After the storm: how political attacks on renewables elevates attention paid to climate change



File 20171008 25764 1l2bb7h

AAP/David Mariuz

David Holmes, Monash University

This time last year, Australia was getting over a media storm about renewables, energy policy and climate change. The media storm was caused by a physical storm: a mid-latitude cyclone that hit South Australia on September 29 and set in train a series of events that is still playing itself out.

The events include:

In one sense, the Finkel Review was a response to the government’s concerns about “energy security”. But it also managed to successfully respond to the way energy policy had become a political plaything, as exemplified by the attacks on South Australia.

New research on the media coverage that framed the energy debate that has ensued over the past year reveals some interesting turning points in how Australia’s media report on climate change.

While extreme weather events are the best time to communicate climate change – the additional energy humans are adding to the climate is on full display – the South Australian event was used to attack renewables rather than the carbonisation of the atmosphere. Federal MPs hijacked people’s need to understand the reason for the blackout “by simply swapping climate change with renewables”.

However, the research shows that, ironically, MPs who invited us to “look over here” at the recalcitrant renewables – and not at climate-change-fuelled super-storms – managed to make climate change reappear.

The study searched for all Australian newspaper articles that mentioned either a storm or a cyclone in relation to South Australia that had been published in the ten days either side of the event. This returned 591 articles. Most of the relevant articles were published after the storm, with warnings of the cyclone beforehand.

Some of the standout findings include:

  • 51% of articles were about the power outage and 38% were about renewables, but 12% of all articles connected these two.

  • 20% of articles focused on the event being politicised by politicians.

  • 9% of articles raised climate change as a force in the event and the blackouts.

  • 10% of articles blamed the blackouts on renewables.

  • Of all of the articles linking power outages to renewables 46% were published in News Corp and 14% were published in Fairfax.

  • Narratives that typically substituted any possibility of a link to climate change, included the “unstoppable power of nature” (18%), failure of planning (5.25%), and triumph of humanity (5.6%).

Only 9% of articles discussed climate change. Of these, 73% presented climate change positively, 21% were neutral, and 6% negative. But, for the most part, climate change was linked to the conversation around renewables: there was a 74% overlap. 36% of articles discussing climate change linked it to the intensification of extreme weather events.

There was also a strong correlation between the positive and negative discussion of climate change and the ownership of newspapers.

The starkest contrast was between the two largest Australian newspaper groups. Of all the sampled articles that mentioned climate change, News Corp was the only group to has a negative stance on climate change (at 50% of articles), but still with 38% positive. Fairfax was 90% positive and 10% neutral about climate change.

Positive/negative stance of articles covering climate change by percentage.

Given that more than half of all articles discussed power outages, the cyclone in a sense competed with renewables as a news item. Both have a bearing on power supply and distribution. But, ironically, it was renewables that put climate change on the news agenda – not the cyclone.

Of the articles discussing renewables, 67% were positive about renewables with only 33% “negative” and blaming them for the power outages.

In this way, the negative frame that politicians put on renewable energy may have sparked debate that was used to highlight the positives of renewable energy and what’s driving it: reduced emissions.

But perhaps the most interesting finding is the backlash by news media against MPs’ attempts to politicise renewables.

19.63% of all articles in the sample had called out (mainly federal) MPs for politicising the issue and using South Australians’ misfortune as a political opportunity. This in turn was related to the fact that, of all the articles discussing renewables, 67% were positive about renewables with only 33% supporting MPs’ attempts to blame them for the power outages.

In this way, while many MPs had put renewables on the agenda by denigrating them, most journalists were eager to cover the positive side of renewables.

Nevertheless, the way MPs sought to dominate the news agenda over the storm did take away from discussion of climate science and the causes of the cyclone. Less than 4% of articles referred to extreme weather intensifying as a trend.

This is problematic. It means that, with a few exceptions, Australia’s climate scientists are not able to engage with the public in key periods after extreme weather events.

When MPs, with co-ordinated media campaigns, enjoy monopoly holdings in the attention economy of news cycles, science communication and the stories of climate that could be told are often relegated to other media.


