When the Howard Government released its much anticipated energy policy on June 15, it placed a brick wall in front of Australia’s renewable energy industry.
Although recent research points to the increasing cost competitiveness of wind power around the world, the renewable energy industry in Australia will come to a grinding halt unless the Howard Government reconsiders its decision not to increase the Mandatory Renewable Energy Target (MRET), or the Labor Party wins the election and implements its five per cent MRET plan.
The Declining Price of Renewable Energy
Wind energy is one of Australia’s most successful renewable energy technologies. Today there are ten wind farms generating enough energy to power all the homes in Canberra. Despite concerns that increased investment in the renewables sector will raise the price of electricity for consumers, a recently released report commissioned by the Australian Wind Energy Association (AusWEA) found that US, European and Australian research all pointed to wind power continuing to decline in price.
The report, Cost Convergence of Wind Power and Conventional Generation in Australia, shows that the current difference in generation costs between wind power and fossil fuels is steadily narrowing. The cost of electricity from wind turbines has already declined to a quarter of the price it was in the 1970s and it will continue to decline.
Provided that the wind industry growth in Australia keeps up with international growth, the report predicts that Australia can expect the price of wind energy to overlap with gas prices between 2008 and 2016, and start to overlap with coal prices from 2018 onwards, with wind prices continuing to drop even more thereafter. However, all of these results are based on continued market growth. While wind technology will continue to improve driven by world-wide growth, at least half of the economies of scale in Australia will come from increased efficiencies in financing, building and operating wind farms in Australia.
Breaking the Catch 22
While the reality is that renewables are on track to become a cost-effective and sustainable energy solution for Australia over a relatively short period of time, the industry needs to break through the current price barrier. Like any commodity, the cost is driven down by economies of scale. By refusing to grow the renewable energy market, the Federal Government is not allowing wind and other renewables to break through the price barrier: Catch 22.
Energy Statement Leaves Stranded Investment
Drawn by the promise of a government committed to renewable energy and the current MRET, over a dozen foreign companies have invested heavily in Australian wind power. There are now over 5,000 megawatts of wind farm projects on the table, enough to power over 2 million homes. Many have been progress-based on the assumption that the success of the current one per cent MRET would lead to its expansion, just as similar schemes have been expanded to beyond ten per cent in the UK, EU and various US states.
The wind energy industry has called for higher targets, but consistently maintained that a minimum of a five per cent MRET target is required to underpin a competitive manufacturing industry in Australia. The ALP has committed to a five per cent MRET. However the refusal of the Howard Government to increase MRET leaves over $5 billion worth of wind projects stranded. There will be no more wind turbines installed after 2007 and the market rug has been pulled out from under the companies committed to manufacturing wind turbine components in Australia. Many of these companies create precious jobs for rural people in places of high unemployment. Now their future has been thrown into doubt.
Cash Hand-Outs or Red Herring?
The cash handouts promised by the Howard Government are targeted at removing barriers, but this will do virtually nothing to increase the viability of renewables in this country. Some of the more experimental technologies like hot-rocks and geo-sequestration may find this useful. But the mature renewable technologies are competing with a fossil fuel industry that receives $9 billion in government subsidies a year. Furthermore, fossil fuel generators still don’t pay for the impacts of their greenhouse gas pollution. The costs of bush fires, the ongoing degradation of the Great Barrier Reef and the extended droughts are all considered consistent with climate change and all cost the country dearly. But it is the citizens and tax payers of Australia that are footing the bill.
Is there a Future for Renewable Energy in Australia?
By 2020 electricity demand in Australia is forecast to increase by 50 per cent. There is a need for the equivalent of 12 new power stations or more. Renewable energy could play a significant role in that future generation. Environment academics have called for 200 wind farms in Australia to tackle climate change. The wind industry has been working towards 50, even going as far as undertaking a project with the National Trust to look at how to ensure these can be properly sited to preserve landscape values. But the future of renewable energy in Australia will be decided this year. Only a policy reversal by the coalition or a change of government will give wind power and other renewables a meaningful place in Australia’s energy future. Polling has shown that nine out of ten Australians want more clean energy, isn’t it time politicians listened?
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