The renewable energy target is a joke

Peter Kerr

Would the last hippy out please switch off the micro-hydro/wind/solar-powered light?

Note, I’m not trying to suggest anything other than my undying devotion to renewables – heck, $8000 in federal government subsidies paid for the installation of my rooftop solar panels.

West Australian government incentives pay me up to $50 a month in reduced power bills from those same panels – a generous program budgeted to cost WA taxpayers $180 million over four years in payouts to about 75,000 homeowners. Double note: the government isn’t sure about that last number as the scheme was so popular that bureaucrats kinda lost track of how many applications they received before the shut-off date.

No, the obvious long-term merits of green power are not at issue here.

Rather it’s the short-term renewable energy cargo cult, and the need to scrap myriad overlapping government incentives that pander to vote-grabbing notions that “green is good”.

Chief among these is the forced, costly target (agreed to by all state and federal governments) that we produce 20 per cent of energy from renewable sources by 2020.

Despite the inevitable protests from misty-eyed altruists, it is unachievable on current indications if you factor in likely technological developments over the next eight years allied with “sane” cost estimates of achieving the target.

With a price on carbon from mid-year, allowing the market to better determine how to allocate capital to energy projects, it’s time to drop the competing government schemes and let consumers and businesses decide like grown ups.

Consider this: despite a decade of trying to meet the 2020 target, Australia now produces about 8 per cent of its power from renewable energy – that’s including the pre-existing massive 1950s-era Snowy Mountains hydro scheme.

It won’t be replicated, and despite the falling cost of solar power the heavy lifting of doubling Australia’s renewable energy supply by 2020 will be shouldered by wind power.

Solar is already proving problematic for remote towns in WA, and installations over a certain size are banned in Carnarvon and Broome due to the difficulty of regulating the networks’ voltage.

On a bigger stage, without widespread affordable storage systems, solar will struggle to be ready in eight years.

Investing in “smart grid” technology to allow electric cars to become a network of batteries, or utilities to turn off a block of appliances to smooth electricity consumption and not have to burn fossil fuels, is one of the great hopes.

But with an estimated $240 billion needing to be spent Australia-wide by 2030 on normal electricity grids, which forces up power bills, consumers are unlikely to want to pay for rolled-gold smart grids in the next eight years, even if it will mean huge long-term payoffs.

With other logical base-load power sources such as geothermal, biodiesel or wave still a way off, wind looks most likely in terms of meeting the 2020 target.

The problem is that governments and technicians indicate there are limits – political and practical – to the amount of wind power.

The WA government is already cutting back a less obvious subsidy to wind farms – a so-called “capacity payment” to encourage new generators – because variable wind power has forced coal-fired power stations to “cycle” rather than staying on 24 hours a day, triggering extra maintenance costs.

In other states there are restrictions amid complaints about the amenity of wind farms.

Importantly, the 2020 target is law, and comes with another hidden cost to consumers.

Like counterparts in other states, WA’s main electricity retailer, Synergy, is liable to purchase some power from renewable energy sources through the acquisition of renewable energy certificates.

This is to encourage renewables by helping fund the difference between the wholesale price of fossil fuel electricity and cost of renewable energy production, which is up to six times as expensive at the moment.

Synergy will meet its requirements – but at a cost.

While not complaining, it estimates that in 2017 alone it will pay at least $100 million for its share of the scheme.

If governments persist on picking winners, they should stick with the carbon tax, cut other incentives and plough half the savings into preferred energy sources.

At least that would be more transparent.

The Australian Financial Review