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Renewables, 18c and the many paradoxes of Tony Abbott

30 January 2017

12:12 PM

30 January 2017

12:12 PM

gettyimages-488237182In his address to the Young Liberals in Adelaide over the weekend, Tony Abbott once again demonstrated how wonderful he is as a critic of government.  He applauded deregulation and border protection; he called for free trade, a slimmed down bureaucracy, repeal of Section 18c restraints on free speech and to “ensure the Fair Work Commission is not the union protection racket that Bill Shorten turned it into”.  The speech was laced with gems like:

Government can’t solve all problems – and trying to will make many problems worse


But taxes should be going down, not up; the rules should be getting easier to comply with, not harder; and government should be getting smarter, not bigger.

The problem is that in government was unwilling or unable to effect so many of these policies.  Much of this may be due to one of the themes highlighted in his speech – the present voting arrangements that almost inevitably bring a Senatorial electoral impasse on reforms involving lower spending or taking away subsidies and privileges that are currently in place.   He makes a debate-worthy suggestion for countering this: joint parliamentary sittings after a period of reflection.

But he cannot be absolved from blame for the policy wrongs that are in place.  Many will point to his failure to act on Section 18c.

But it is in the energy area that his vulnerability to censure is greatest.

Abbott rightly points out that “Australia has almost limitless reserves of clean coal and gas. We should have the world’s lowest power prices. Instead, we’re making it harder and harder to use coal and gas through the renewable energy target – so that power is getting more expensive and less reliable”.  And he states the obvious: the Liberals cannot feast off the fact that Labor is even worse than them in this vital area of the economy.

But even so he glosses over the main difficulties.  It was his government that agreed to the 26-28 per cent reduction in greenhouse gas emissions Australia signed up to in the December 2015 Paris Climate Change agreement.

That target can only by met de-industrialisation and replacement of coal by wind.  He claims as a great victory that the Abbott Government reduced the renewable target to 33,000 GWh from 41,000 GWh.  But, aside from the fact that this total excludes the solar roof top subsidised supply, it still means that 23 per cent of electricity comes from wind and large scale solar.  Only around eight per cent of the 23 per cent total comes from commercial sources (mainly hydro).  The rest is forced upon consumers by regulatory means; it costs three times as much as the coal power it replaces, while driving down the reliability of the system and requiring billions of extra spending on transmission lines.

Mr Abbott points out that the policy is bringing problems to major industrial facilities among them Alcoa, Arrium and Roxby Downs.  His solution is to call for a further reduction in the RET target from the level of 23 per cent agreed to by his government.

This is not good enough!  Renewables comprise nowhere near 23 per cent of supply as of now but the policy supporting them is already causing price escalation and bail-outs of prized industrial plant.  If he is trying to lead the debate he must recognise that the RET as it presently stands is poisoning the productive landscape of Australia. It needs to be totally abolished with no more payments to the unwelcome, uncompetitive, high cost renewable plant it is fostering.

The lobbyists will scream “sovereign risk” at such a suggestion but they have for over a decade enriched themselves by foisting upon a hapless public their high cost product.  Anything less than eliminating the toxic renewable subsidies will see a continued haemorrhaging of valued industrial and agricultural processing and the existing cost, mainly levied on households – of nearly $5 billion a year.

Alan Moran is with Regulation Economics.

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