There’s only one real way to tackle rising power prices – invest in renewables | Michael McGuire

No way around it – electricity bills are going to soar. And there’s really only one viable solution, writes Michael McGuire.

The standout number from last week’s federal budget had nothing to do with debt and deficit.

It wasn’t even economic growth numbers or unemployment.

It was the projection that we were all going to be paying another 56 per cent on electricity bills and 44 per cent on gas across the next couple of years.

Parked right on top of already galloping inflation and rocketing mortgage repayments, these rising power bills will create great pain for households and businesses.

The question is: what can be done about it? Federal Labor’s promise before the federal election that power bills would drop by $275 by 2025 looks about as realistic as state Labor’s pledge that it would “fix” ambulance ramping. Both feel like promises with an eye to election day, rather than on the actual business of governing.

But there is plenty of blame to go around when it comes to how Australia found itself in this mess. The most recent crisis point has no doubt been provoked by Russian President Vladimir Putin’s aggression in Ukraine.

But Australia has also wasted a lot of time in building a strong and secure energy network that could have helped withstand these global shocks. Labor prime minister Kevin Rudd squibbed the greatest “moral’’ challenge of a generation. Julia Gillard undermined her own efforts by promising not to introduce a carbon tax, then doing so. The policy wasn’t the issue, that was sound, but the breaking of the promise sounded her political death knell.

Windfarm technician Bard Davy from Sevion Australia at Snowtown.

Then came a decade of confusion from the Liberals, whose internal battles between those who believed in science and those who believed in ideology laid waste to significant progress.

So, that’s the history. But what do we do about it and how do we protect people from ridiculous power prices?

Whatever else this is, it does feel like a turning point has been reached. Whatever else we do, we can’t go on as we have been.

South Australia does give some guide to the future. SA has been heading down the renewable energy path faster and harder than anyone else, outside Tasmania.

It gives some hope that South Australians could avoid the absolute worst of the price rises if that 56 per cent prediction comes true. Of course, SA is a complicated market., with higher retail prices than elsewhere in Australia. The wholesale price makes up only around 40 per cent to 50 per cent of a retail bill. That is because SA is huge. The population is low and transmission costs are high. In the wholesale market last week, electricity costs in SA have been about $68MWh. In the same time, NSW has been about $150MWh and Queensland about $170MWh.

That week NSW and Queensland generated about 60 per cent of their electricity through black coal, while 75 per cent of SA’s electricity came from wind and solar. However, when the connector to NSW is complete, SA will also take NSW prices when it imports energy to cover any shortfall.

If you dig down even deeper into SA’s figures, wind alone contributed 54 per cent at an average cost of about $40MWh, while power from the biggest gas source was about $150MWh.

But, as is commonly pointed out, the wind doesn’t always blow and the sun doesn’t always shine, such as in the middle of winter.

In July, the average cost of electricity in SA was about $398MWh. Wind only gave 41 per cent. Gas gave about the same but at prices between $506MWh and $750MWh. In July, NSW was about $384MWh and Queensland $430MWh.

It’s undeniable the cheapest form of energy is renewable. It’s also a form of energy we, as a nation, have control over. We are not hostage to the current global record prices for coal and gas.

The transition to renewables has been clunky and badly handled in part, but accelerating it is really the only sensible solution. Investment must be quickened into building more renewables, into storage capacity and transmission. There is no more reason to delay.

In its outlook document published last week, the International Energy Agency said the Russian invasion of Ukraine was causing “profound and long-lasting changes’’ that would hasten the shift to renewables. The IEA also said there was “scant evidence’’ net zero commitments linked to climate change played a role in rising power prices. It also predicts demand for fossil fuels will decline from the mid-2020s.

Opposition leader Peter Dutton talked up the potential of small modular nuclear reactors in his budget reply speech, but the technology is still unproven, very expensive, and a long way away from being even close to a realistic alternative.

Developing renewables will also take time, meaning gas will have a role to play, but if its use can be reduced, bills will come down as well.

In the meantime, governments must do more to protect consumers. Australia has plenty of gas, it’s the world’s largest exporter of liquefied natural gas. A limit should be introduced to reserve a portion for domestic use and at a lower rate.

Global energy companies, including Shell and Chevron, are among the biggest exporters. They are making obscene profits from the current crisis.

These profits are not made from their own genius, but from a global crisis brought on by war. The Albanese government should impose some form of windfall tax on those companies and direct the money to help struggling Australians pay their bills. That at least would help bring a measure of fairness back to the energy market.