An open letter to Mr Abbott

Australia already lags other countries in redefining its energy system and would not be well served by propping up old forms of power generation.

Dear Mr Abbott,

As managing director of an engineering firm working in the energy field, I am writing to impart my concerns in the direction on energy your party appears to be taking.

Electricity demand on the National Electricity Market has been falling for the last few years, and the influx of low-cost renewable energy into the network (for instance, wind power in August contributing the equivalent of 155,000 Australian home’s annual electricity demand) has been reducing wholesale energy costs. In 2012-13 this equated to a reduction of $10.10 per week on the bills for most households compared with a $9.90 rise per week due to the carbon tax. This example of a net benefit to consumers has been driven by some of the energy policies that have been put in place over the last few years, covering renewable energy and energy efficiency.

Economics has played a part as well – with increasing energy prices and reducing prices for renewable energy systems many consumers have opted to hedge against further energy price increases by generating their own power or reducing their consumption.

This transition is part of a mega-trend that is being played out the world over. We are not alone in facing the challenges of redefining our energy system, in fact we are lagging behind many other countries in this regard. I have been seeing a general acceptance of this trend by many of our energy industry clients including many of the electricity network service providers who are facing significant changes and challenges but are seeking solutions to be able to incorporate increased levels of renewable energy and smart-grid technologies. We are seeing rational decisions being made, like the recent approval by the Australian Energy Regulator for an upgrade to the South Australian-Victorian transmission link in order to increase the usage of low-cost generators such as wind power capacity in South Australia.

In such a major change in our energy system, there are inevitable winners and losers. In particular, losses are being felt by those with large interests in coal-fired generation and an under-investment in renewable generation. Again, we are not alone in this regard, with German wholesale energy prices falling about 30 per cent in the last two years causing a number of coal-fired plants to shut down for the same factors seen in Australia – ie: lower electricity demand and lower wholesale energy prices. This move away from coal generation has come at a time when Germany’s economy continues to grow – driven largely by exports – the competitiveness of which relies on a low cost energy system. This includes the export of power to other European countries (electricity exports rose by 62 per cent in the first half of 2013), spurred by declining wholesale energy rates due to the very low operating costs of renewables in Germany.

I have focused on coal in particular in response to the Coalition’s explicit stated aim to restore coal-fired power stations to profitability, however there is a general emphasis in your policies of propping up old and carbon-intensive forms of energy generation and distribution at the expense of investing in low carbon forms of generation such as solar and wind and smart-grid technologies. Intelligently deployed, these technologies are cost effective today and can also improve overloaded and unstable electricity networks.

In light of the trends highlighted above and by leading investment firms around the world including Citigroup, Bloomberg and the International Energy Agency, it is a questionable strategy to continue investment in assets such as coal-fired generators that are in danger of becoming stranded and the simultaneous dismantling of support for assets that have a net positive impact on our current and future energy systems, our environment and society such as renewable and smart-grid technologies.

As succinctly put by the IEA’s chief economist back in 2011 “as each year passes without clear signals to drive investment in clean energy, the lock-in of high-carbon infrastructure is making it harder to meet our energy security and climate goals… Delaying action is a false economy.” This statement was made almost two years ago and is even more pertinent today.

Now that you have the responsibility of governing rather than campaigning, I ask you not to disrupt the Clean Energy Legislation. It is a considered set of policies put in place in response to realities that our country and world faces today. These policies are providing the investment signals that the IEA, the OECD, the World Bank and many other economically rational organisations suggest are required.

In particular the following policies, programs and organisations are, in my experience, sending a strong signal for investment into future proof assets:

– Australia’s Emissions Trading Scheme

– Climate Change Authority

– Clean Energy Regulator

– Clean Technology Program

– Clean Energy Finance Corporation

– Australian Renewable Energy Agency

It has been clear to our team – which has over 20 years global experience in the renewable energy industry – that business has picked up the baton strongly since their introduction and is now playing its part in transitioning our economy, with Australia’s carbon emissions falling 7 per cent in the last financial year.

Dismantling or severely reducing resources for these policies, programs and organisations will send the wrong investment signals, in defiance of the global and local trends and realities. I ask you not to do so, as it will only impose greater costs on our country in the future.

Yours sincerely, Lachlan Bateman

Lachlan Bateman is the managing director of Clean Technology Partners.

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