new clean energy projects.
But any saving is quickly overshadowed by the much higher cost of coal and gas to fuel the generator and a windfall to the fossil fuel generators. That cost keeps going up in line with more demand at home and overseas on our coal and gas reserves. The more Korea and China demand our gas, the more we pay for it here at home, while also being forced to burn dirtier brown coal.
So, just like it makes no sense for the government to want to scrap the Clean Energy Finance Corporate, which made a profit of 7 per cent in 2013 investing in business efficiency and clean energy, it makes just as little sense to go after the Renewable Energy Target.
It makes so little sense, in fact, that the question must be asked? Why is the Government so intent on scraping the renewable power that keeps power prices down?
Dugald Murray is the chief economist at the Australian Conservation Foundation, Australia’s leading national environment group.
Disclosure: Dugald is a former adviser to the Australian Government and former public servant working on energy and climate policy for Australian, Canadian and Victorian government departments.
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