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Policy foundations for affordable, reliable, lower-emissions power, absent NE'G' nonsense

By Geoff Carmody - posted Monday, 24 September 2018


This MIT analysis also looked at renewables costs. It found renewables costs really take off when their power share increases above 50% – even if batteries cost 67% less than now. In fact, they found costs increase as renewables' share increases from any starting level. They do not decline, as claimed by some politicians and others in Australia. As chart 2 shows, according to the MIT study, as Californian renewables' share increases from 50% to 100%, the cost of power (in US$/MWh) increases from US$49 to US$1,612.

See chart 2.

Chart 2

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Clean air task force analysis of CAISO data, 'The $2.5 trillion reason we can't rely on batteries to clean up the grid', James Temple, MIT Technology Review, 27/7/2018.

So how should we go about delivering affordable reliable power again?

We need to stand back from ideology. We must allow technology to speak from a level cost playing field. That's the policy foundation for investment in needed power capacity. That foundation gives us as much investment certainty as technology will allow, because it's not dependent on changing political whims.

The first policy foundation is to remove all power source bans, and all distortions against fossil fuels. (ii) Abolish all renewable energy targets (RETs). (iii) Abolish all subsidies favouring renewables. (iv) Let technology speak, don't gag it. This will reveal the lowest cost, reliable power sources.

Lower global emissions

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If anthropogenic global warming is a problem, it's global. Australian action (1.3% of global emissions and falling) by itself is ineffective. We need, but never have had, a global response to any such global problem.

Emissions reduction efforts to date target national emissions production. These affect GDP including exports. They exempt imports. 'First movers' therefore suffer trade competiveness losses. Policy encourages those not acting to continue as laggards. That increases their trade competitiveness. Harmonised global action on global warming therefore has never emerged, from Rio (1992) to date.

This is anthropogenic policy design failure. To avoid trade competitiveness effects, policy must switch from national production to consumption. Policy should target a comprehensive, uniform, national emissions consumption base. All exports are exempt. All imports are included. The policy operates like Australia's GST. Comprehensiveness and uniformity deliver the least-cost, least distorting, way of reducing emissions.

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This is a policy summary of a longer article by Geoff Carmody on 17 August 2018 reviewing the many deficiencies of renewable energy policies, titled "Does renewable energy sustain Australian agriculture, or drive it offshore?". The longer paper can be downloaded by clicking here.



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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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