Electricity price increases: gold plating or carbon dating?

This political manoeuvring does not address the primary issue, which is are the electricity price increases, which have already happened due to delayed, and expensive infrastructure investment, or the impact of the Carbon tax?

Electricity prices in NSW have risen by 69 per cent over the last four years, a rise that Gillard claims had nothing to do with the Carbon tax. The argument seems to be that since the Carbon tax only began on the 1 July 2012 rises which occurred before then cannot be blamed on it.

This is creative accounting rather than a sound position. The Carbon tax is a tax designed to reduce the production of CO2 emissions from the burning of fossil fuels. That mission has more than the Carbon tax in its armoury. For instance the Renewable Energy Target [RET] legislation was introduced by the Howard government in 2000 and refined and magnified by both the Rudd and Gillard governments.

The lucrative subsidies provided by the Clean Energy Finance Corporation (CEFC) and the Australian Renewable Energy Agency (ARENA) are in the process of providing over $13 billion to wind, solar, geothermal and wave energy start-up programs. Those subsidies and other generous incentives to renewable energy are provided in the context of the RET’s mandating that 20 per cent of Australia’s electricity should come from renewable by 2020.

The effect of the RET has already been in the electricity network for 12 years. Electricity suppliers are already buying electricity from the renewables. The cost and reliability of that electricity from the renewable is both far greater and far less than electricity from the fossils and has contributed to the 69 per cent increase in electricity prices in two ways: when the green infrastructure is built and when the green infrastructure is working.

Green energy is much more expensive than fossils and even nuclear because green energy requires fossil fuel or nuclear to continue running as a backup.

In addition, despite Gillard’s declaration that it is ‘gold-plating’ to run an electricity network for occasional peaks the fact is it is always peak in a modern electricity network. This can be shown by seasonal graphs of summer and winter consumption. It is clear that there are daily peaks above the base load or average electricity use. Renewable energy cannot cater for either the base load or the daily peaks in demand and it is misleading to say that it is a waste for an electricity system to cater for peaks in demand.

The only way renewable energy can cater for electricity use is for the peaks to disappear and the base load to drastically decline. A green energy advocacy group, Beyond Zero Emissions (BZE) devised an energy plan to supply all electricity from green energy by 2020. A critique of BZE’s plan was undertaken by Professor Barry Brooks and engineers Peter Lang and Martin Nicholson. They found BZE’s plan would necessitate a reduction in electricity demand of almost 60 per cent and cost up to $4.1 trillion. On a pro rata basis a 20 per cent reduction as mandated by the RET would cost only 20 per cent of that, or about $800 billion and require only a 12 per cent reduction in electricity use.

Another example of the impact of the RET and its spinoff alternative energy schemes’ impact on electricity prices before the Carbon tax was introduced is the NSW solar feed in tariff rebate system.

The NSW scheme was introduced by the then ALP minister John Robertson who claimed it would cost $362 million. By the time of the Keneally government it had reduced the 60 cents per hour rebate to 20 cents and the scheme was estimated to be heading towards a cost of almost $4 billion. Even after the O’Farrell government further reduced payments to the solar panel owners, the scheme is still likely to cost over $2 billion and cost electricity users an extra $140 per annum.

It is plain that infrastructure costs to do with mitigating CO2 emissions and developing green energy have been responsible for a considerable portion of the 69 per cent increase in electricity increases before the Carbon tax was introduced. Since these measures are part of the same program as the Carbon tax it seems unreasonable to claim that the Carbon tax has not been specifically responsible for these increases.

Exactly how much of the ‘infrastructure’ costs already incurred, as compared with those costs to be incurred in the future, are due to the Carbon tax and associated anti-AGW policies is a matter of conjecture. Certainly some necessary infrastructure upgrading was and still remains necessary as Tom Parry, Chairman of the AEMO, notes. But increasingly, if the RET remains in place, which is likely since the Coalition supports the RET, then more and more infrastructure cost will be produced by the construction of the various wind, solar, geothermal, wave and other renewable energy installations, and the extra ‘poles and wires’ necessary to hook them into the grid.