Brewing Voter Fury Guarantees End to Australia’s Renewable Energy Target

Stephen Scherer and the bill that crushed 35 jobs.

 

Pensioners who can no longer afford power vote.

The adult children of those pensioners vote.

South Australian businessman, Stephen Scherer – owner of Plastic Granulating Services – who was forced to permanently shut the gates on an otherwise profitable business when his power bill went from $80,000 a month to $180,000 a month votes.

The 35 workers who lost their jobs as a result of the above vote.

Families struggling to pay retail power bills rising, year-on-year, by 20% vote.

The hundreds of thousands of workers in mining, mineral processing and heavy industry threatened by rocketing power prices vote.

The thousands of (former and maybe still hopeful) workers in the manufacturing sector whose jobs have already disappeared thanks to rocketing power prices vote.

We could go on.

The point is that Australia’s so-called ‘energy crisis’ was as perfectly predictable, as it was perfectly avoidable and for that reason there will be a political reckoning.

The Large-Scale RET is a $3 billion a year tax all Australian power consumers, the largest single industry subsidy scheme in the history of the Commonwealth and one of the largest government mandated wealth transfers of all time.

As noted in our recent posts, the combination of rocketing power prices, load-shedding, blackouts and widespread energy poverty has focused the attention of Liberal and National MPs, who have recognised the LRET as an existential threat operating on at least two levels: Australia’s future wealth and prosperity; and, closer to home, their chances of holding their seats at the next Federal election.

And it’s that pungent smell of fear mixed with political self-interest that oozes from this Chris Kenny article.

Energy debate fuelled by infinite sources of renewable acrimony
The Australian
Chris Kenny
8 July 2017

If there is one economic issue where the ideological prancing and post-material indulgence of the media/political class clashes violently with the daily priorities and pragmatic common sense of the mainstream, it is energy policy. With the highest electricity prices in the world now achieved in South Australia (other states are in hot pursuit) and past blackouts heightening fears of further shortages, the situation is shambolic.

Imagine the lunacy of an ­energy-rich nation — one of the largest exporters of coal, gas and uranium — inflicting an energy crisis on itself. This is self-harm by government decree. The bipartisan renewable ­energy target has been the main cause. It achieved its aim of boosting ­investment in wind and solar generation but governments — federal and state, Liberal and Labor — ignored cost and security. Now, through the Finkel review, the Turnbull government is trying to retrofit affordability and security to an electricity network ­up-ended by the RET.

With coal generators priced out of the market in SA and Victoria, and insufficient investment in storage or back-up gas generation, the nation faces a pricing and ­security crisis. SA experienced the trauma of a statewide blackout triggered by a storm, system instability and over-reliance on inter­state interconnection. It is worth noting that SA took the power price world title from Denmark, which also relies on wind for more than 40 per cent of its electricity.

Energy is the most crucial and volatile policy issue in national politics. In the wake of Finkel, we await a detailed plan from the government. It will be a defining factor in whether the economy can ­reclaim confidence, rekindle growth and diversify.

It will determine whether the Coalition has a chance of remaining in office beyond the next election. And it will be critical in resolving or unleashing the titanic policy and personal struggle ­between Turnbull and his ­aggrieved predecessor.

Tony Abbott talks a big game on electricity now he is free from the constraints of office or cabinet solidarity. He wants to cap the RET, invest in new coal generation and give priority to affordability and security over emissions reductions. But as prime minister, he behaved differently. Abbott scrapped the carbon tax but implemented direct action to cut emissions, supported the RET and negotiated the Paris target. None of this means he is wrong now; it merely exposes him to charges of hypocrisy, changeability and opportunism. Most of the media/political class are committed to climate gestures and renewable energy, so shout down his present interventions. But ­Abbott makes a lot of sense, ­especially to mainstream voters worried about the impact of power prices on household budgets or business cash flows.

The core policy challenge is ­described by Turnbull as a “trilemma”: meeting three criteria of affordable energy, secure supplies and reduced emissions. The fatal flaw is that reducing emissions is precisely what has made power more expensive and ­less reliable.

If we really want the cheapest and most reliable electricity we would concentrate on thermal baseload generation and forget emissions. And if we really want lower emissions and refuse to ­embrace nuclear, we must accept higher prices and less reliability.

