What is the future for renewable energy in Australia?


It’s the energy of the future, according to its promoters. I’m talking about solar, wind and other sources of renewable energy. It seems, though, that due to ‘institutional dysfunction’, as one pundit describes it, renewable energy is facing a bleak future in Australia, at least in the short term.

Recently a review of the nation’s renewable energy target (RET), by a panel chosen by the Prime Minister’s office, has recommended substantially reducing the target. The panel was headed by a former chairman of Caltex Oil, Dick Warburton, who is unconvinced that increased carbon dioxide causes global warming. He’s wrong about that.

The RET is currently set at 41,000 gigawatts an hour of renewable energy by 2020, and it apparently represents a threat to the traditional energy companies at a time when electricity consumption is falling. As Ross Gittins points out in The Sydney Morning Herald, the fall in consumption over the last four years is unprecedented and has taken the industry completely by surprise.

So why has consumption fallen? According to an Australia Institute report by Dr Hugh Saddler, the decline has been entirely at the expense of coal-fired generators, many of which are struggling to be profitable. The main cause is simply an increase in energy-efficient buildings and appliances, due to regulations brought in in the late 90s. Other factors, in order of significance, include the economic shift from electricity-driven industry (with major steelworks, aluminium smelters and oil refineries, either shutting down or cutting back), the failure of many other electricity-guzzling industries to grow as expected, and, since 2010, consumer response to higher electricity prices and the carbon tax (either the real one or the slightly scarier one concocted by the conservatives in opposition). The price hikes, ironically, were largely a result of expenditure on upgraded poles and wires to meet expected new peaks in summer demand. The decreased residential usage provided intriguing proof that we can, if needs must, wean ourselves from ever-spiralling consumption. Meanwhile the increased capacity, for which consumers will continue to pay into the future, remains unused.

So what has this to do with renewable energy, and why does the Prime Minister’s panel recommend downgrading the RET? According to Peter Martin, the economics editor of The Age, it’s because the renewable energy sector has gotten too big for its boots and is significantly cutting into the profits of the fossil fuel industries. However, the repealing of the carbon tax was a big win for those industries, and the abandoning of the old RET, assuming the panel’s recommendations will be acted upon, will be another boost.

It looks like the federal government, probably under pressure from the fossil fuel lobby, is set to reduce or abandon the RET. The Warburton panel was set up in February by a Prime Minister who has stated at a public meeting that anthropogenic global warming is ‘bullshit’ (though he has tried to backpedal furiously from this since). The conservatives have chosen to ignore a review of the RET by the Climate Change Authority, released in December 2012. The Climate Change Authority was set up under the Gillard labor government in July 2012 to conduct climate change research and to regularly review associated policies, but the conservatives are trying to scrap it, though their first attempt was blocked in the Senate in March of this year, and the Authority now appears to be in limbo. It’s difficult not to conclude that the Warburton panel, which includes other industry heavyweights, has been set up to deliver the government what it wants.

So, bearing in mind the guidelines to problems and solutions I’ve taken from David Waltner-Toews, what exactly are the problems here, and how can we move towards solutions?

Not surprisingly, there’s more than one problem. For example, one problem is with the Warburton panel itself. The strong perception within the renewable energy sector and its potential investors is that the panel’s findings are already known, and that RET targets will be reduced or abandoned, leading to job losses and a substantial loss in investor confidence. In fact investors are already backing out because of the new climate of uncertainty.

Of course the panel isn’t bent on destruction. It presumably sees the problem elsewhere – a substantial decrease, at least domestically, in fossil fuel consumption. But why would anyone want to preserve a highly polluting industry when there are clean alternatives available? Well I can think of two reasons, apart from the obvious vested interests. First, job losses. The Greens and other clean energy advocates are heavily emphasising the job and investment losses in that market if the RET were to be abandoned, but of course the fall in consumption together with the challenge of the new technologies were leading to the same problems on the other side, and of course losses on one side can’t be simplistically balanced by gains on the other, and I’ve no idea how the actual numbers would fall out. Second, these industries aren’t simply limited to the domestic market. In fact the industry has long been heavily subsidised by the federal government because its exports are a major contributor to government revenues and to foreign exchange earnings. The government protection of the industry has of course been strongly criticised by the renewable energy sector, which is keen to point out that Australia is the highest per capita emitter of greenhouse gases in the world, with the fossil fuel industry playing the primary role in maintaining that record. But it’s difficult, especially for a conservative government with little obvious concern for the greenhouse issue, to see beyond the substantial revenues that coal and natural gas are bringing in.

