ACCC report points to real costs of renewable energy

There are enough complexities and a sufficient array of statistics around our National Electricity Market for special interests, activists, politicians and commentators to find something or other to support any argument. Yet, as the government prepares to finalise and announce its new climate and energy policy, there are some unambiguous facts that ought to be front and centre.

First among these is the extent of our rising electricity prices. “Australia’s electricity prices are high by international standards,” Environment and Energy Minister Josh Frydenberg said in a speech last week. He went on to detail how, a decade ago, we had the fifth lowest costs in the OECD but had climbed 13 spots to be among the dozen most expensive developed nations. We are still climbing. The other pertinent fact is, given we produce only 1.3 per cent of global carbon emissions and much larger emitters such as China and India are increasing theirs, our actions cannot have direct, discernible environmental benefits. Yet the Greens talk about our policies “putting lives at risk” — you wouldn’t want to get carried away.

Politicians and activists have seized on yesterday’s Australian Competition & Consumer Commission report to claim it is not climate policies that are driving up power prices. This relies on the headline figure showing that across the NEM green policies have directly contributed a 16 per cent share of the price rises. But such a narrow view ignores the influence policies such as the renewable energy target have on other costs, such as generation, and it tends to overlook how costs such as network investments provide tangible services whereas the outcomes from green policies are simply in meeting a self-imposed and arbitrary target.

The ACCC report confirms prices have risen by “80 to 90 per cent in real terms” in a decade, with no matching wages growth. “The international competitiveness of Australian manufacturers has been diminished over the past decade due to electricity price increases,” the ACCC says. This hardly exonerates green policies. The report notes how large-scale renewable generation has driven price “volatility” because of its intermittence. “The growth in renewable generation has also displaced some aged thermal generation with the effect of pushing wholesale prices higher as exit occurred,” it found.

The one state where supposedly low-cost renewables have reached a 50 per cent share is South Australia. In SA, while the price impact from direct green costs matches the national average, the share of increase from generation is 45 per cent — nearly double Queensland’s (where generators have been accused of profiteering), three times that of NSW and 15 times the share in Victoria.

Pointedly, the ACCC warns that future schemes must be “rigorously and transparently” analysed. “In particular, policymakers must ensure that the costs created by environmental schemes are not disproportionate to the benefit they seek to achieve,” it says.

Malcolm Turnbull and Mr Frydenberg need to take particular notice of these lessons when they formulate their final plan. Prices must be their top priority. A choice must be made between the objective of Labor and the Greens to ensure more than 50 per cent of the nation’s electricity is renewable within 15 years, and the goal of reducing household prices and trying to restore competitiveness to our industries. It should be obvious which of these aims would be the imperative for a Coalition government.