The ConversationWith thanks to Tahnee Burgess for research assistance on this article.

David Holmes, Director, Climate Change Communication Research Hub, Monash University

This article was originally published on The Conversation. Read the original article.

Advertisements

Renewables will be cheaper than coal in the future. Here are the numbers


Ken Baldwin, Australian National University

In a recent Conversation FactCheck I examined the question: “Is coal still cheaper than renewables as an energy source?” In that article, we assessed how things stand today. Now let’s look to the future.

In Australia, 87% of our electricity generation comes from fossil fuels. That’s one of the highest levels of fossil fuel generation in the world.

So we have important decisions to make about how we’ll generate energy as Australia’s fleet of coal-fired power stations reach the end of their operating lives, and as we move to decarbonise the economy to meet our climate goals following the Paris agreement.

What will the cost of coal-fired and renewable energy be in the coming decades? Let’s look at the numbers.

Improvements in technology will make renewables cheaper

As technology and economies of scale improve over time, the initial capital cost of building an energy generator decreases. This is known as the “learning rate”. Improvements in technology are expected to reduce the price of renewables more so than coal in coming years.

The chart below, produced by consulting firm Jacobs Group and published in the recent Finkel review of the National Electricity Market, shows the projected levelised cost of electricity (LCOE) for a range of technologies in 2020, 2030 and 2050.

The chart shows a significant reduction in the cost of solar and wind, and a relatively static cost for mature technologies such as coal and gas. It also shows that large-scale solar photovoltaic (PV) generation, with a faster learning rate, is projected to be cheaper than wind generation from around 2020.

Notes: Numbers in Figure A.1 refer to the average.
For each generation technology shown in the chart, the range shows the lowest cost to the highest cost project available in Jacobs’ model, based on the input assumptions in the relevant year. The average is the average cost across the range of projects; it may not be the midpoint between the highest and lowest cost project.
Large-scale Solar Photovoltaic includes fixed plate, single and double axis tracking.
Large-scale Solar Photovoltaic with storage includes 3 hours storage at 100 per cent capacity.
Solar Thermal with storage includes 12 hours storage at 100 per cent capacity.
Cost of capital assumptions are consistent with those used in policy cases, that is, without the risk premium applied.
The assumptions for the electricity modelling were finalised in February 2017 and do not take into account recent reductions in technology costs (e.g. recent wind farm announcements).

Independent Review into the Future Security of the National Electricity Market

Wind prices are already falling rapidly. For example: the graph above shows the 2020 price for wind at A$92 per megawatt-hour (MWh). But when the assumptions for the electricity modelling were finalised in February 2017, that price was already out of date.

In its 2016 Next Generation Renewables Auction, the Australian Capital Territory government secured a fixed price for wind of A$73 per MWh over 20 years (or A$56 per MWh in constant dollars at 3% inflation).

In May 2017, the Victorian renewable energy auction set a record low fixed price for wind of A$50-60 per MWh over 12 years (or A$43-51 per MWh in constant dollars at 3% inflation). This is below the AGL price for electricity from the Silverton wind farm of $65 per MWh fixed over five years.

These long-term renewable contracts are similar to a LCOE, because they extend over a large fraction of the lifetime of the wind farm.

The tables and graph below show a selection of renewable energy long-term contract prices across Australia in recent years, and illustrate a gradual decline in wind energy auction results (in constant 2016 dollars), consistent with improvements in technology and economies of scale.

https://datawrapper.dwcdn.net/R1bBY/3/

https://datawrapper.dwcdn.net/IXtHg/3/

https://datawrapper.dwcdn.net/Ugi50/7/

But this analysis is still based on LCOE comparisons – or what it would cost to use these technologies for a simple “plug and play” replacement of an old generator.

Now let’s price in the cost of changes needed to the entire electricity network to support the use of renewables, and to price in other factors, such as climate change.

Carbon pricing will increase the cost of coal-fired power

The economic, environmental and social costs of greenhouse gas emissions are not included in simple electricity cost calculations, such as the LCOE analysis above. Neither are the costs of other factors, such as the health effects of air particle pollution, or deaths arising from coal mining.

