Renewable energy

In Australia, as Renewables Surge the Price of Electricity Doubles

Activist happy talk that transitioning to renewables will be cheap is entirely specious.



The price of electricity is soaring in Australia largely because of mandated adoption of renewable power generation.

Yes, the price of renewable energy continues to fall, but mandating the installation of current wind and solar power technologies still boosts the price of electricity in countries pursuing decarbonization strategies as a way to mitigate climate change.

In an op/ed, "Green Madness: Australia Has Gone from Cheapest to Most Expensive Power," in The Australian, Flinders University economist Judith Sloan details what has happened to electricity prices as the government has enacted its Renewable Energy Target (RET) scheme.

Judith Sloan

Sloan observes:

The kicker is the fact renewable energy, with its preferential dispatch status and low operating costs, sends ­dispatchable power plants into early retirement and kills off the incentives to build new ones. Note that since 2011 nearly 6000 megawatts of coal-fired plant capacity has been withdrawn from the ­market, or close to 12 per cent of total capacity.

Now the point is often made that we have reached this appalling position — high-cost, unreliable electricity affecting, in particular, the competitiveness of our heavy industries — because of very poor government policy.

But whether the outcome was entirely unintended is not so clear-cut. From the time John Howard introduced the first version of the renewable energy target, it was a one-way street to more subsidised, intermittent renewable energy and an investment strike in dispatchable energy. This was the aim; it could not have been otherwise.

Australia's RET scheme has set a national renewable energy target of 20 percent by 2020. As of July, renewables accounted for about 18.8 percent of Australia's electric power generation, 41 percent coming from hydroelectric plants, 31 percent wind, 18 percent rooftop solar, and two percent from large solar farms.

Consider the cases of Germany and Denmark, two countries which have been aggressively mandating the switch to wind and solar power.

As Reuters reports Germany "has been getting up to 85 percent of its electricity from renewable sources on certain sunny, windy days this year." Overall, Deutschland got about 35 percent of its electricity from renewable sources in the first half of 2017. Rather stupidly, Germany is phasing out its no-carbon nuclear power plants which supplied 25 percent of the country's electricity in 2011, which has since fallen to 14 percent.

Interestingly, Germany still generates 43 percent of its electricity by burning coal, mostly lignite. In order to prevent manufacturers in search of lower energy prices from leaving, Germany charges very low wholesale prices for electricity, but has some of the highest retail rates in the world.

IEEE Spectrum noted that renewables provided about 56 percent of Denmark's power as of March, 2017.

In 2016, hydropower generated 6.5 percent of the United States renewable energy. Wind and solar accounted for 5.6 and 0.9 percent respectively.

I have concluded that the balance of the evidence suggests that unmitigated man-made climate change could likely pose significant problems for humanity as the 21st century unfolds. That said, activist happy talk asserting that mandating the adoption of current versions of renewable energy technologies as a way to transition from fossil fuels will be cheap is entirely specious. The trade-offs between using cheap fossil fuels now to spur economic growth and the risks of future climate change must be acknowledged.