Before we start talking solutions, we need to squarely face the evidence. Anthropogenic global warming is happening, and climate scientists are only in disagreement about rates and precise consequences in what is an enormously complex climate system. As just mentioned, Australians  have the worst per capita record in the world in contributing to the problem, and our coal industry produces about 38% of our total greenhouse gas emissions.

The aim should be to reduce our emissions while still providing all the energy required to maintain our lifestyles – though all the while being mindful that some tweaking of those lifestyles might substantially reduce emissions. We need to win the battle with government, as to the value and the necessity of emissions reduction, but we also need to be realistic. How much of our energy needs can be met by renewables, now and in the near future? Is it worth trying to clean up the fossil fuel industry? Is clean coal a possibility, or a myth?

On this latter issue, a US organisation, the Union of Concerned Scientists, has this to say:

Technology is evolving that has the potential to substantially reduce coal’s contribution to global warming by capturing carbon emissions before they are emitted. This technology could become an important part of the battle against global warming, but it remains to be seen whether it will work at a commercial scale and at what cost.

So here’s one weighty problem. We’re still heavily reliant on fossil fuels, though that reliance is reducing, as well as our overall energy usage. Reduced energy usage is seen as a problem rather than a victory, which may be a perception problem rather than a real problem, but it is a real problem insofar as the fossil fuel industry is losing revenue locally, which is affecting its ability to be competitive in the overseas market. Around 70% of Australia’s coal production is sent overseas, making Australia proportionally the world’s largest coal exporter. Coal is our second biggest export earner, worth more than $40 billion per annum.

Another problem is that we’re paying, into the future, for the new infrastructure above-mentioned. Arguably, we’re paying for the lack of foresight of the fossil fuel industry, which is passing on to the consumer the costs of an unnecessary extra capacity. Presumably if more consumers switch to solar for their domestic energy supply, this infrastructure cost burden will be shared among fewer people.

Also, those that want to reduce Australia’s carbon emissions through reduction of our fossil fuel production and exports have to counter the argument that our exports represent some 5% of global coal consumption, while the economic cost to us of cutting exports would be very substantial. It’s the ‘great pain for little gain’ argument.

There’s also another good point made by Chris Greig, Professor of Energy Strategy at the University of Queensland. We make the mistake, living as we do in an energy-rich nation, of assuming that our supply of coal is simply adding to the abundance, with disastrous consequences, but there are many parts of the world that are energy-poor, and would be deprived of opportunities to rise from poverty if the fuel supply from nations such as ours were to be cut off. By all means we should try to improve the efficiency of the fuel we export, and we should be looking to renewable alternatives in these energy-deprived regions, but some renewables are not suitable for some regions, and most cannot deliver base-load power as they currently stand. There are no easy solutions to this problem. Curently – and this returns me to my previous post – there’s a huge problem of indoor pollution in developing countries due to the lack of a clean, or cleaner, energy supply. Professor Greig effectively summarises the issue:

Few Australians realise that two million people in developing countries die each year due to indoor air pollution from biomass combustion – typically a black smoke containing fine particulates, carbon monoxide and nitrogen oxides. The indirect consequences are also far-reaching. The relentless harvesting of biomass wood for fuel is responsible for depleting groundwater systems and declining agricultural productivity, which in turn leads to food and water shortages and reinforces the poverty cycle. And let’s not forget the one billion tonnes of CO2 that are released annually as a result of this rudimentary burning of biomass materials.

All of this is further evidence of the complexity and messiness of the issues involved. Clearly they won’t be fully covered in this post, and I’ll be returning to the subject in the future, to look at nuclear power among other things. I’ve also got Naomi Klein’s monumental opus, This changes everything, a tale of climate change and capitalism, to plough through.

Meanwhile, the Australian situation with regard to renewables is still very much up in the air, with Federal Environment Minister now making assurances that the RET will not be scrapped, while not ruling out a downgrading. Climate Change Authority head Bernie Fraser, along with Business SA, suggest retaining the 41,000GWh target but extending the time-frame beyond 2020. This might help to maintain business investment while taking a little pressure off the fossil fuel industry, which might take the opportunity to review and improve future planning, with perhaps a greater focus on exports.

Whatever the future for all these businesses and technologies, the aim of a more sustainable, less carbon-intensive and less polluting energy supply should be paramount. If that means job losses as the dirtiest and least efficient power plants are closed, then that needs to be faced, unless they can be profitably cleaned up.

Having said that, Australia’s future lies in renewables, especially wind and solar. Our current government seems to be having trouble taking the long view on this, and it’s positively embarrassing to find a country that is in many areas among the most modern and technologically developed in the world falling behind so badly in a field we should be leading. I await with interest the government’s coming announcement on the RET. I’m sure they realise what’s at stake.



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