The risk of the possible introduction of carbon emissions mitigation policies can be indirectly factored into the LCOE of coal-fired power through higher rates for the weighted average cost of capital (in other words, higher interest rates for loans).

The Jacobs report to the Finkel Review estimates that the weighted average cost of capital for coal will be 15%, compared with 7% for renewables.

The cost of greenhouse gas emissions can be incorporated more directly into energy prices by putting a price on carbon. Many economists maintain that carbon pricing is the most cost-effective way to reduce global carbon emissions.

One megawatt-hour of coal-fired electricity creates approximately one tonne of carbon dioxide. So even a conservative carbon price of around A$20 per tonne would increase the levelised cost of coal generation by around A$20 per MWh, putting it at almost A$100 per MWh in 2020.

According to the Jacobs analysis, this would make both wind and large-scale photovoltaics – at A$92 and A$91 per MWh, respectively – cheaper than any fossil fuel source from the year 2020.

It’s worth noting here the ultimate inevitability of a price signal on carbon, even if Australia continues to resist the idea of implementing a simple carbon price. Other policies currently under consideration, including some form of a clean energy target, would put similar upward price pressure on coal relative to renewables, while the global move towards carbon pricing will eventually see Australia follow suit or risk imposts on its carbon-exposed exports.

Australia’s grid needs an upgrade

Renewable energy (excluding hydro power) accounted for around 6% of Australia’s energy supply in the 2015-16 financial year. Once renewable energy exceeds say, 50%, of Australia’s total energy supply, the LCOE for renewables should be used with caution.

This is because most renewable energy – like that generated by wind and solar – is intermittent, and needs to be “balanced” (or backed up) in order to be reliable. This requires investment in energy storage. We also need more transmission lines within the electricity grid to ensure ready access to renewable energy and storage in different regions, which increases transmission costs.

And, there are additional engineering requirements, like building “inertia” into the electricity system to maintain voltage and frequency stability. Each additional requirement increases the cost of electricity beyond the levelised cost. But by how much?

Australian National University researchers calculated that the addition of pumped-hydro storage and extra network construction would add a levelised cost of balancing of A$25-30 per MWh to the levelised cost of renewable electricity.

The researchers predicted that eventually a future 100% renewable energy system would have a levelised cost of generation in current dollars of around A$50 per MWh, to which adding the levelised cost of balancing would yield a network-adjusted LCOE of around A$75-80 per MWh.

The Australian National University result is similar to the Jacobs 2050 LCOE prediction for large-scale solar photovoltaic plus pumped hydro of around A$69 per MWh, which doesn’t include extra network costs.

The AEMO 100% Renewables Study indicated that this would add another A$6-10 per MWh, yielding a comparable total in the range A$75-79 per MWh.

This would make a 100% renewables system competitive with new-build supercritical (ultrasupercritical) coal, which, according to the Jacobs calculations in the chart above, would come in at around A$75(80) per MWh between 2020 and 2050.

This projection for supercritical coal is consistent with other studies by the CO2CRC in 2015 (A$80 per MWh) and used by CSIRO in 2017 (A$65-80 per MWh).

So, what’s the bottom line?

The ConversationBy the time renewables dominate electricity supply in Australia, it’s highly likely that a price on carbon will have been introduced. A conservative carbon price of at least A$20 per tonne would put coal in the A$100-plus bracket for a megawatt-hour of electricity. A completely renewable electricity system, at A$75-80 per MWh, would then be more affordable than coal economically, and more desirable environmentally.

Ken Baldwin, Director, Energy Change Institute, Australian National University

This article was originally published on The Conversation. Read the original article.

Can two clean energy targets break the deadlock of energy and climate policy?



File 20170922 17319 1yjiyih
Climate policy has become bogged down in the debate over a clean energy target.
Shutterstock

Bruce Mountain, Victoria University

Malcolm Turnbull’s government has been wrestling with the prospect of a clean energy target ever since Chief Scientist Alan Finkel recommended it in his review of Australia’s energy system. But economist Ross Garnaut has proposed a path out of the political quagmire: two clean energy targets instead of one.

