Combet's green envy

In a weekend commentary on the media’s penchant for flim-flam (What the Rudd rumours really tell us, 8 June), Rob Burgess says the Gillard government carbon pricing scheme “seems to be working.”

This is another example of how an idea can take hold in the media despite a plethora of evidence (as opposed to assertion) against it.

Is Burgess perhaps influenced by Greg Combet’s determination to go down fighting, telling the National Press Club last week that, since July last year, “pollution” has been reduced under his government’s policies?

The facts are that the 7.4 per cent fall in greenhouse gas emissions in the east coast electricity market – measured by the government on the current carbon intensity of generation versus what it was in 2011-12 – is a direct result of a reduction in power demand.

Analysts RepuTex are forecasting that a continuation of depressed demand on the east coast will see a further 13 per cent fall in emissions by 2020.

The demand drop is a result of two main factors.

Households are cutting their consumption because power bills have almost doubled in six years and the manufacturing sector (the biggest single consumer of electricity) is in decline because of a range of factors, including high energy costs.

(Households and manufacturers account for just over half of all power demand across Australia.)

The household shift was underway well before 1 July 2012 and can be expected to continue even if an Abbott government repeals the present carbon price regime.

The manufacturing decline has been underway for four years.

High labour costs and poor productivity, plus high energy bills, are all in the mix of causes. A high-value dollar has played a part too.

The impending large increases in wholesale gas prices on the east coast will be a fresh factor for business power demand, impacting on the health of about 1,000 major companies.

The biggest single change in business demand since Combet’s policy came into play has been the 2,500 gigawatt hours a year of (black coal-fired) electricity consumption lost when the Kurri Kurri aluminium plant closed its gates in the minister’s personal political playground, the Hunter Valley.

Does he claim this as a win for the carbon price?

In the real world, lower consumption in an oversupplied east coast market has led to wholesale prices falling to their lowest levels since the late 1990s – even as higher network prices, the cost of green schemes and higher retailer bills drive end-user prices up.

The situation has led to old, less efficient coal-fired generators being mothballed.

(Mothballing is not removal from the market, by the way – as demonstrated in South Australia this month when one of the oldest coal burners was brought back on line because weather conditions cruelled wind power output.)

The largest coal-fired project actually abandoned in the past year has been a $500 million upgrading of a Delta Electricity plant, proposed under the former New South Wales Labor government and not viable in the current market conditions. 

Is this a win for the carbon price, too? I don’t hear Combet claiming it.

In his Press Club speech, Combet made a fair bit of the Clean Energy Council’s new annual report on renewable energy – but he didn’t refer to this review showing that, for the year to September 2012, fossil-fuelled electricity amounted to 86.86 per cent of national generation production compared with 90.36 per cent in the previous year.

Fifty-eight per cent of the renewable energy produced in the review period came from the old hydro-electric systems, mainly in Tasmania and on the Snowy River.

The hydro systems are in a position to provide more electricity at the moment because flooding rains have filled their dams after the Big Drought (the one Tim Flannery told us was here to stay).

And another flood served to cut production at a brown coal plant in this period.

Wind farms, on which more than $5 billion has been spent since the introduction of a mandated target, contributed 3.4 per cent of total national generation output in the 12 months under review.

Altogether, renewable energy forms have attracted $18.2 billion worth of subsidised investment since 2001 and contributed just 5.5 per cent of all the electricity sent out by power plants in the review period.

If stats do your head in, what this amounts to is that, in the current marketplaces (east and west coasts), the new green shoots of which Combet boasts delivered about as much electricity as Tasmania consumes each year. And not because of the carbon tax but via support from the renewable energy target and other green schemes – which are about a twelfth of the average household power bill.

The government policies, Combet told the Press Club, are delivering “remarkable changes.”

But here’s what he didn’t tell the journalists:

His government’s latest advice – from the Bureau of Resources & Energy Economics – is that, if the current policies are all retained, renewable energy, including hydro-electric schemes, in 2034-35 will deliver 40 per cent of power production.

In this scenario, black coal will still deliver 31 per cent of output and gas 26 per cent.

The big “if” in the BREE projections is that utility-scale solar power and geothermal energy, neither of which are viable today and certainly won’t become options under the government’s post-2015 carbon price levels, will deliver about an eighth of the 2034-35 output.

The Gillard government has set aside $10 billion over five years for the Clean Energy Finance Corporation to kickstart technologies such as solar and geothermal, while denying support to carbon capture and storage, which would be essential under the future mix its own agency predicts.

The unanswered question – one that wasn’t asked at the Press Club – is: what will it actually cost in capex, subsidies and carbon price to deliver the 2034-35 renewables outlook?

Of course, Team Abbott has many questions to answer about its energy and carbon policies – it is promising yet another energy white paper to light its way – but heralding the Gillard carbon pricing scheme as “seems to be working” seems well to the flim-flam side of the media ledger from where I am sitting.

Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of OnPower, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.