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Funding Australia’s move to renewable energies

By Kevin Cox - posted Tuesday, 28 November 2006


The present per person production and capital costs to produce this amount of electrical energy equates to approximately $3,500 or 5 cents per kWh. Governments, through GST, resource taxes, profit taxes and land taxes collect at least 5 cents per kWh in taxes. There is a further cost of distribution and profit for energy retailers. Let us either use existing taxes or add 5 cents per kWh to the cost of energy. This money should then be given back to the energy consumer as a GRI voucher, with the restriction that the GRI may only be spent as an investment in renewable energy infrastructure.

Rather than the consumption tax proposed under current thinking, the GRIs become a compulsory investment savings scheme, not unlike Australia’s superannuation scheme. Let us make this $3,500 per year per person which equates to approximately $70 billion per year which would be available immediately for investment in renewable energy. The GRI charge placed on products or services would be calculated in terms of carbon emissions and would increase over time so as to keep the total investment dollars available for renewables and to accelerate the rate of change to clean coal technologies.

How can we invest GRIs

The following are very rough estimates but give the scale of the solution.

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PacHydro estimates it will cost $600 million to build a 200 megawatt geothermal power station. If this operated for a full year at 80 per cent capacity, the capital cost to produce a watt would be approximately $3.75. Thus the capital to produce 70,000kwh over one year can be expressed as:

Capital cost = (total kWh / the number of hours in the year) x cost per kW

In the case of PacHydro, this equation works out to be approximately $30,000 or 8.5 years at $3,500 per year.

The cost of wind power is less per kilowatt than geothermal sources, but wind stations average only 40 per cent capacity. Using the above equation, this means the capital cost to produce 70,000 kWh is roughly $40,000 or 11 years.

The cost of the Victorian Solar Power Station is $450 million for a capacity of 154 megawatts. However, because solar only runs for one third of the time, this gives a capital cost of $80,000 or 22 years.

The other way to generate green power is to burn coal cleanly, using ways that remove carbon before it gets to the atmosphere. This technology is likely to double the cost of coal fired power stations. If retrofitted to existing stations, the cost is likely to be $100 million per 100 megawatts, equating to a $10,000 investment per person, which would be paid in about three years.

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Investment in solar hot water systems gives a return of about four years.

Given that through GRIs there will be massive amounts of funds seeking investment opportunities, it is inevitable that the market will respond, creating schemes and technologies offering some form of return, particularly if the GRIs do not earn interest making it in the best interests of owners of GRIs to invest now rather than wait for greater returns in the future.

But isn’t this just another tax?

The point about the proposal is that it is NOT a tax but it is tagged money that has to be used for a particular purpose. The GRIs can be sold on the open market and it is expected that there will be a ready market where people will buy the GRIs at a discount. Companies that want to be seen to be green will allow GRIs to be used to purchase other goods. For example, airlines like Virgin and Qantas will permit the use of GRIs to purchase airline tickets as a promotional tool. We can also expect the government to purchase GRIs directly from pensioners and others who would find the extra cost of energy too high.

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About the Author

Dr Kevin Cox is an entrepreneur. Previously he has taught Information Systems in Canberra and Hong Kong and worked with computers for various multinationals in Australia, the USA and Indonesia.

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

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