Regulatory policy

Fanning the fires of energy policy

Stung by previous election defeats, the ALP is working hard to deny that it will introduce a carbon tax. The Coalition is trying to pretend that a Labor government would.

Apart from that, both sides seek to sideline environmental issues and their very significant impact on the economy. Many on the Government side believe in Matt Kean’s dogma that there is an inevitable ‘transition’ away from coal, while others feel compelled to whisper their assent in the face of popular support for that same view, funded as he is by renewable energies dependent on subsidies. interests.

In fact, we already have carbon taxes and an ALP government would increase them.

Existing carbon taxes come in two forms:

  • Firstly, retailers are required to incorporate increasing shares of wind/solar energy into the electricity supply, which is increasingly augmented by the construction of additional electricity transmission network to meet supply dispersed and variable wind and solar energy. The costs of these and other regulatory interventions in the market are passed on to customers.
  • Second, there are levies that fund direct grants and subsidized loans for wind and solar through agencies like the Clean Energy Finance Corporation for wind and solar farms.

The government no longer makes public the extent of these taxes on electricity consumers and taxpayers, but they amount to about $7 billion a year. This gives wind and solar twice the price that coal receives and that is what drives coal out of the market.

The ALP has outsourced the development of its own energy policy to renewable energy interests. They produced a report, Feed Australia, which proposed increased support for renewable energy. This mainly comes in two forms:

  • Arming the current “backup mechanism” to provide what he describes as “a stronger signal”. This will oblige the 215 installations with the highest emissions to reduce their emissions by 5% per year.
  • Provide grants and concessional loans of $20 billion to attract an estimated additional $58 billion in private capital to build transmission lines.

Feed Australia incorporated dummy modeling, which conjures up the benefits of spending money and imposing new regulatory costs to replace low-cost, reliable coal-generated electricity with high-cost, unreliable wind and solar power.

The first part of the policy is already crumbling. Some ALP members, seeing electoral dangers in further penalizing coal mines, say they (which include 15 of the 215 high-emitting facilities) will be exempted. Shadow Energy Minister Chris Bowen suggested there could be “tailor-made” plans for each facility based on their exposure to foreign competition.

Even so, in support of the plan, Mr Albanese said “the market” chooses wind and solar, which he says demonstrates that wind and solar are cheaper; apparently no one told him about the subsidized price that wind and solar receive. And he cites the plan’s modeling to claim that his measures will reduce electricity bills by an average of $225 (15%) as early as 2025.

The projected cost ($78 billion) of transmission to “rewire Australia” under the ALP program is staggering. It’s almost four times the current $21 billion in asset value of the existing national market transmission network (which excludes Western Australia). Angus Taylor plausibly says that with interest payments, amortization, and other costs, that’s $560 a year on bills.

Taylor’s critics say he didn’t provide any “modelling” to back up his numbers.

This is because they go without saying.

The additional $78 billion spent on transmission to support the supply of solar and wind renewable energy to electricity markets must get a return. To be on the safe side, the lower this could be 3% or $2.3 billion a year (Powerlink, the Queensland government-owned transmission company, returns 4%); based on current networks, average operating costs would add another $3 billion per year, and depreciation—even assuming a 40-year lifespan—would add another $2 billion. So that means a very conservative annual cost of $7.3 billion, more than double the current $6.9 billion per year for existing wind and solar subsidies.

On top of all these costs, if the “energy transition” continues, more than $200 billion in wind/solar power and back-up storage will need to be found. And all to give us a less reliable system that provides electricity at twice the price of the one government policies are dismantling.

Globally, the realities of Western economies’ vulnerabilities to the stable eradication of coal, nuclear and gas from the energy supply are still not fully apparent despite the war in Ukraine. Although France is returning to nuclear, Germany is doubling its investment in renewables while the UK and America are only taking cautious steps to reverse hostility to fossil fuels.

The debate is very different in fast-growing economies like China and India as well as in Russia, which, to improve its own export potential, has funded much of the opposition to hydrocarbon development in Europe. and in America.

In Australia, although ministers panic when the closure of all major coal-fired power stations is announced, with a time horizon no longer than the next election, anything beyond 2025 is a century away.

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