Garnaut’s proposal is essentially a flexible emissions target that can be adapted to conditions in the electricity market. If electricity prices fail to fall as expected, a more lenient emissions trajectory would likely be pursued.

This proposal is an exercise in political pragmatism. If it can reassure both those who fear that rapid decarbonisation will increase energy prices, and those who argue we must reduce emissions at all costs, it represents a substantial improvement over the current state of deadlock.


Ross Garnaut/Yann Robiou DuPont, Author provided

Will two targets increase investor certainty?

At a recent Melbourne Economic Forum, Finkel pointed out that investors do not require absolute certainty to invest. After all, it is for accepting risks that they earn returns. If there was no risk to accept there would be no legitimate right to a return.

But Finkel also pointed out that investors value policy certainty and predictability. Without it, they require more handsome returns to compensate for the higher policy risks they have to absorb.


Read more: Turnbull is pursuing ‘energy certainty’ but what does that actually mean?


At first sight, having two possible emissions targets introduces yet another uncertainty (the emissions trajectory). But is that really the case? The industry is keenly aware of the political pressures that affect emissions reduction policy. If heavy reductions cause prices to rise further, there will be pressure to soften the trajectory.

Garnaut’s suggested approach anticipates this political reality and codifies it in a mechanism to determine how emissions trajectories will adjust to future prices. Contrary to first impressions, it increases policy certainty by providing clarity on how emissions policy should respond to conditions in the electricity market. This will promote the sort of policy certainty that the Finkel Review has sought to engender.

Could policymakers accept it?

Speaking of political realities, could this double target possibly accrue bipartisan support in a hopelessly divided parliament? Given Tony Abbott’s recent threat to cross the floor to vote against a clean energy target (bringing an unknown number of friends with him), the Coalition government has a strong incentive to find a compromise that both major parties can live with.


Read more: Abbott’s disruption is raising the question: where will it end?


Turnbull and his energy minister, Josh Frydenberg, who we understand are keen to see Finkel’s proposals taken up, could do worse than put this new idea on the table. They have to negotiate with parliamentary colleagues whose primary concern is the impact of household electricity bills on voters, as well as those who won’t accept winding back our emissions targets.

Reassuringly, the government can point to some precedent. Garnaut’s proposal is novel in Australia’s climate policy debate, but is reasonably similar to excise taxes on fuel, which in some countries vary as a function of fuel prices. If fuel prices decline, excise taxes rise, and vice versa. In this way, governments can achieve policy objectives while protecting consumers from the price impacts of those objectives.

The devil’s in the detail

Of course, even without the various ideologies and vested interests in this debate, many details would remain to be worked out. How should baseline prices be established? What is the hurdle to justify a more rapid carbon-reduction trajectory? What if prices tick up again, after a more rapid decarbonisation trajectory has been adopted? And what if prices don’t decline from current levels: are we locking ourselves into a low-carbon-reduction trajectory?

These issues will need to be worked through progressively, but there is no obvious flaw that should deter further consideration. The fundamental idea is attractive, and it looks capable of ameliorating concerns that rapid cuts in emissions will lock in higher electricity prices.

The ConversationFor mine, I would not be at all surprised if prices decline sharply as we begin to decarbonise, such is the staggering rate of technology development and cost reductions in renewable energy. But I may of course be wrong. Garnaut’s proposal provides a mechanism to protect consumers if this turns out to be the case.

Bruce Mountain, Director, Carbon and Energy Markets., Victoria University

This article was originally published on The Conversation. Read the original article.

A cleanish energy target gets us nowhere



File 20170920 25319 2stl05

Shutterstock

Alan Pears, RMIT University

It seems that the one certainty about any clean energy target set by the present government is that it will not drive sufficient progress towards a clean, affordable, reliable energy future. At best, it will provide a safety net to ensure that some cleanish energy supply capacity is built.

Future federal governments will have to expand or complement any target set by this government, which is compromised by its need to pander to its rump. So a cleanish energy target will not provide investment certainty for a carbon-emitting power station unless extraordinary guarantees are provided. These would inevitably be challenged in parliament and in the courts.


