Australia: slow to wake up?

As the rest of the major economies wake up to the insane cost of wind power – and the fact that its claimed benefit to the environment is so much turbulent air – has Australia been caught napping?

Graham Lloyd’s article in the Weekend Australian today suggests it’s time to Wake Up Australia.

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The Weekend Australian, May 11-12, 2013
Graham Lloyd

Economic reality a wake-up call for the green dreamers

Cheap, plentiful shale gas in the US is undermining the economic case for renewables worldwide.

RETREAT on green energy policies is causing red political faces worldwide. The Gillard government’s backdown this week on promised tax cuts to compensate for the carbon tax reflects a global trend of thwarted ambition and second thoughts.

But where Australia is pushing higher costs on to consumers and business, governments elsewhere are starting to baulk at the voter backlash and the high price of going green.

Australia’s backflip on carbon tax compensation is designed to save money for a stretched federal budget, but it is justified by the European parliament’s inability to muster the political will needed to bring the world’s largest carbon market back from the abyss.

Against Australia’s $23 a tonne for carbon emissions, European permits are trading at €3-€4 ($3.88-$5.18) due to oversupply. The downward spiral in Europe’s carbon price has cut billions of dollars from future carbon tax receipts in Australia, because local companies will be able to access the European market to cover their domestic carbon tax liabilities.

Climate Change Minister Greg Combet is correct to say that cheaper mitigation due to the collapse of the European market has reduced the need to compensate electricity users for the carbon tax impact at home. But the decision not to honour legislated tax cuts undermines already fragile business confidence in green energy policy. With other green schemes likely to be squeezed, a well-founded uncertainty is gripping the investment community worldwide.

In Britain, which has set an ambitious target to decarbonise its electricity sector, a scathing and widely reported assessment by Liberum Capital has warned of a looming crisis in energy policy. The report said EU policymakers had grossly underestimated the difficulties and risks of achieving their green ambitions.

Yesterday, the Financial Times reported: “The reality is that the government is losing its appetite for a scheme which is liable to disintegrate under the weight of its own complexity.”

The British energy policy is to achieve three difficult and often contradictory ambitions.

These are to secure investment to maintain supplies; work towards high 2050 emissions-reduction targets; and maintain a reasonable electricity price for consumers.

According to Liberum, the British energy policy is not plausible and has grossly underestimated the engineering, financial and economic challenges posed by the drive to decarbonise the sector by 2030. It says the cost is high and the economic rationale weak.

Increasingly, the politics of renewables is colliding with economic reality.

Even clean energy investment funds are reportedly changing their philosophy. Venture capitalists are increasingly looking for investments that are not trying to replace the fossil fuel industry but instead trying to help make it less dirty.

The trend reflects both the poor financial performance of renewables such as wind and solar as governments start to pull back on taxpayer subsidies, and the reality that shale gas – an unconventional fuel that now dominates the European energy debate – is rapidly changing the global equation.

Environment groups have campaigned heavily against shale gas largely because it has an immediate environmental impact where it is produced, and has much higher greenhouse gas emissions than claimed by the industry.

The big problem for many environment groups, however, is that shale gas undermines the economic case for renewables.

Driven by new technology, the rise of the fuel is forcing some hard political decisions.

Governments across Europe appear increasingly worried they have been blindsided by the US shale gas revolution.

EU heads of state are debating how to limit the impact of energy costs on European competitiveness as the US advantage grows.

Environmentally, the shale gas boom has not only put Europe at an economic disadvantage in terms of energy costs for industry; it has flooded the trans-Atlantic market with coal.

And where the US sees shale gas as an exit strategy from Middle Eastern oil, for Europe gas is an escape route from dependence on Russia.

Ironically, cheap American coal, driven out by shale gas at home, is causing a spike in coal use in Europe at the expense of higher priced, but less polluting, continental gas.

The Wall Street Journal reported this week that a growing number of European utilities have been forced to mothball modern gas-fired plants that can’t compete with growing imports of cheap coal dislodged from the US. The trend has presented policymakers with a dilemma: cheaper coal-fired power could provide some relief for the region’s struggling economies, but might be incompatible with long-term goals for carbon emissions and renewable energy.

Analysis by Bloomberg shows US investment in renewable power and energy efficiency fell 54 per cent last year to $4.5 billion as government support faltered. The agency says the trend is expected to continue this year as states pull back on targets that force electricity companies to buy renewable energy.

More than half the states with such targets are reportedly considering ways to cut them in the face of a glut of cheap shale gas.

As a big gas producer and one of the few countries to sign up to a second round of the Kyoto agreement to limit carbon dioxide emissions, Australia is living in both camps.

State and federal government policy encourages the development of coal seam and shale gas, despite environmental and landholders’ concerns.

There is political support for a renewable energy target that represents an increasing proportion of electricity usage as industrial demand weakens and greater consumer efficiency is pushed by rising prices.

Australia is still toying with the idea of going 100 per cent renewable. A study by the Australian Energy Market Operator commissioned by the federal government says a 100 per cent renewable future by 2030 to 2050 was possible, at a price.

AEMO estimates the cost at between $219bn and $332bn, which some green energy lobby groups have said would represent only a modest price increase for electricity users over price rises under a carbon tax.

“In practice the final figure would be higher,” AEMO said.

The sobering reality is AEMO’s observation that the technology remains uncertain. To fully replace fossil fuels it would be necessary to build alternative generation with twice the maximum customer demand. “This results from the prevalence of intermittent technologies such as photovoltaic, wind and wave, which operate at lower capacity factors than other technologies,” the report said.

The renewable future would also rely greatly on biomass; AEMO says expert opinion is divided on whether it should be classified as renewable.

The estimates do not account for the acquisition of up to 5000sq km of land, the investment to bolster the distribution network, or the cost of stranded coal-fired power generation.

The report can be seen as a bit of blue-sky thinking.

Australia is only at the start of what would need to be a massive investment in renewable energy technologies to meet the reconfirmed target.

There are lessons in what is happening now in Europe.

Green dreams don’t always work out as planned and politicians often have to change their mind.

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. Solar and wind provide energy, but we have no use for energy, its (base load) power we want and neither can provide power.

  2. Jim Hutson says:

    There is no affordable Alternative energy. End of story.

  3. Jackie Rovensky says:

    Australia has a problem learning from others mistakes. Unfortunately in this instance those in authority who have the apparent capability to learn from others mistakes are so clouded by the ‘feel good’ promotion of IWT’s they are sending this country into the abyss. Yes to renewables and yes to reducing pollution, but this should not come at a high cost to the environment and human health and welfare.
    They need to see through the ‘smog clouds produced by hard sell talk’ and see what the rest of the world sees and listen to those citizens of their own country who for several years have been telling them all is not well with this technology.

  4. You have to wonder how much of the reluctance stems from fear of losing large sums of money….and has absolutely nothing to do with not being FULLY aware of the truth about the useless overpriced turbines. I bet it`s close to say…..100%?

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