During my career in the Electricity Industry, Australia had some of the lowest electricity prices in the world. In Queensland for many years, under the guidance of Electricity Commissioner Neil Galway, we had the challenging target of keeping increases in electricity charges to less than half of CPI increases. As a result for many years, in real terms, electricity prices were continually falling.
But in recent years that has all changed. Not only have Australia’s electricity prices risen dramatically so that we now have some of the highest cost electricity, but our reliability of supply has reduced making the likelihood of blackouts far more likely.
What is the cause of this alarming change to our electricity supply system? It has been the undue haste to install renewable generation.
Now this is bound to be a controversial essay, so I need to carefully outline my position on the subject.
To begin with let me assure you I am a proponent of renewable energy. When I was CEO of Stanwell Corporation we made an early commitment to pursue renewable energy projects.
I must confess also that we actively lobbied government to establish a renewable energy target. But the target we lobbied for which was eventually legislated by the Federal Government was a modest 2%.
We envisaged a transition to renewables from fossil fired generators occurring over many decades. The transition that we had in mind was that the reduction in carbon intensity of electricity generation in the early phases would involve higher levels of gas generation. Gas generation reduces carbon emissions compared to coal fired generation but has the advantage ( like coal fired generation but unlike renewable generation -except hydro generation) of being despatchable, hence helping secure system reliability. Unfortunately the gas component of the orderly transition has been curtailed by environmental activism which has successfully thwarted the exploitation of much of Australia’s abundant gas resources.
Along with this, the Greens, and subsequently the Labor Party, have continually championed excessive renewable energy targets that result in higher prices and less reliability of supply.
[In the recent Australian Competition and Consumer Commission report on the Australian electricity market demonstrated how well-intentioned climate change policies have hurt electricity consumers. For example when considering the proliferation of photovoltaic (PV) cell installations they concluded that the subsidies offered by state governments have pushed up prices for all energy users. They concluded that subsidies outweighed by many multiples the value of the PV energy. Unfortunately it is the relatively well-off that install PV arrays, and it is those not so well-off who bear most of the consequences.]
Why then would we want to take such measures that unduly burden electricity consumers and threaten the viability of energy intensive industry? Well it is because we are trying to save the world from the ravages of climate change.
There are still some reputable scientists who are ambivalent about climate change. They point out that the climate models predicting temperature increases relied upon for justifying such large scale and costly remediation efforts have largely been pessimistic and not validated by subsequent data.
We know the earth has been warming since the Little Ice Age which lasted from the 14th to the mid- 19th century. The temperature of the earth is affected by many influences only one of which is the Greenhouse Effect. (I have discussed this in previous essays so I won’t go into that again in this essay.) There is some suggestion that warming might have temporarily plateaued in the last decade. It is drawing a long bow to suggest that the primary influence on global warming is the Greenhouse Effect. It is even more dubious to claim with certainty that the warming mechanism is anthropocentric.
But just for the sake of argument let us assume that global warming is a fact, that it is caused by the Greenhouse Effect, and that it is a result of CO2 emissions caused by human activity.
If that is the case then what should we do about it?
We have a range of strategies available to us ranging from:
- Mitigation, where we could attempt to reduce CO2 emissions and try to reverse the Greenhouse Effect, or
- Adaptation, where we could accept that temperature rises are inevitable and put in place strategies to minimise any subsequent ill effects, or
- We might choose to adopt both mitigation and adaptation strategies.
The problem with mitigation strategies is that it is almost impossible to do enough to make a perceptible difference. If we wish to prevent the temperature of the earth from rising by more than 20C it has been calculated that it would require the reduction of projected emissions for this century of 6,000 billion tonnes of CO2. The UN has calculated that if each nation was to meet its agreed reduction targets (including the US who has now with drawn from the Paris Agreement) this would result in a reduction of atmospheric CO2 by 2030 of only 60 billion tonnes. Consequently our efforts to reduce CO2 emissions of any consequence seemed doomed to failure.