Putting climate science arguments to one side, it is clear that given the minuscule size, globally, of Australia’s carbon dioxide ­reductions and the massive ­ongoing increases from China and India alone, our cuts will have no discernible impact on the planet. So as a nation we must decide whether we are prepared to pay a high economic price for no environmental gain.

Alternatively, we could decide this moment in time — with the US withdrawing from Paris, our economy in flux and ­global temperatures stubbornly ­refusing to rise in line with the models — might be opportune to abandon or forestall reductions targets and concentrate on economic stability. This is a proposition few politicians, aside from Cory Bernardi, Pauline Hanson and, less directly, Abbott, are prepared to even discuss. Little wonder the major parties are in strife.

Turnbull faces an even more challenging political “trilemma” than his policy challenge. A ­workable political resolution on energy needs to meet three ­demands that, like his policy aims, are irreconcilable. The Prime Minister first needs a technically plausible plan, as he says, based on economics and ­engineering rather than ideology. This goal is compromised by the determination to reduce emissions by at least 26 per cent by 2030 and is a diabolical challenge for any technocrat given the starting shambles.

Turnbull’s policy must also pass through parliament and deliver ­investment certainty; the only way to satisfy those aims is to win agreement from Labor. If Bill Shorten approves of the package, it will sail through the Senate and business can confidently make ­investment decisions with perhaps two terms of policy certainty — an eternity compared with the dystopia of the past decade.

Finally, the Turnbull plan needs to demonstrate policy differentiation and political advantage to provide some chance of recovery in the polls and re-­election. But the Coalition cannot simultaneously trump Labor and win its bipartisan support. Like his policy trilemma, this political trilemma cannot be resolved.

Prioritising the national interest would favour a solution that Labor could support, which is where Turnbull is drifting. It might involve a clean energy target where the subsidy cut-off is set at a level allowing high efficiency coal generation (about 0.6 tonnes per megawatt hour) — this would ­entrench prices higher than they otherwise would be but guarantee emissions reductions.

But politics is bound to intervene. Labor could leave the ­Coalition hanging out to dry, both because its left flank and the Greens would prefer to destroy coal, and it would present an irresistible chance to execute Turnbull politically. Why not destroy Turnbull on energy and go with a carbon price, 50 per cent RET and higher global commitments once in office? Labor seems to be trying to lure Turnbull into undermining his own leadership twice in eight years on climate policy.

There is also a catch-22 for the most conservative and pragmatic players such as Abbott. Even if a hardline Coalition could convince parliament to cap the RET and ditch emissions targets, the electricity crisis would not be over.

Knowing a Labor administration would turn all this on its head, the industry would have no confidence. At the very least, industry planners would factor in a price on carbon and, at worst, would join an indefinite investment strike.

Past bipartisan policy has made investment so fraught for anything other than subsidised and ­intermittent renewable ­energy that we are seeing areturn to government intervention. Turn­bull is directly intervening through his Snowy 2.0 hydro plan and other Coalition MPs, including Abbott, are talking about government-subsidised new coal generation. Just a year ago, for the want of about $20m, the SA government stood and watched the demolition of a coal-fired station and Victoria taxed Hazelwood into retirement.

Renewables sound attractive and are popular when they work. But governments who allow high power prices to reduce living ­standards or fail to keep the lights on will not have their mandates ­renewed.
The Australian

South Australians suffering blackouts vote, too.

 

In an otherwise solid and sensible article, Chris Kenny falls for the myth that Tony Abbott is responsible for the current LRET, accusing him of hypocrisy, among other RET related charges.

As PM, Tony Abbott was instrumental in getting Dick Warburton to head the 2014 RET Review, a review that spelt the beginning of the end for subsidised wind power in Australia, and which allowed the Abbott government to attack the 41,000 GWh annual renewable target, which had been upped by the Green/Labor Alliance in 2010.

Throughout 2014, Abbott made no secret of the fact that his preferred option was to scrap the RET and to do away with the most colossal corporate welfare scheme in the history of the Commonwealth (see our post here).

At the same time, his Treasurer, Joe Hockey pinned his colours to the mast as someone who couldn’t stand wind farms – and made it clear his political mission was to bring the “age of entitlement” to an end, which included the constant stream of subsidies directed at wind power (see our posts here and here).