Read more: Turnbull is pursuing ‘energy certainty’ but what does that actually mean?


Even then, the unstoppable evolution of our energy system would leave an inflexible baseload power station without a market for much of the electricity it could generate. Instead, we must rely on a cluster of other strategies to do the heavy lifting of driving our energy market forward.

The path forward

It’s clear that consumers large and small are increasingly investing “behind the meter” in renewable energy technology, smart management systems, energy efficiency and energy storage. In so doing, they are buying insurance against future uncertainty, capturing financial benefits, and reducing their climate impacts. They are being helped by a wide range of emerging businesses and new business models, and existing energy businesses that want to survive as the energy revolution rolls on.

The Australian Energy Market Operator (AEMO) is providing critically important information on what’s needed to deliver energy objectives. The recently established Energy Security Board will work to make sure that what’s needed is done – in one way or another. Other recommendations from the Finkel Review are also helping to stabilise the electricity situation.

The recent AEMO/ARENA demand response project and various state-level energy efficiency retailer obligation schemes and renewable energy targets are examples of how important energy solutions can be driven outside the formal National Energy Market. They can bypass the snail-paced progress of reforming the NEM.

States will play a key role

State governments are setting their own renewable energy targets, based on the successful ACT government “contracts for difference” approach, discussed below. Victoria has even employed the architect of the ACT scheme, Simon Corbell. Local governments, groups of businesses and communities are developing consortia to invest in clean energy solutions using similar models.

Some see state-level actions as undermining the national approach and increasing uncertainty. I see them as examples of our multi-layered democratic system at work. Failure at one level provokes action at another.

State-level actions also reflect increasing energy diversity, and the increasing focus on distributed energy solutions. States recognise that they carry responsibilities for energy: indeed, the federal government often tries to blame states for energy failures.

There is increasing action at the network, retail and behind-the-meter levels, driven by business and communities. While national coordination is often desirable, mechanisms other than national government leadership can work to complement national action, to the extent it occurs.

Broader application of the ACT financing model

A key tool will be a shift away from the current RET model to the broader use of variations of the ACT’s contract for difference approach. The present RET model means that project developers depend on both the wholesale electricity price and the price of Large Generation Certificates (LGCs) for revenue. These are increasingly volatile and, over the long term, uncertain. In the past we have seen political interference and low RET targets drive “boom and bust” outcomes.

So, under the present RET model, any project developer faces significant risk, which makes financing more difficult and costly.

The ACT contract for difference approach applies a “market” approach by using a reverse auction, in which rival bidders compete to offer the desired service at lowest cost. It then locks in a stable price for the winners over an agreed period of time.

The approach reduces risk for the project developer, which cuts financing costs. It shifts cost risk (and opportunity) to whoever commits to buy the electricity or other service. The downside risk is fairly small when compared with the insurance of a long-term contract and the opportunity to capture savings if wholesale electricity prices increase.

The ACT government has benefited from this scheme as wholesale prices have risen. It also includes other requirements such as the creation of local jobs. This approach can be applied by agents other than governments, such as the consortium set up by the City of Melbourne.

For business and public sector consumers, the prospect of reasonably stable energy prices, with scope to benefit if wholesale prices rise and limited downside risk, is attractive in a time of uncertainty. For project developers, a stable long-term revenue stream improves project viability.

The approach can also potentially be applied to other aspects of energy service provision, such as demand response, grid stabilisation or energy efficiency. It can also be combined with the traditional “power purchase agreement” model, where the buyer of the energy guarantees a fixed price but the project developer carries the risk and opportunity of market price variations. It can also apply to part of a project’s output, to underpin it.

The ConversationWhile sorting out wholesale markets is important, we need to remember that this is just part of the energy bill. Energy waste, network operations, retailing and pricing structures such as high fixed charges must also be addressed. Some useful steps are being taken, but much more work is needed.

Alan Pears, Senior Industry Fellow, RMIT University

This article was originally published on The Conversation. Read the original article.

