Zen and the difficult art of renewable energy profits

The energy transition provides salutary lessons in the gulf that exists between bureaucratic idealism and how things work in the real world. With Jim Chalmers declaring publicly he is driven by the decarbonisation challenge and Chris Bowen showing no signs of facing up to the size of the problems being experienced in his energy portfolio, consumers and taxpayers have every reason to be alert and alarmed.

Economist Ross Garnaut, a long-term adviser to the Labor government and a determined renewable energy enthusiast, has shown first-hand the perils of relying on the sun and wind to pay the bills. After failing in his recommendations for a national carbon trading scheme made in a report for the Rudd government in 2008, Professor Garnaut has tried his hand at the renewable energy coalface through Zen Energy. As we reported on Monday, the loss-making Zen is precariously placed, blaming in part a “wind drought” that forced prices to spike in the wholesale power market. Zen’s chief executive, Anthony Garnaut, Professor Garnaut’s son, acknowledged the company has had to make changes. He said the company had been unprepared for the extent of the wind, solar and water drought of May 2024.

Low wind also was cited as a factor behind the rise in electricity default market prices from July 1 of up to 9 per cent. The supply disruptions from natural events also have to be factored into long-term contract prices. Wind droughts are not new. They have plagued the renewable energy industry in Europe, where the seasonal low winds are known as dunkelflaute. The industry response has been to recommend increasing the geographic spread of wind production on the basis that wind will always be blowing somewhere. This is something that has yet to be demonstrated in reality but underpins the multibillion-dollar rollout of transmission lines that will have to be paid for in future energy bills.

Professor Garnaut has co-founded and is a director at the Superpower Institute, which advocates a “carbon solutions levy” of $90 a tonne of carbon dioxide emissions on Australia’s 105 top fossil fuel companies. The tax would raise an estimated $100bn in the first year to fund early investors in new green export industries. Zen Energy has received millions of dollars in government subsidy funding for its battery and pumped-hydro storage ambitions.

Meanwhile, the bureaucratic ambition to force Australians to buy electric vehicles is going flat. There has been a 37 per cent decline in the year-on-year sales of electric vehicles in the first two months of 2025. This coincides with the introduction of aggressive targets aimed at lowering the carbon footprint of new cars by 60 per cent by 2030. Under the government’s scheme, carmakers must guarantee an average carbon emissions performance across their fleet. Carmakers that fail to meet the target will be forced to pay a penalty. The scheme gives electric vehicle-only companies a big advantage.

Major car companies are warning the result will be fines of $2.7bn by the end of the decade for missing carbon emission targets. This money will be raised by putting an additional financial impost on the cars that Australians currently want to buy and drive. The nation’s most popular car in 2024 was the Ford Ranger ute. Large utes made up three of the five top-selling vehicles; the other two were medium SUVs.

Mr Bowen and the bureaucrats behind the scheme must heed the words of Mitsubishi Motors Australia chief executive Shaun Westcott: “You can take a horse to water but we cannot force people to buy these (electric) cars.” In business, the consumer is always right.

It is a lesson for government that ignores the interests of taxpayers to follow the dreams of bureaucrats who too often are disconnected from reality.