Renewable energy debate in Australia needs to focus on emissions

by David Blowers and Cameron Chisholm

Published by The Age, Thursday 23 July

Public debate is essential to democracy. But the debate around renewable energy has become so toxic, so heavily politicised, that it is taking attention away from the main game: what is the most effective and least painful way to tackle climate change?

Hard on the back of a public row over the Renewable Energy Target (RET), the government has maintained its anti-renewables reputation by directing the Clean Energy Finance Corporation (CEFC) to stop funding wind farms and small-scale solar projects. The directive just looks like picking a fight. With each fresh announcement, it becomes harder to see the government’s position as anything other than hostility towards renewables and a hope that they and the whole climate change debate will simply go away.

And the Labor Party has hit back. Bill Shorten on Wednesday put forward a policy that would require 50 per cent of Australia’s electricity to come from renewables by 2030. Labor has promised there will be no carbon tax; instead, it will focus on renewables. Both sides have drawn up the battlelines for the next election, and both sides are dreaming.

On television on Wednesday opposition environment spokesman Mark Butler said that increased penetration of renewables in the electricity sector will put “downward pressure on power prices”. This frequently-made claim might please the renewable energy industry and its supporters, but it also clouds the debate.

This claim stems from the fact that having more renewables in an oversupplied electricity generation market reduces wholesale prices. Once built, renewables produce electricity at a very low cost. That means they can bid into the market at a lower price than coal and gas-fired power, both of which have a fuel cost. Generators with higher fuel costs will find it harder to bid into the market, which means the average wholesale price will come down, at least in the short term.

But in the long run, it’s not the fuel cost but the total cost of renewables that counts. Even though the cost of solar photovoltaics and wind energy has come down significantly, it is still more expensive to produce electricity from these sources than it is from the traditional fossil fuel sources we’ve relied upon for many years. Replacing existing coal generation with new renewables will increase the financial cost of providing electricity, which consumers will eventually have to pay.

Similarly, Shorten says that renewable energy will create jobs. It will. But moving away from fossil fuel generation will also cost jobs. Try telling workers in the Latrobe Valley about all these new economic benefits from green technologies. In a carbon constrained world, their livelihoods are very much under threat.

None of this means we should not include more renewables in the electricity mix. On the contrary, they are highly likely to form a large part, even all, of our electricity needs if we decarbonise our economy by 2050. One reason they cost more is that fossil fuel generation does not have to pay for the emissions it produces. Include this cost through an emissions trading scheme or a carbon tax and renewables instantly become more competitive.

And this is the point. Reducing emissions will come at a financial cost but we need to do it. Doing nothing will be far more expensive in the long run.

The fight over renewables is not the fight we should be having. For Australia to play its part in limiting global temperature increases to 2 degrees, our economy must be largely decarbonised by 2050. The transition is likely to be far from painless. We should be debating how to reduce our emissions at least cost, not the current political-media obsession on the good versus bad of renewable energy.

Any policy that will drive emissions down to the extent that is needed is going to be more expensive than business as usual. Lost in the toxic debate around a carbon tax is the fact that the current government’s emissions reduction policy also imposes a cost on society. The previous government’s attempt to introduce a price on carbon foundered in part on an inability to explain that emissions can only be driven down if they are made more expensive to produce, as a carbon price sought to do. Labor’s new proposal, and its evasion of this key fact, looks like history repeating.

Australia needs a sensible, bipartisan emissions reduction policy that can achieve our emissions reduction targets at least cost, a policy that is explained clearly to the country. It is time to end the current damaging debate – renewables are good versus renewables are bad – and get honest with the public about what tackling climate change really means.