On top of that, many countries who signed up the Paris Agreement (and the Kyoto Agreement before that) are unlikely to meet their commitments. It does not seem apparent that they were cognisant of the costs and the impact on their standards of living when they made their pledges, driven by virtue signalling more than any real understanding of the science and the economics of combatting the Greenhouse Effect. But one thing is clear – that the cost of mitigation strategies is high and the benefits likely to be meagre.
It is likely then that any mitigation efforts that might have a substantial effect are beyond us at this stage. This would suggest that a prudent response might be to concentrate more on adaptation but also to committing more resources to research particularly on renewable energy generation technologies and storage technologies.
Australia’s position is particularly parlous insofar as our emissions comprise only 1.3% of total emissions. Taking abatement action that is costly and with such minimal impact seems foolish in the extreme. Even Australia’s Chief Scientist, Alan Finkel, has agreed that any emission reduction strategies taken by Australia can have no discernible impact on global warming.
In addition, the dangers of global warming are usually overstated, at least in its early phases. The UN Intergovernmental Panel on Climate Change has estimated that the impacts in about half a century if there were no mitigating strategies in place would amount to a loss of between 0.2% and 2.0% of GDP. Bjorn Lomborg, President of the Copenhagen Consensus Centre, points out “this is similar to the effect of one recession over the next five decades – a problem, but by no means the end of the world.”
Proponents of abatement often highlight the costs to the world of global warming pointing to increased heatwaves, cooling costs and heat deaths. They neglect to balance the equation by highlighting the reduced cold, heating costs and the number of deaths attributed to cold (which are currently six times more than those caused by extreme heat).
In Australia the rising electricity prices, resulting from a too hasty move to renewables, is already having perverse effects. High electricity prices are forcing energy intensive industries to look at relocating overseas. When this happens not only are we exporting jobs but we are increasing the CO2 burden in the atmosphere. Many overseas countries have less efficient electricity generation than we do. So just shifting those industries doesn’t solve the problem because the Green House effect is maintained wherever the generation occurs.
The climate change alarmists tell us that there is no future for coal. They continue to tell us that countries like China and India are making significant investments in renewable energy technology. But renewable energy is still a minor component of the world’s electricity generation and according to the Climate Study Group there are “1370 coal-fired power units being planned or installed around the world.” In fact most of the recognised authorities on electricity generation confirm that coal will play a vital role for many decades to come.
So what to do?
I will try to summarise where I stand.
- I am in favour of renewable energy technologies and have no doubt that that is where the future lies. But our transition to renewable technologies must be a rational and measured one. As we can see from both our experience in Australia and the experience in Europe, an undue haste to install renewable generation has greatly increased the price of electricity and reduced reliability of supply.
- It is apparent that the earth is warming. But it is not warming at the rate that the climate alarmists have suggested. The earth has gone through heating and cooling cycles many times before. The current warming is consistent with the warming trend since the end of the Little Ice Age. We cannot be sure this is due to increasing levels of atmospheric CO2.
- Even if the warming is a result of increased levels of CO2, the mitigation strategies endorsed by the Paris Agreement, if fully implemented, are unlikely to make a significant change in the rate of warming.
- It is unlikely that many of the signatories to the Paris Agreement will meet their abatement targets.
- Australia contributes only 1.3% of CO2 emissions, and consequently any abatement initiatives we might take have little consequence in the scheme of things.
In light of all this, it seems to me to be futile to concern ourselves unduly with the undertakings of the Paris Agreement. Australia should proceed in a measured way to install renewable technologies but to give higher regard to the cost and reliability of electricity supply.
It is appropriate that we should support research into renewable generation and storage technologies which should ensure that a transition to renewable generation is affordable and can offer us renewable energy in a reliable and cost-effective manner.
If this means abandoning our commitment to the Paris Agreement, then so be it!