It’s clear that the net-zero utopia we’ve set our hearts upon reaching by the middle of the century will be monstrously, absurdly and detestably expensive, writes Nick Cater.
One Nation Leader Pauline Hanson says the government’s plan to allow hundreds of thousands more immigrants into the country is “ridiculous” with the current cost of living and housing crises.
“You can’t dictate to people what size house they have and how many bedrooms they use,” she told Sky News host Chris Kenny.
“They work for it, they bought it, that’s their house.
“But if they want to rent out a room and get a bit of income to pay for the escalating costs – especially electricity that’s gone up under the governments, that hasn’t gone down, and that’s adding cost of living to everyone right across the board, I think it’s ridiculous.”
They could also save on their grocery bill by pouring milk on the kid’s cereal straight from a cow of course, but the pressure of daily life means they’re probably stuck with the fridge.
It is an open question whether Labor’s promise to knock $275 off our electricity bills was a deliberate con job or utter stupidity on the part of a future energy minister.
Let us hope it was just political sharp practice, for it would be scary to think that Chris Bowen wasn’t aware the consequence of Labor’s emissions reduction target would be to send the price of electricity soaring.
It is hard to believe that Bowen and economists at Reputex who advised him were unaware of the cost structure of retail electricity, which in its basic elements, is not much different from the delivery of milk.
Labor’s ‘ideological obsessions’ around energy means Australians are paying more
Even if Labor’s policies had bought generation costs down (which they haven’t), the other components, those same policies would have been pushing up the cost of the cost of transmission.
The latest inflation report from the Australian Bureau of Statistics confirms that Household electricity bills have risen by around 20 per cent in the last two years.
It has added more than $200 to the annual household bill which is now around $1600 a year.
The cost of generation was about $560, 35 per cent of the retail price.
Environmental levies accounted for $145 or 9 per cent.
The largest cost driver is the cost of transmission, which accounts for $720 – 45 per cent – of the retail price.
Solar and wind power costs more to transmit than coal and gas.
Electrons derived from variable renewable energy have further to travel since they are typically generated in regional locations far from the major cities.
More electricity is dissipated along the way and transmission lines carrying intermittent energy run at lower capacity, making them less economically efficient.
Labor and the Greens ‘renewables push’ causes energy prices to top $2,000 annually
The premium on the cost of delivering renewable energy to a socket close to you is pushed higher by the need to invest in 10,000 km of new transmission lines by 2030, as demanded by the Australian Energy Market Operator’s plan to phase out coal by 2043.
How many tens of billions of dollars this will cost is pure guesswork, since none of AEMO’s predictions so far have been anywhere close to the mark.
Take the 916 km interconnector from Wagga Wagga, NSW to Robertstown, SA, priced at $1.52 billion when it was approved four years ago.
The projects’ join developers, ElectraNet and TransGrid, assured us it would be running by 2022 when the coal fired power station at Liddell in NSW was due to close.
NSW consumers would save $30 a year thanks to the spanking brand-new line which would be channelling 330 kV of pristine South Australian wind and solar power into their homes.
Consumers in SA would save $66.
Anyone familiar with the challenges of construction would have known at the time that these magical figures had simply been plucked from the air and slapped into the press releases, which was in turn dutifully cut and pasted by an ABC journalist and posted online on 13 February 2019.
Construction on the first stage finally began in February last year, too late to save the state’s electricity grid being cut off from neighbouring states when the main interconnector from Victoria at Talem Bend came crashing down in a violent storm last November.
At least 163,000 South Australian customers lost power, some of them for days.
It was too late too to make up for the loss of a gigawatt of capacity from Liddell, even though the owners AGL had kept it running for another year.
Electricity price hike places cost of living back in focus
The latest news is that Burra to Wagga Wagga section might be finished next year.
The most recent estimate of the cost of the project is $2.3 billion, but it lacks credibility.
The dream of former SA energy minister Dan van Holst Pellekaan that the line would turn SA into “an energy powerhouse” lies in tatters, while AEMO’s 2019 cost benefit analysis that concluded that consumers will would be better off has to all intent and purposes eventually been discredited.
It would be nice to be able to dismiss the cost blow-outs and delays in this small part of Bowen’s chain as a single slip-up.
It is not.
Almost every project in the government’s plan to re-wire the nation is hopelessly behind schedule and costs are mounting in almost every case.
Experienced engineers say there is zero chance that the nation will be rewired by 2030, if at all.
Australia no longer has the expertise to build transmission lines on this scale. Labor is short and wages are rising.
The cost of raw materials has risen and planning approval turns out to be harder to get than the project planners expected.
It is proving hard to find farmers clamouring to have giant steel towers built across the lengths of their properties, strangely enough.
The shambolic plan to decarbonise our entire energy system in a ridiculously short space of time is not just another government bungle, like the pink bats scheme or covered outdoor learning centre revolution that bedevilled the last federal Labor government.
Energy is the beating heart of our economy.
United States physicist and economist Robert Ayres describes the economic system as “a system for extracting, processing and transforming energy as resources into energy embodied in products and services.”
Lack of ‘reliable power’ cause of energy price increases: Matt Canavan
Switching it over from a system that drew strength and stability from the portability, energy density and abundance of coal, oil and gas to a system depending on the emerging technology was never going to be as simple and cheap as they told us.
When you scratch beneath the surface of the fatuous, dumbed down discussion on climate change and energy policy with which we’ve been cursed, it’s clear that the net-zero utopia we’ve set our hearts upon reaching by the middle of the century will be monstrously, absurdly and detestably expensive.
The McKinsey Global Institute had a stab at calculating the global cost of achieving net-zero by 2050.
The figure they arrived at was $275 trillion, or $9.2 trillion per year on average, or roughly 9 per cent of global GDP.
McKinsey warned: “Consumers may face additional up-front capital costs and have to spend more in the near term on electricity if cost increases are passed through, and lower-income households everywhere are naturally more at risk.”
Perhaps Bowen could tell us how to reconcile those figures with his cut-price offer the green energy dream.
Nick Cater is senior fellow at the Menzies Research Centre