The reality is that when Australia’s electricity demand stagnated and then started going down, it exposed a game of musical chairs. The music has just stopped and the power sector is scrambling for a chair.
The owners of existing power supply infrastructure are desperately trying to find a way to make the lack of chairs from the demand drop someone else’s problem, and to act to protect themselves from the emergence of a fearsome competitor – the customer. Customers, through a combination of more energy efficient products and solar PV, have left the cosy energy market in a space which it was completely unprepared for. Power companies are now left holding more power supply capacity than will go around.
This is what the battle over the Renewable Energy Target is really all about. It’s also why there is only now a desperate desire to shift a greater proportion of power tariffs to unavoidable fixed charges, rather than being based on how much energy customers consume.
The reality is that both private sector and state-owned power companies have been ploughing on, buying assets and signing contracts in full knowledge that scientific evidence of global warming would mean that:
1) energy efficiency needed to improve; and
2) more power needed to come from less emissions-intensive sources of supply, particularly renewable energy
Policies to address both these objectives were foreshadowed and ultimately adopted. In addition, a range of product and technology companies publicly declared they would make it a strategic priority to develop and improve products that would make it easier and cheaper to achieve the two objectives above.
Meanwhile power companies ploughed on, investing in a bet against these technology companies and climate change science. More than 20,000 megawatts of fossil fuel power plant capacity (almost half of Australia’s installed base of fossil fuel plant) was acquired after 2007, when it became official policy to expand the RET to 45,000 gigawatt-hours.
Yet, according to Dick Warburton’s Renewable Energy Target review panel, these bets against society doing something to address global warming should be treated more like a bank deposit with a government guarantee.
How else can you explain their principle that a policy to clean up power supply shouldn't lead to the addition of new capacity if that acts to displace the existing fossil fuel capacity?