George Orwell once said that political language was designed to “give an appearance of solidity to pure wind”. Step forward exhibit A and the Labor Party’s explanation for refusing to fix the mess that is Australian renewable energy policy. Mark Butler says that Labor will not “stand by and watch” billions of dollars in investment in renewables head overseas.
Back on planet reality there is no investment in renewable energy now because we already have too much of it.
This year the legislated Large Renewable Energy Target required Australia to produce 16,100 gigawatt hours of renewable energy.
What this effectively means is that businesses have to surrender an equivalent amount of renewable energy certificates or pay a penalty. But Australia has an enormous oversupply of renewable energy certificates. This has nothing to do with the change of government a year ago and everything to do with the overly generous solar subsidies provided by various state and federal governments until recently. These subsidies have correctly been removed but the overhang remains.
Where there is a surplus of a product its price falls and this is what has happened to the price of renewable energy. Renewable energy certificates have been stuck at about $30 a megawatt hour, too low to bridge the gap between cheap fossil fuels and renewables.
Labor’s refusal to even consider reform is condemning the renewable energy industry to greater uncertainty and simply defers a reckoning. The reckoning will come when it becomes apparent that we cannot, by 2020, increase our renewable energy production to 41,000GWh as set by law. To meet that target we need an additional 26,000GWh of renewables.
The most efficient renewable energy wind turbines are capable of producing about 3MW while running. Because there are 8670 hours in a year, each wind turbine has the potential to produce about 26GWh a year.
But turbines don’t run at full capacity because the wind doesn’t always blow. Across Australia the average real output of wind turbines is about one-third of their rated capacity.
That means each wind turbine could produce about 8GW of energy every year. To produce another 26,000GWh we would need an extra 3000-plus wind turbines — more than doubling the population of wind turbines in Australia today. Each of these wind turbines would take up about 1sq km of land — considering the space needed between turbines. That means we would need an area larger than the size of the ACT to produce all this additional wind energy.
Now we technically could blanket the ACT with wind turbines — and some may suggest that would be a more productive use of that land — but that is not going to happen in five years. There is too short a time to build so many wind turbines so fast.
What will actually happen is that we won’t reach the target, but the dirty secret is that those that have already invested in renewables don’t really mind.
In about three years the target will grow to be above the renewable energy we are producing. Under the law that will mean the price of renewable energy certificates will increase to a shortfall charge of about $93 a megawatt hour in post-tax dollars increasing the burden of the RET threefold.
The producers of renewable energy will once again have their pockets lined thanks to the largesse of the families and businesses that consume energy. Irrigators will pay more to water their crops and we will become even less competitive in steel production. Jobs will be lost.
The RET costs the average family about $50 a year now; in a few years that will probably rise to $150 a year, or half a carbon tax but without the compensation. Every time you open the fridge, the little white light will come on to remind that you are paying for rich investors to make money in renewable energy stocks.
Australia’s renewable energy policies could simply be titled “Robin Hood visits Bizarro World” — they steal from the poor and give to the rich.
For all the Labor Party’s fine words in the cause of social justice and redistribution, when the lights go on those words are shown to be about as robust as a bunch of dead leaves blown along by the wind.
Originally published in The Australian on 4 December 2014