The REC Tax that comes with the RET is the most regressive tax of all. The impact on the poorest and most vulnerable is punishing and has led to the new phrase of our time – “energy poverty”.
Germany has disconnected some 800,000 homes from its grid simply because they can no longer afford their – renewables driven – soaring power costs (see our post here).
Australia has seen similar impacts as a consequence of the RET. Australia’s wind power capital – South Australia – has the highest concentration of wind power capacity and – as a result – the highest power prices among the states and, indeed, the world. As power prices have doubled there – some 50,000 households now go without power altogether (see our post here). In a first world economy – this is nothing short of a disgrace.
Well, it seems The Australian’s Dennis Shanahan shares our anger about what’s happened to energy policy in this Country – and about how those in need are suffering the most, as a result.
When power produces poverty, time to act is now
Dennis Shanahan, Political Editor
21 February 2014
ENERGY sustainability and affordability is the new priority in global climate-change policy and politics. The policy is being driven by the politics and economics of rising power prices.
Even in the European Union, a bastion of climate-change politics, and Germany, the world’s largest industrial nation committed to expanding renewable energy to reduce carbon emissions and replace nuclear power, new pressures and priorities are emerging.
So it is no surprise to see that the Abbott government’s terms of reference for the review of the Renewable Energy Target – which requires having 20 per cent of Australia’s electricity produced from renewable sources by 2020 – contains clear avenues to wind back, or do away with, the target and end the subsidies that have fuelled the rapid expansion of wind and solar power.
The Coalition’s first term of reference for the review, which was built into the scheme by the former Labor government, asks for a consideration of “the economic, environmental and social impacts of the RET scheme, in particular the impacts on electricity prices, energy markets, the renewable energy sector, the manufacturing sector and Australian households”.
Giving equal treatment to economic and social impacts, as well as to the environmental effects, is exactly what is happening in Europe. And it is happening for exactly the same reason: the unbearable rising costs of electricity for industry and households. Energy poverty, defined as a household having to spend more than 10 per cent of its net income on power, is entrenched in Europe and is becoming more common in Australia, traditionally the home of low-cost (coal-fired) electricity for businesses and homes.
Late last year the NSW Energy and Water Ombudsman reported that there had been a 43 per cent rise in the number of complaints in 2012, to 25,612, from people being denied extensions for time to pay or being disconnected, and this would “continue to rise”.
A Salvation Army’s survey late last year of people it has helped found that 58 per cent could not pay their utility bills on time, 27 per cent could not afford to heat or cool just one room and some families were gathering around the kitchen table to use just one light and were sharing rooms for warmth.
Of course, there are various reasons for the sharp rise in electricity prices in Australia, including over-investment, poor management and the carbon tax. But the RET is a policy impact without the household concessions that applied to the carbon tax and one which is subsidised by the taxpayers who are paying the higher power prices.
In July last year, for one small business, the carbon tax accounted for 10 per cent of the electricity bill while the RET charges made up 6.3 per cent.
The object of having a RET is to reduce greenhouse gas emissions by replacing fossil-fuel electricity generation with renewables, such as solar, wind, wave and biomass technologies. And the subsidies are to encourage investors because without government backing renewable energy is not commercially viable.
Before the 2009 global financial crisis – during a period of prosperity when climate change was the “greatest moral challenge of our time” and efforts to address it were seen as a priority in Europe – many nations plunged into large-scale renewable energy developments, offering generous tariffs for rooftop solar systems, industry support for solar-cell development, electricity subsidies to keep prices down and government-backed loans and guarantees. Australia’s RET, with the bipartisan aim of delivering 41,000 gigawatt hours of electricity from renewables a year by 2020, covers a suite of industry assistance measures and huge subsidies through guaranteed premium returns for renewable-generated electricity.
The financial crisis, the European debt crisis and the global downturn began hitting the most exposed – both governments and consumers – first.
In 2012, Spain, the poster nation for a renewable energy-led economic revival, began to retreat.
Subsidies for new wind and solar schemes were halted by government decree, support for solar-panel production was phased out and government guarantees were reined in. Spain had to act to cut its debt and try to bring down spiralling power costs to consumers who were in revolt.
Various European nations have begun exploring shale-oil potential and reopening dirty brown-coalmines in an effort to address spiralling energy costs – including gas – which show no sign of abating. While the EU has stuck to renewable energy targets for 2020, it has not imposed binding national targets and Germany is clamping down on its extensive renewable subsidy schemes.
Germany’s Economy and Energy Minister, Sigmar Gabriel, is dramatically reforming the European industrial powerhouse’s energy policies and is putting economic and social impacts ahead of environmental priorities.
“We need to break the dynamics of ever-rising electricity bills, while ensuring a stable supply of energy for all,” Gabriel told the German parliament as he announced a cut in the average subsidies for renewable power from 17 euro cents per kilowatt hour to 12 euro cents by next year. The Germans are also capping the growth of onshore wind and solar plants to 2500 megawatts a year and are not expanding offshore wind capacity beyond 6.5GW until 2020. Gabriel warned he couldn’t promise a cut in electricity prices but he said he was “doing everything” he could to stop them from rising further.
That’s what Tony Abbott said before and since the election. While he’s concentrated politically on the carbon tax, the Australian RET is heading in the same direction as its forerunners in Europe where a long-distant environmental outcome was given priority over concerns of companies wanting to stay in business and those people on lower incomes paying a disproportionate burden.
When proponents of the RET say the increase in electricity prices is only “2 to 3” per cent a year and is outweighed by future job opportunities, the people paying most attention are those who can afford to offset price rises through home solar generation. Those who can least afford it are the increasing numbers of people suffering from “energy poverty”.