Victoria is the latest state to take renewable energy into its own hands



File 20170828 1572 7jnrar
The Victorian government is aiming to boost renewable energy to 40%.
Changyang1230/Wikimedia Commons, CC BY-SA

Samantha Hepburn, Deakin University

The Victorian government’s intention, announced last week, to legislate its own state-based renewable energy target is the latest example of a state pursuing its own clean energy goals after expressing frustration with the pace of federal action.

The Andrews government has now confirmed its plan for 40% renewable energy by 2025, as well as an intermediate target of 25% clean energy by 2020. The policy, first flagged last year and now introduced as a bill in the state parliament, seeks to reduce greenhouse gas emissions by 16% by 2035.

At a general level, these actions are reflective of the increasing frustration states and territories have experienced at perceived inaction at the federal and even international levels. Neighbouring South Australia has also been pursuing clean energy, this month announcing plans to develop one of the world’s biggest concentrated solar plants in Port Augusta.

Victorian Premier Daniel Andrews has remarked that “it up to states like Victoria to fill that void”.


Read more: Victoria’s renewables target joins an impressive shift towards clean energy.


It is also, of course, a product of growing concerns regarding domestic energy security and investment confidence. Victoria’s climate and energy minister Lily D’Ambrosio said: “The renewable energy sector will now have the confidence to invest in renewable energy projects and the jobs that are crucial to Victoria’s future.”

National plans?

The Andrews government’s underlying objective is to reinforce, rather than undermine, federal initiatives such as the national Renewable Energy Target and any future implementation of the Clean Energy Target recommended by the Finkel Review.

But federal Environment and Energy Minister Josh Frydenberg has apparently rejected this view, claiming that the new Victorian proposals run counter to the development of nationally consistent energy policy. “National problems require national solutions and by going it alone with a legislated state-based renewable energy target Daniel Andrews is setting Victoria on the South Australian Labor path for higher prices and a less stable system,” Frydenberg said.


Read more: Finkel’s Clean Energy Target plan ‘better than nothing’: economists poll.


A nationally consistent plan is somewhat unrealistic in view of the current fragmented, partisan framework in which energy policy is being developed. The federal government’s apparent reluctance to accept Finkel’s recommendation for a Clean Energy Target is generating uncertainty and unrest.

In this context, actions taken by states such as Victoria and South Australia can help to encourage renewable energy investment. Given that Australia has promised to reduce greenhouse emissions by 26-28% (on 2005 levels) by 2030 under the Paris Climate Agreement, it is hard to see how boosting renewable energy production is inconsistent with broader national objectives.

The renewables target rationale

Mandating a certain amount of renewable energy, as Victoria is aiming to do, helps to push clean energy projects beyond the innovation stage and into commercial development. It also helps more established technologies such as wind and solar to move further along the cost curve and become more economically competitive.

Renewable energy targets aim to stimulate demand for clean energy, thereby ensuring that these technologies have better economy of scale. Under both the federal and Victorian frameworks, electricity utilities must source a portion of their power from renewable sources. They can comply with these requirements with the help of Renewable Energy Certificates (RECs), of which they receive one for every megawatt hour of clean energy generated.

Independent power producers can sell their RECs to utilities to earn a premium on top of their income from power sales in the wholesale electricity market. As well as buying RECs, utilities can also invest in their own renewable generation facilities, thus earning more RECs themselves.

Victoria’s situation

Victoria’s proposed new legislation will serve an important purpose following the retirement of the Hazelwood coal-fired power plant. Renewable energy currently represents about 17% of the state’s electricity generation, and the Andrews government is aiming to more than double this figure by 2025.

This year alone, Victoria has added an extra 685MW of renewable generation capacity, creating more than A$1.2 billion worth of investment in the process. If the new legislation succeeds in its aims, this level of investment will be sustained well into the next decade.

Under the bill’s proposals, D’Ambrosio will be required to determine by the end of this year the minimum renewables capacity needed to hit the 25% by 2020 target, and to make a similar decision by the end of 2019 regarding the 40% by 2025 target.

In mandating these milestones, the state is aiming to set out the exact size of the state’s transitioning energy market, in turn giving greater investment certainty to the renewable energy industry.


