Terrible policy decisions by state and federal governments has led to high power prices
HIGH power prices are slowly strangling our economy thanks to series of terrible policy and regulatory decisions by the federal and state governments. Fixing the problem is the only way to fix the nation’s economy, writes Satyajeet Marar.
Opinion
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AUSTRALIANS pay some of the highest electricity prices in the world, and reports from the Australian Competition and Consumer Commission and independent, non-partisan think-tanks such as the Grattan Institute have pinned a majority of the blame on a series of terrible policy and regulatory decisions, courtesy of our federal and state governments.
Government policy has allowed an over-reliance on heavily taxpayer-subsidised, unreliable, intermittent and expensive wind and solar energy.
A recent study found that these subsidies had created distortions in the wholesale electricity market, driving Australia’s coal-fired power stations into premature retirement and forcing us to pay more for power.
Australians pay many times more every month than we did at the start of the millennium, when coal accounted for a majority of our electricity generation.
The irony is that even with generous subsidies, wind and solar power is heavily dependent on fossil fuel backup. Not only has the closure of coal-fired power generators forced us to rely increasingly on expensive and carbon-emitting natural gas, it has also left parts of the country — such as South Australia and Victoria — vulnerable to rolling blackouts, according to the Australian Energy Market Operator.
This abysmal state of affairs has already claimed political casualties. A few weeks ago, South Australians voted to boot the Labor Party out of office after a 16-year reign.
A zealous crusade for expensive renewable energy and gold plating slugs Australian families with high household bills and drives up the prices of goods and services.
Momentum swung against Jay Wetherill’s state government after its ideologically driven crusade to adopt renewable energy sources, with the burden for these policies passed on to unwitting taxpayers and consumers through the nation’s most expensive electricity bills, and a series of blackouts that made national headlines.
Unsurprisingly to everyone except South Australian Labor, the people had enough and made their sentiments known at the ballot box.
But renewables aren’t the only policy failure of our governments in the energy space.
Electricity companies also take advantage of arrangements with the government and regulators that allow them to “gold-plate” — in other words, invest in assets they do not need — while passing the cost of these assets to the consumer over the long-term by hiking up power bills.
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This practice was recently called out by the ACCC in its report on Australia’s electricity prices.
A zealous crusade for expensive renewable energy and gold plating slugs Australian families with high household bills and drives up the prices of goods and services.
Naturally, this has hit our businesses hard.
High power bills destroy our productivity and international competitiveness while sending jobs and industries to other nations that pay far less for their power than we do.
Here are just a few of the jobs, workers, industries and companies that have fallen victim to high electricity prices and the government policies which have enabled them.
Australia’s aluminium smelting industry, which was forced to drastically cut production last year due to electricity price hikes — placing thousands of jobs at risk.
Australian dairy farmers, who struggle to compete with their Kiwi counterparts because of much cheaper electricity prices and labour costs in New Zealand.
Australia’s small businesses, including family-run recycling company Plastics Granulating Services, which was forced to close its doors for good last year, leaving 35 employees out of work after nearly four decades in operation due to crippling electricity costs.
Council of Small Business Australia chief executive Peter Strong, recently described electricity price hikes as the “biggest business crisis in my lifetime”.
Australia’s almond industry, which suffered a 50 per cent increase in its energy bills since 2012. The country’s largest producer, Olam International, incurs 15 per cent of its costs through electricity bills. Olam chief executive Sunny Verghese described Australia as the most expensive nation where Olam operates due to our “broken” electricity system.
Sydney-based hardware manufacturer Alchin Long Group, which was forced to reconsider plans to shift jobs back to Australia from China in 2017 due to a doubling of its electricity bills.
Australia’s aluminium smelting industry, which was forced to drastically cut production last year due to electricity price hikes — placing thousands of jobs at risk. Boyne Smelters, a subsidiary of Rio Tinto, was forced to shed 100 jobs.
Multinational packaging group Orora was forced to review where it does business after seeing its electricity and gas prices double in the previous 12-18 months. The company reported that it was paying more than twice as much for electricity and gas here than it pays in the United States.
These prices are set to decline further with the Trump administration’s commitment to cut red tape and make cheaper energy a top priority for America.
As the corpses of Aussie small business, industries, jobs and political careers continue piling up, it is becoming increasingly clear that our nation must follow America’s lead in order to reduce costs for families and entrepreneurs.
Cutting power bills is a sure-fire way to bring jobs and industry back to our shores.
We could truly make Australia great again.
Satyajeet Marar is director of policy at the Australian Taxpayers’ Alliance.