As the treasurer lauds supply-side economics, a once-controversial recovery theory is gaining traction.This is the essence of modern monetary theory – that government budgeting is nothing like household or business budgeting, for the simple reason that government can create money.
The true cost of green energy
There are lies, damned lies and Alan Jones statistics. The figure with which the climate change sceptic shock jock misled the million-odd viewers of the ABC’s Q&A program last Monday was a whopper.
Jones was arguing against renewable energy, on the basis of cost.
“Eighty per cent of Australian energy comes from coal, coal-fired power, and it’s about $79 a kilowatt hour,” he said. “Wind power is about $1502 a kilowatt hour.”
The statement was spectacularly wrong, in a couple of ways. First and least because he confused kilowatt hours with megawatt hours, which made all his figures wrong by a factor of 1000.
But even allowing that this confusion was a slip of the tongue, he exaggerated the cost of wind power twentyfold. By Bloomberg New Energy Finance’s most recent calculations a new wind farm in Australia would cost $74 a megawatt hour.
“A new large-scale photovoltaic project would cost $105,” says the firm’s Australian head, Kobad Bhavnagri. “A new coal-fired power station would cost $119. And a new gas base-load station would cost $92. So both wind and solar are already cheaper than coal.”
What’s more, says Bhavnagri, the cost advantage of non-polluting energy is rapidly increasing. “Wind is already the cheapest, and solar PV [photovoltaic panels] will be cheaper than gas in around two years, in 2017. We project that wind will continue to decline in cost, though at a more modest rate than solar. Solar will become the dominant source in the longer term.”
These are not wishful predictions, as other work by Bloomberg has shown. Just three months ago, it released an analysis of global spending on new electricity generation capacity, showing the world now is adding more renewables each year than coal, natural gas and oil combined. The tipping point was passed in 2013 when 143 gigawatts of renewables was added, compared with 141 of fossil fuels. By 2030, on current trends, renewables will be coming on stream at four times the current rate.
Clearly much of the world sees that the future lies in renewables, even if Alan Jones does not. In his view, renewable energy is an expensive solution to a problem that doesn’t exist. He is on the record describing climate change as “a hoax” and “witchcraft”.
It is a view unsupported by scientific fact, but one shared by many in Australia’s current government, possibly including Prime Minister Tony Abbott, who has previously voiced his scepticism about anthropogenic global warming.
Just six years ago Abbott described climate science as “absolute crap”. More recently he has disavowed that view, but a fuller reading of that 2009 quote gives reason to doubt his change of heart. His quote continued: “However, the politics of this are tough for us. Eighty per cent of people believe climate change…”
Since winning office Abbott has scrapped the previous Labor government’s emissions trading scheme, and moved to demolish most of the modest architecture that had been set up to combat climate change. If it were up to him, Australia would have abandoned any target for renewable energy. The senate blocked much of his agenda and as things now stand, Australia has a target of getting about 23.5 per cent of its electricity from renewable sources by 2020.
Australia remains the only developed country yet to announce what plan it will take to the global climate summit in Paris this year, for action beyond 2020.
The government’s intransigence on the matter of climate change is largely ideological, although the reason for this is unclear even to many conservatives. Only this week Britain’s former Tory environment minister Richard Benyon wrote in a piece for the Fairfax press that he found “the stance of Tony Abbott’s government on climate change … incomprehensible”.
True conservative values, he said “include a respect for sound science and economics, a belief in protecting the natural world and a responsibility to do the best for the biggest possible number of one’s citizens.”
Citing the British experience, Benyon argued that science and economics were in alignment, that it was possible to deal with climate change and enhance prosperity.
This is in stark contrast to the Abbott government line, which is that any significant move towards the decarbonisation of Australia would seriously damage the economy.
They were at it again this week, after Opposition Leader Bill Shorten confirmed that a future Labor government would bring back an emissions trading scheme and would more than double the renewable energy target, to 50 per cent by 2030. The government’s immediate response was that it would prang the economy.
But would it, really?
Last year ClimateWorks Australia, an independent research outfit that grew out of a partnership between Monash University and the Myer Foundation, joined with the Australian National University and the CSIRO to find out what changes would have to be made if the world were to meet the objective of limiting global warming to two degrees, and what the costs would be. It was part of an international effort involving 15 countries, which collectively account for about three-quarters of world greenhouse emissions.
The bottom line, says ClimateWorks CEO Anna Skarbek, is that Australia could completely decarbonise its economy while maintaining current rates of economic growth and do it – mostly – using existing technology.
“Very roughly, we’ve got until mid-century to eliminate the energy-related emissions – carbon dioxide principally,” she says. “There are four basic steps, and three relate to energy.
First, being more efficient in our use of energy. That means upgrading equipment – cars, building, manufacturing – so it uses less.
“Then greening our electricity to zero carbon. That could mean 100 per cent renewable, or some nuclear, or some carbon capture and storage. Then you switch everything you can to electricity. For example gas used for heating or cooking would be replaced by electricity. Petrol vehicles would go to batteries.”
Not everything can run on electricity, at least as technology stands today. Large trucks, planes and ships can, however, switch to gas as an interim measure, and then to biofuels.