Read more: Closing Victoria’s Hazelwood power station is no threat to electricity supply.


Victoria’s renewable energy scheme is designed to work coherently with the federal Renewable Energy Target, which given current usage projections is aiming to source 23.5% of national electricity consumption from renewables by 2020.

The federal government is yet to decide on any clean energy policy beyond the end of the decade, whether that be a Finkel-recommended Clean Energy Target or something else. In the absence of confirmed federal policy, the states have assumed the responsibility of accelerating renewable energy production through legislative initiatives designed to sustain and progress market development. This is consistent with federal commitments to global climate change imperatives.

The ConversationIt is hoped that these initiatives will act as a stepping stone for the eventual introduction of comprehensive state and federal clean energy regulation, and the advent of some much-needed national cohesion.

Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University

This article was originally published on The Conversation. Read the original article.

Finkel’s Clean Energy Target plan ‘better than nothing’: economists poll


Bruce Mountain, Victoria University

Few topics have attracted as much political attention in Australia over the past decade as emissions reduction policy.

Amid mounting concern over electricity price increases across Australia and coinciding with blackouts in South Australia and near-misses in New South Wales, the Australian government asked Chief Scientist Alan Finkel to provide a blueprint for reform of the electricity industry, in a context in which emissions reduction policy was an underlying drumbeat.

In a new poll of the ESA Monash Forum of leading economists, a majority said that Finkel’s suggested Clean Energy Target was not necessarily a better option than previously suggested policies such as an emissions trading scheme. But many added that doing nothing would be worse still.


Read more: The Finkel Review: finally, a sensible and solid footing for the electricity sector.


The Finkel Review’s terms of reference explicitly precluded it from advising on economy-wide emissions reduction policy, and implicitly required it also to reject emission reduction policies such as an emissions tax or cap and trade scheme.

One of the Finkel Review’s major recommendations was a Clean Energy Target (CET). This is effectively an extension of the existing Renewable Energy Target to cover power generation which has a greenhouse gas emissions intensity below a defined hurdle. Such generation can sell certificates which electricity retailers (and directly connected large customers) will be required to buy.

The ESA Monash Forum panel was asked to consider whether this approach was “preferable” to an emission tax or cap and trade scheme. As usual, responses could range from strong disagreement to strong agreement with an option to neither agree nor disagree. Twenty-five members of the 53-member panel voted, and most added commentary to their response – you can see a summary of their verdicts below, and their detailed comments at the end of this article.

https://datawrapper.dwcdn.net/Kzu9L/2/

A headline result from the survey is that a large majority of the panel does not think the CET is preferable to a tax or cap and trade scheme. None strongly agreed that the CET was preferable, whereas 16 either disagreed or strongly disagreed, and four agreed.

Of the four who agreed, three provided commentary to their response. Stephen King preferred the CET on the grounds of its ease of implementation but otherwise would have preferred a tax or cap and trade scheme. Michael Knox agreed on the basis that the CET was preferable to the existing Renewable Energy Target. Harry Bloch unconditionally endorsed the CET.

Of the five who neither agreed nor disagreed, three commented and two of them (Paul Frijters and John Quiggin) said there was not much to distinguish a CET from a tax or cap and trade scheme. Warwick McKibbin, who disagreed with the proposition, nonetheless also suggested that the CET, tax and cap and trade scheme were comparably effective if applied only to the electricity sector.

However, closer examination of the comments suggests much greater sympathy with Finkel’s CET recommendation than the bare numbers indicate. Even for those who strongly disagreed that the CET was preferable, none suggested that proceeding with a CET would be worse than doing nothing. But eight (Stephen King, Harry Bloch, Alison Booth, Saul Eslake, Julie Toth, Flavio Menezes, Margaret Nowak and John Quiggin) commented that proceeding with the CET would be better than doing nothing. Interestingly none of these eight explained why they thought doing something was better than doing nothing. Does it reflect a desire for greater investment certainty or a conviction that reducing emissions from electricity production in Australia is important?

