And as I will explain below, my alert in June to the approaching weather pattern needs an update. The pattern is still on track, so the chances of heavy rain in large parts of northern and central Australia late this year or early in 2025 are increasing – just as the energy debate intensifies.
Australia’s renewable energy policy is one of the four pillars I isolated last week that are set to underwrite an inflation rate that is higher than economists would normally expect given the slump in the Australian economy. (The other pillars are the industrial relations legislation, state and federal government spending sprees, and wage growth without productivity increases).
Our renewable energy policies will convert Australia from a low to a high-cost energy producer, with dramatic consequences for the nation. And our high-cost policies will actually increase global emissions rather than reduce them.
Wind and solar must be an important part of Australia’s future energy mix, and while their operating costs are minimal, the capital costs are huge, particularly as wind and solar facilities have a limited life and involve big transmission costs. Accordingly, as private capital is being used to finance them, they must generate high returns which must be paid for by power users.
When the community eventually understands the long-term impact of what we are actually doing, the national revolt will be hard to control. But that realisation may not happen until after the next election.
Construction of renewables infrastructure has fallen behind expectations because of rising costs, regulations and intense rural community hatred of what is being done to farm lands.
The federal government realised that something had to be done to stimulate private investment or there was no way we would reach the target of 80 per cent of renewable capacity by 2030 – especially as that target included an enormous rise in electricity consumption.
Action was required, and the Albanese government dreamt up a plan known as the Capacity Investment Scheme.
Investors were lured by almost certain big profits with minimal risk. How about this as an investment proposal: “Invest in renewable infrastructure and the government will guarantee a worthwhile base income, which means you can’t lose while making good returns. And the tranche of income above the base is also yours. We will keep most of the top tier, higher risk, income.”
The government excitedly announced it had received 32 times more than it asked for. I am surprised it wasn’t 132 times the target.
Of course, the community must pay for that subsidy via higher power prices or less money for government services.
Those unfortunates who invested in renewables facilities without guaranteed returns will not be happy. Many of the early facilities are now reaching the end of their economic life and will need to be replaced. They will not be renewed unless the more generous scheme is offered.
Australia is pricing itself out of the global energy market. To be competitive, industry must source more products overseas, where energy prices are lower.
Two major sources are China and India, which have much greater pollution than Australia, so every time we push manufacturing abroad we lift emissions. This is set to explode because we are using our major electricity consumers as “batteries”. When demand for power in the general community rises to levels that can’t be supplied by renewables, the big power-using complexes such as aluminium, alumina and steel producers shut down part of their operations. These plants were never designed to be batteries, and it is simply the first stage of an inevitable shutdown and transfer to lower-cost power.
What we should be doing is constructing an energy supply grid that might be more costly than coal, but is reliable and efficient. That way we make a real contribution to lowering global emissions and having an economic but low polluting energy source.
Meanwhile, we need greater weather pattern alerts. For months, America’s top weather analysts along with those who operate in Australia independent of the Bureau of Meteorology have sending out alerts to their clients about a large Australian rain pattern possibly developing.
In the next few weeks, the Americans are likely to add more urgency to that alert because the pattern is still in place. It is a weather pattern that we have seen many times over the last century. A body of deep cold water proceeds easterly across the Pacific towards the US. On many (but not all) occasions in the past, similar water streams have hit the coast and rolled over to become a stream of cold water much closer to the surface, heading west across the Pacific towards Australia.
Americans fear this water movement pattern because it very often creates increased hurricanes in the US. If the stream of water comes close to northern Australia, it will force warmer water into the Papua New Guinea/Indonesian area. When that happens, it usually creates very heavy rainfall. It is possible that the rain will stay in PNG and Indonesia, but normally it extends across northern Australia and spreads south through Brisbane and Sydney into northern Victoria.
Those managing farms and dams like Sydney’s Warragamba, Brisbane’s Wivenhoe and possibly as far south as Lake Eppalock in Victoria need to follow the system closely as it nears PNG.
Unions’ Rio strong arm attempt fails at the first flex
Rio iron ore boss Simon Trott probably gave a quiet fist pump after a worksite vote to re-unionise the Pilbara mines didn’t get enough employee support.
Crunch time for Helia as ING Bank heads for exit
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Energy pricing will be important in the US presidential election. We have taken the high-cost and less reliable energy path, so the issue will gain even greater significance when Australia goes to the polls next year.