Power price debacle illustrates lack of understanding

Nothing better illustrates the lack of public policy expertise in the media than the debacle over power prices.

Nothing better illustrates the lack of public policy expertise in the media and government than the debacle over power prices.

Moral posturing about climate change so infected thinking on issues of power generation that former prime minister Kevin Rudd in all seriousness declared that “climate change is the great moral challenge of our time”.

Not the upheavals in Iraq and later Syria, not the rise of Islamic terrorism, not global poverty or even the destruction of farming lands and forests in the third world.

Such posturing reached a high point when the former director of the left wing Australia Institute, Clive Hamilton, suggested this paper — and me personally — could face criminal charges for the “crime’’ of scepticism on climate issues. As I tried to explain to Hamilton in writing, the paper was, like rational Danish environmentalist Bjorn Lomborg, keen on economically sound solutions to issues and did not believe in suppressing dissenting views.

The Australian’s editor-at-large Paul Kelly was among the first to bell the cat on the potential perverse effects renewables, then called the mandatory renewable energy target, would have in combination with an emissions trading scheme.

Climate alarmists should have understood this first year economics. Trading schemes are about lowest-priced carbon abatement.

Mandated renewables have the opposite effect, by bidding up prices of conventional power to pay for incentives to renewables investors.

Often the justification for this policy has been polling that suggests people like clean energy. Of course they do, until asked if they are prepared to double their power bills to get it.

And it was not just Rudd or former PM Julia Gillard’s carbon tax broken promise. The conservatives have been just as bad.

As late as last week three hosts on Sky News, all correct in their criticism of renewables, allowed former prime minister Tony Abbott chief of staff Peta Credlin to blame Prime Minister Malcolm Turnbull for the present 28 per cent renewable energy target (RET). She should have remembered she was the chief of staff who introduced the policy under Abbott.

Turnbull does not get off the hook. He bought the whole moralising line of Rudd between 2008 and 2010 and even crossed the floor to support an emissions trading scheme after he had lost the opposition leadership.

It is unsurprising Turnbull, a former merchant banker, supports the RET. Most bankers do.

I have a friend, a merchant banker, who has invested a large part of his personal fortune in wind farms in Europe. They are crap policy, he admits freely, but guaranteed by government legislation to produce a high rate of return.

As The Australian’s environment editor Graham Lloyd wrote for the umpteenth time here on Friday, wind just cannot be relied on to provide “despatchable capability”. Or as this paper has argued correctly for 10 years, renewables cannot provide baseload power and battery storage technology is not sufficiently developed.

This brings us to the gullible media reaction to a tweet last week from AGL’s US -born chief executive Andy Vesey, who won applause from Fairfax Media, The Guardian and ABC for appearing to rebuff Turnbull on suggestions the company’s Liddell power plant in the NSW Hunter Valley should not necessarily be mothballed in 2022.

This was in response to a report from the Australian Energy Market Operator that pointed out the national electricity market was heading towards a shortfall of despatchable power and might face more blackouts. Left-wing journalists love that AGL has said it is getting out of coal.

But not until 2050. At the moment, it only makes about 7 per cent of its profits from renewables.

Just like BP, which at the start of the century rebranded itself “Beyond Petroleum”, such exercises are designed for applause of the political left.

The Australian on Thursday and Friday revealed Vesey has hired a couple of senior people committed to renewables.

One, Skye Laris, is formerly of activist group GetUp! and a one-time Labor staffer, and another, head of government relations Tony Chappel, is a graduate of Al Gore’s climate leadership program.

This may seem odd for a company using so much coal, until you remember both sides of politics have talked the language of renewables and the end of fossil fuels for a decade.

Our energy policy is mad for a country with the world’s largest supplies of high-quality steaming coal, among the best natural gas reserves on the planet and 40 per cent of the world’s uranium. Oh, and we are the world’s No 1 exporter of all three commodities.

This paper warned the Rudd government we would be exporting our electricity intensive manufacturing industries if we plunged headlong into renewables. Guess what? They have largely gone.

None of this is a condemnation of privatisation as Labor leader Bill Shorten kept squawking last week.

The steepest power price rises this year have been in Queensland, where the generators are still in state ownership.

And US power is so cheap, even though in private ownership, precisely because it harnessed its gas reserves while we failed to use ours to our own advantage.

Australia should have stuck to the original scenario envisaged by Howard at the 2007 election.

A market mechanism would have priced carbon and gradually made new gas baseload generation feasible. Gas has half the carbon intensity of coal and would have ensured we met our carbon reduction targets.

As carbon trading prices rose over decades this market would have facilitated the growth of renewables so that by the time mass battery storage was feasible we would have presided over an orderly transition.

And just as US power prices are a fraction of ours now, our own would have been a fraction of what they are today.

But don’t believe coal is dead. More than 1500 new efficient coal-fired plants are being planned or already under construction worldwide.

And don’t believe what loud populists say about fracking. It is used safely around the world. Never believe the left’s lies on climate alarmism. Intergovernmental Panel on Climate Change reports do not predict the scenarios many Greens say they do. They are cautious on individual extreme weather events and sea level rises.

While rich people fill their roofs with solar panels that just transfer costs to the poor, this does nothing for the climate because Australia represents only 1.3 per cent of global emissions. But it makes baseload power generation less feasible, less reliable and more expensive for consumers.