Australia’s Demand for Renewables Drives Energy Prices Way Up

Fractivists

K.J. Rodgers
Crownsville, Maryland  

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Australia’s Renewable Energy Target is producing more renewable energy; however, their energy prices are now the most expensive in the world. 

Since the dawn of the shale natural gas revolution, we have watched how quickly energy prices have fallen, how our carbon emissions have dropped, and how our own economy has grown. It has been amazing to watch new technological breakthroughs increase production and reduce operational costs.

Forecasts of Natural Gas Prices

Forecasts of Natural Gas Prices

Natural gas has, to put it simply, saved our rear-end in many areas. It is nowhere near the peak of production as our reserves and supplies continue to grow. Some say that the stated supply is grossly overstated, but when you compile our future and existing technologies into the mix, our optimistic views of cheap natural gas are actually conservative. This reserve, along with new advancement in technologies, has led to having a downward trend of wholesale energy prices between 27%-37% across the U.S. as I reported here.

Despite having lower energy prices that are saving some customers upwards of $1,800 per year, many activists still hold on to the claim that renewable energies are cheaper than any fossil fuels. It is the fallacy of the “Keep it in the Ground” movement. While overlooking that their case study of Germany is a fraud, we can point to a recent turn of events in the Land Down Under that should make you run and take cover. Sorry, I couldn’t resist.

Australia Relentless Renewable Plan

Fueled by a Renewable Energy Target (RET) to establish renewable energies as 20% of the energy supply by 2020, Australia now has some of the most expensive energy costs in the world. The renewable supply has grown from 7% to 18.8% in ten years; comprised of 40% hydroelectric, 31% wind, 18% rooftop solar, and 2% large solar farms. Activists say 70% percent of Australian homes are suitable, which would be great if they could afford it.

Just as we have watched in the U.S., these companies were backed by renewable energy certificates and various state government incentives. They implemented a nearly $25 per ton carbon tax which is nearly three times the EU price. It has led to one boondoggle and one crony project after another in remote areas that do not even serve the power grid.

Australian Energy Prices at an all-time high

A recent op-ed in The Australian, “Green Madness: Australia Has Gone from Cheapest to Most Expensive Power,” explained. Flinders University economist Judith Sloan detailed what has happened to these electricity prices as the government has forced its Renewable Energy Target (RET) scheme on everyone.

“However, the kicker is the fact renewable energy, with its preferential dispatch status and low operating costs, sends ­dispatchable power plants into early retirement and kills off the incentives to build new ones. Note that since 2011 nearly 6000 megawatts of coal-fired plant capacity has been withdrawn from the ­market, or close to 12 percent of total capacity.

Now the point is often made that we have reached this appalling position — high-cost, unreliable electricity affecting, in particular, the competitiveness of our heavy industries — because of very poor government policy.

But whether the outcome was entirely unintended is not so clear-cut. From the time John Howard introduced the first version of the renewable energy target, it was a one-way street to more subsidised, intermittent renewable energy and an investment strike in dispatchable energy. This was the aim; it could not have been otherwise.”

When you compare this to what we are battling in the U.S., it is clear we would be heading in the same direction but for the resistance of common sense in some places at least. If we listened to fractivists such as Mark Jacobson, who claims his 50/50 plan would bring the U.S. to 100% renewable status, and all of the Mark Ruffalos of the world who claim we are setting ourselves up for certain death, etc. we’d be where South Australia is now. We are fortunate to live in the US where government imposed energy policy hasn’t yet destroyed or free market energy system; the greatest in the world.

Yet, we have invested more money into renewable research and technologies, which I support. Much of it has been funded by the market or by those activists who want to give to the private companies who have found a way to be profitable doing it. That’s as it should be, but we’re a long way from a renewables option that provides affordable dispatchable energy without requiring government subsidies. Until then, we need to move forward with a real solution that can be fully implemented today without subsidies: natural gas. The alternative is too scary to entertain, as Australians are learning.

 

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