Abbott’s Finance Minister, Mathias Cormann set out to prevent the Clean Energy Finance Corporation signing up anymore unsecured loans to wind power outfits in effort to bring the rort to an end (see our post here).

This August 2014 article from the AFR sums up Abbott’s position at the time.

Coalition fails to budge on RET pruning
Australian Financial Review
Phillip Coorey
26 August 2014

Pleas by solar and wind companies to leave the Renewable Energy Target untouched have fallen on deaf ears with the government deciding to proceed with a phasing down of the scheme.

While a final position will not be announced until next month, The Australian Financial Review understands the intent is to cut the scheme harder than a compromise scenario that was being pursued by the Environment Minister, Greg Hunt.

The end result will be closer to the abolition scenario advocated by Prime Minister Tony Abbott which would end the scheme by closing it to new entrants and grandfathering existing large scale projects.

Seeking to overcome the cabinet split, Mr Hunt, Mr Abbott and Industry Minister Ian Macfarlane met on Sunday to discuss a policy position to be put to the bureaucracy for analysis and then to the cabinet for a final decision.

The government is being guided by the findings of the review into the RET conducted by businessman Dick Warburton, a person the industry has argued is ill-suited to the task because he is a climate-change sceptic.

The guiding principles of the final decision will be to balance investor risk with the impact of the RET on household and business power bills. Mr Abbott claims the RET has had a significant impact on power prices. The government’s own modelling shows while the RET has added $40 a year to average household power bill, prices will fall over the medium term as more renewable energy is produced.

The industry is ramping up its warnings that any dilution of the current scheme will not only jeopardise more than $11 billion in the renewable energy investment pipeline, but create a broader sovereign risk perception for Australia.

Close watch on outcome

Philip Green, the London-based partner of the Children’s Investment Master Fund (TCI), which has a 33 per cent stake in renewable energy company Infigen, said the issue was being watched closely. “Sovereign risk has already increased in Australia given the media coverage of the carbon debate and now the RET. Sovereign risk will increase more if the stories about cuts to the RET are confirmed,” he said in a statement.

“This comes at a cost to the nation through higher capital costs as it seeks future investment in infrastructure. The Australian RET had strong bi-partisan political support [including from the current prime minister]. It can take a long time to restore trust and in some cases this is only achieved with a change in leadership/policy/party.”

Under the RET, a policy which hitherto had bipartisan support, 20 per cent of Australian’s energy production by 2020 would come from renewable sources. Based on earlier predictions of power production in 2020, this 20 per cent target was calculated at an annual production of 41,000 gigawatt hours.

But the 2020 production total has been downgraded following the decline of the manufacturing sector, including automotive and aluminium.

Consequently, 20 per cent of the revised production target is 27,000 GWh. This is the “real 20 per cent” scenario for which Mr Hunt is advocating.

Under the push by Mr Abbott, renewable energy output would be frozen at current levels of about 16,000 GWh.

Any proposed change faces a near impossible passage through the Parliament with Labor and the Greens opposed to any alteration, while Clive Palmer says he will not allow any change unless Mr Abbott goes to the next election in 2016 and wins a mandate.
Australian Financial Review

For Chris Kenny’s benefit and the benefit of others wedded to the myth that Tony Abbott is responsible for the current 33,000 GWh target, we’ll set it out again:

Under the push by Mr Abbott, renewable energy output would be frozen at current levels of about 16,000 GWh.

Had Abbott’s 16,000 GWh target eventuated, it would have been satisfied by the renewable generation capacity that then existed; and there would have been no further addition of either wind or solar power generating capacity, at all.

As Chris Kenny is well aware, the Liberal/National Coalition did not control the Senate during Abbott’s term as PM, resulting in the ultimate compromise.

At the time, Abbott’s Environment Minister, Greg Hunt was in bed with the wind industry and being pushed to keep the target as high as possible, hence the reference above to Hunt’s push for a 27,000 GWh target.

Labor recognised that if the 41,000 GWh target had remained in place, there would have been an annual shortfall of renewable energy generated (in the order of 25,000 GWh).