“Finally,” says Skarbek, “you sequester the rest in trees or by putting in capturing equipment on things like cement plants and other non-fuel sources of emissions.”
The detail is, of course, immensely complex and would require massive retooling of our technology. But there are gains to be had, too.
To date, energy efficiency has probably contributed more to limiting carbon emissions than anything else. According to official figures from the United States, the best new clothes washers use 70 per cent less power than they did just 15 years ago. The same goes for refrigerators. Dishwashers use 40 per cent less. Airconditioners, 50 per cent less.
A compact fluorescent lightbulb uses a quarter of the power that an incandescent bulb does. An LED one uses one-sixth the power. And a compact fluorescent lasts on average nine times as long, an LED bulb 45 times as long. They cost more in the short term, but there is a longer-term payoff in both dollar and greenhouse terms.
Says energy analyst Hugh Saddler, of consultancy firm pitt&sherry: “Australia is saving about four million tonnes of emissions per year, just as a result of the turnover in lighting stock.”
Simple changes can bring big results. The former government’s Home Insulation Program, known colloquially as the pink batts scheme, was no doubt poorly administered, resulting in four deaths and numerous house fires. But it also put ceiling insulation into some 1.2 million Australian homes and yielded huge benefits.
Robert Foster, of the Victorian consultancy Energy Efficient Strategies, has done the numbers: “Nationally, the program saved about 10 gigajoules per dwelling, which equated to a money saving of about $300 per year and also saved an average in emissions of close to one tonne per household.”
By 2020, says Foster, the cumulative saving will be $3.88 billion, and 10 million tonnes in greenhouse gas emissions. “Effectively the scheme avoided the need for a fair-sized power station.”
At the start of this century, Foster was commissioned to look at the possible introduction of minimum-efficiency standards for housing in Victoria. He borrowed the star-rating system already used for appliances and advocated a mandatory five-star rating for new dwellings. That meant they would use about half the energy consumption for heating and cooling as the average for existing houses. It also meant big reductions in greenhouse gas emissions.
But that is not what convinced the Victorian government to mandate the new code. They were persuaded by the cost savings – roughly half a billion dollars.
“Mandatory energy performance standards for appliances have actually been one of the most successful activities Australia has undertaken,” says Hugh Saddler. “They have probably had a bigger impact than solar PV, for example. But we need to keep updating them to keep up with technological change … Under the Abbott government efficiency policy has all come to a standstill. There haven’t been any new regulated standards since 2012.”
The reason, he says, is the government’s blinkered determination to cut “red tape”, even when regulation is efficient and beneficial.
“Under the Abbott government, to introduce a new regulation we have to abolish an existing regulation within the same program. To make new appliances more energy efficient, we have to find other energy standards that we’re happy to abolish. Energy efficiency is just going nowhere at the moment.”
This does not apply simply to appliances.
“Australia is the only G20 country, I think other than Saudi Arabia, that doesn’t have mandated fuel-efficiency standards for vehicles,” says Erwin Jackson, deputy CEO of the Climate Institute. “We’re miles behind the world.”
Lenore Fletcher, general manager of corporate communications for BMW Australia, reinforces his point. “Australia is a little lost island by itself at the moment,” she says. “All of the major Western markets have standards, and all have incentives.”
But not Australia. The only force pushing the Australian vehicle fleet towards greater fuel efficiency, she says, is that almost all our cars are now imported.
“The drop in energy demand is entirely due to things done in other countries,” Fletcher says.
While Australia continues to argue over the short-term questions of the cost of dealing with climate change, says Erwin Jackson, we are missing the longer term. “The reason many countries now have strict efficiency standards is not just about emissions reductions but because it makes economic sense.”
Let’s return to the energy generation sector, which, Jackson says, “is the one that unlocks opportunities across all others”.
Australia’s coal power station “fleet” is on average more than 30 years old. Five years from now, almost half of the country’s power stations will be more than 40 and 15 per cent of them more than 50. They are technologically antiquated and very dirty – particularly the brown coal stations of Victoria, which are among the worst in the world – but they are cheap.
As Hugh Saddler explains: “The existing coal-fired power stations are basically fully depreciated. In some cases the current owners got them for nothing. So all they have is the operating costs. For black coal that’s $10-$20 a MWh [megawatt hour]. For brown coal it is as low as $1-$2 a MWh.”
Of course, the operating costs of renewable generators are even lower than that – almost nothing. But there is the capital cost of setting them up.
In America, most of Australia’s coal powerhouses would already be mothballed due to regulation – if not of carbon dioxide then of other pollutants such as mercury. But this is another area in which Australian regulation is lacking.
Many of the plants are so old and clapped out they will have to be retired within about five years. The bad news is that we will have to spend billions on new ones. The good news is that it will be cheaper to do it with alternative energy sources. The right-wind scaremongers and climate change deniers are wrong.
And as for Alan Jones’s dodgy statistics, The Saturday Paper contacted his producer at Radio 2GB, seeking the source. He didn’t know but undertook to find out. That was the last we heard from him.
This article was first published in the print edition of The Saturday Paper on Jul 25, 2015 as "The true cost of green energy".
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