Seven respondents (Stephen King, Alison Booth, Saul Eslake, Julie Toth, Gigi Foster, Lin Crase and John Quiggin) alluded to the political constraints affecting the choice, of which several drew attention to Finkel’s own observations. None of these seven suggested that the political constraint invalidated proceeding with the CET.

Of the 19 economists who provided comments on their response, 16 thought a tax or cap and trade scheme better than a CET. Numbers were equally drawn (three each) as to whether a tax or cap and trade was better than the other, with the remaining 10 invariant between a tax or cap and trade.

My overall impression is that in judging Dr Finkel’s CET recommendation, most of the panel might agree with the proposition that the “the perfect is the enemy of the roughly acceptable”. I surmise that in a decade past, many members of the panel would have held out for greater perfection, but now they think prevarication is more cost than benefit, and it is better to move on and make the best of the cards that have been dealt.

In emissions reduction policy the mainstream advice from Australia’s economists has not been persuasive. But this is hardly unique to Australia, as the pervasiveness of regulatory approaches in other countries shows. Perhaps an unavoidably compromised policy that is nonetheless well executed may be better than a brilliant policy that is poorly executed. Even if they could not have been more persuasive in design, Australia’s economists should still have much that is useful to contribute in execution. Hopefully more can be drawn into it.

Read the panel’s full responses below:

https://cdn.theconversation.com/infographics/115/8c22ecaf49b3a727fb96e8c3b50da37fd0c28f49/site/index.html


The ConversationThis is an edited version of the summary of the report’s findings originally published by the ESA Monash Forum.

Bruce Mountain, Director, Carbon and Energy Markets., Victoria University

This article was originally published on The Conversation. Read the original article.

Poor households are locked out of green energy, unless governments help


Alan Pears, RMIT University

A report released this week by the Australian Council of Social Service has pointed out that many vulnerable households cannot access rooftop solar and efficient appliances, describing the issue as a serious problem.

It has provoked controversy. Some have interpreted the report as an attack on emerging energy solutions such as rooftop solar. Others see it as exposing a serious structural crisis for vulnerable households.

The underlying issue is the fundamental change in energy solutions. As I pointed out in my previous column, we are moving away from investment by governments and large businesses in big power stations and centralised supply, and towards a distributed, diversified and more complex energy system. As a result, there is a growing focus on “behind the meter” technologies that save, store or produce energy.

What this means is that anyone who does not have access to capital, or is uninformed, disempowered or passive risks being disadvantaged – unless governments act.

The reality is that energy-efficient appliances and buildings, rooftop solar, and increasingly energy storage, are cost-effective. They save households money through energy savings, improved health, and improved performance in comparison with buying grid electricity or gas. But if you can’t buy them, you can’t benefit.

In the past, financial institutions loaned money to governments or big businesses to build power stations and gas supply systems. Now we need mechanisms to give all households and businesses access to loans to fund the new energy system.

Households that cannot meet commercial borrowing criteria, or are disempowered – such as tenants, those under financial stress, or those who are disengaged for other reasons – need help.

Governments have plenty of options.

  • They can require landlords to upgrade buildings and fixed appliances, or make it attractive for them to do so. Or a bit of both.

  • They can help the supply chain that upgrades buildings and supplies appliances to do this better, and at lower cost.

  • They can facilitate the use of emerging technologies and apps to identify faulty and inefficient appliances, then fund their replacement. Repayments can potentially be made using the resulting savings.

  • They can ban the sale of inefficient appliances by making mandatory performance standards more stringent and widening their coverage.

  • They can help appliance manufacturers make their products more efficient, and ensure that everyone who buys them know how efficient they are.

To expand on the last suggestion, at present only major household white goods, televisions and computer monitors are required to carry energy labels. If you are buying a commercial fridge, pizza oven, cooker, or stereo system, you are flying blind.

The Finkel Review made it clear that the energy industry will not lead on this. It clearly recommends that energy efficiency is a job for governments, and that they need to accelerate action.

The ConversationIt’s time for governments to get serious about helping everyone to join the energy transition, not just the most affluent.

Alan Pears, Senior Industry Fellow, RMIT University

This article was originally published on The Conversation. Read the original article.