That shortfall would result in the imposition of the shortfall penalty charge, adding $2.35 billion annually to power bills – a ‘stealth tax’ that would operate at that rate until 2031 (see our post here): political suicide for both the Coalition and Labor, hence their willingness to negotiate a reduced target.

Despite Abbott’s efforts, and over his private objections, Hunt’s office (which included a number of wind industry plants, such as Patrick Gibbons) negotiated the reduction of the ultimate annual LRET target from 41,000 to 33,000 GWh – more than double what then PM, Tony Abbott was pushing for.

Tony Abbott did not get what he was after, but that’s the nature of politics and government. Had he done so, STT wouldn’t be writing this post, and there would have been a whole lot less to write about over the last three years.

Instead, Australia is presently stuck with a Renewable Energy Target that can never be met, a policy that has all but destroyed Australia’s once affordable and reliable power supplies.

What happens next is up to the man who stabbed Tony Abbott in the back in September 2015, Malcolm Turnbull. Or, rather, the dozens of Liberal and National MPs who now recognise the LRET as a clear and present danger to their very own political futures.

Tony Abbott: not guilty of the charges presented by Chris Kenny et al.

About stopthesethings

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

Comments

  1. Asian countries alone are building or planning 1,200 high efficiency coal fired plants to supply low cost and reliable base load power. Many are relying on Australia’s high quality reserves of coal.
    Australia used to be called the’ lucky country’, should now be called the stupid country, because of its useless energy policy.

  2. Jackie Rovensky says:

    When we get a Government with enough of a backbone to do the right thing for the people of this Nation will be a day to rejoice.
    So our Federal Government the last time I heard had accepted all but one of Finkels report up to that point in time.
    Are they completely stupid, I thought at least some of Turnbull’s inner circle might have had a backbone but alas it doesn’t seem so.
    Goodbye Democracy and hello Dictatorship. After all the rule of Dictatorships is the rule of the self-righteous to pursue their personal wishes at the expense of the peoples.

  3. Hi,

    Here’s the link to the Petition on the Federal Government website for Australia to Withdraw from The Paris Climate Agreement.

    Please Sign it by clicking on the link below and please also share it with everyone you know. There are only 1523 signatures to date, so it needs to move FAST !

    Petition closes in 5 days !
    http://www.aph.gov.au/Parliamentary_Business/Petitions/House_of_Representatives_Petitions/Petitions_General/Sign_an_e-petition?id=EN0264

    Thankyou.

    Esther

  4. Hi,

    Here’s the link to the Petition on the Federal Government website for Australia to Withdraw from The Paris Climate Agreement.

    Please Sign it by clicking on the link below and please also share it with everyone you know. There are just 1523 signatures to date, so it needs to move FAST !

    Only 5 days left to sign this Petition.

    http://www.aph.gov.au/Parliamentary_Business/Petitions/House_of_Representatives_Petitions/Petitions_General/Sign_an_e-petition?id=EN0264

    Thankyou.

    Esther

  5. Woohoo! Here we go. Here we go. Here we go.
    State governments from SA, Vic, Qld and the ACT couldn’t resist the photo opportunity to hang out with Al Gore and sign up to more CO2 cuts.
    Putting my concern aside for the demise of human life and rapidly approaching hardship as this impending disaster looms large, I’m now engaged in a voyeuristic fascination at this massive governmental failure.
    I don’t see a way out. Any pro-active action by conservative groups to beef up baseload power will be countered by the Left and reversed at the next election. Any power hungry businesses which aren’t considering a move to full electrical backup are going to be left behind. The “Welcome to the Third World Australia” banner is flapping in the breeze and rapidly approaching.

  6. Terry Conn says:

    The current ‘bed wetting’ liberal party has no stomach for doing anything Bill Shorten and the CFMEU and the public service unions don’t approve of – they will disappear after the next federal election and be remembered as the weakest bunch of politicians ever seen in federal parliament – ultimately they will be replaced with men and women of conviction and moral strength, unfortunately it will be too late for all the people nominated in this post who will be destroyed by the prevailing insanity – the bigger question is whether the nation survives pretending you can power it on ‘sunshine and breezes’ – the only hope is that voters work out the answer in time and forcibly change the present course.

  7. Sick of being cold
    Sick to the ears of these idiots with their giant killer fans.

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