A decade from now we’ll be talking about the transition to wind and solar that never happened. Right now, though, rent seekers and their enabling politicos are making claims, fast and furious about reaching net-zero carbon dioxide gas emissions targets using nothing but sunshine and breezes.
No country has ever run itself entirely on wind and solar; no country ever will. But that doesn’t stop the myth makers from pretending that the grand transition is just a giant battery or two away.
With all the substance of a Soviet 5-year plan, Australia’s Green/Labor Alliance has laid out a path that, as John Cameron explains below, looks more like a Highway to Hell.
The Incoherent Roadmap to Net Zero
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John Cameron
3 September 2023
In 2021 we were confidently told that it would cost $78 billion to rewire the grid for renewables and that the average annual household electricity bill would fall by $275 under Labor because, as Anthony Albanese explained, ‘we have done the modelling’ [2].
Despite the Prime Minister’s assurances, the cost of transforming the grid by 2030 is estimated to be $1,500 billion (not $78 billion) and the full cost to 2060 is up to $9,000 billion[1]. Also, retail prices in Victoria are to increase by 25 per cent from July 2023, and more pain is in store for households and business when the hedging and contracts roll over and the doubling of wholesale electricity prices fully impact retail prices. As Nick Cater wrote “renewables vision is blind to the cost of calamity”[2].
It is time the Victorian public are made fully aware of the enormous cost of a reckless transition to renewables and the huge amount of land (up to 12 million ha) to become renewable infrastructure.
The Victorian default offer (DFO) price is set by an independent regulator to provide a simple, trusted and reasonably priced electricity option, for consumers who don’t engage in the market to find a competitive retail market offer. All electricity retailers in Victoria must offer residential or small business customers the option to take up the current Victorian Default Offer.
The DFO is expected to deliver households a $354 per year increase on 2022-23, or a 25% year on year increase, assuming there are no further increases in 2023-24. Further increases cannot be discounted, as while retail prices are up 25 per cent, wholesale prices are up 100%. Average households now face an annual electricity bill of $1,756 per year (Table 1).[3]
Note that the generation of electricity (wholesale component) only accounts for about a third of the cost and that network costs account for about another third of the total. Reaching Net Zero requires considerable investment in the two largest components of the cost of getting electricity to your home – wholesale costs and network costs. Unlike solar panels on the roof, which are ‘behind the meter’, utility scale solar and wind power in particular require a huge investment in new transmission networks.
Comparisons of renewables against existing coal- and gas-fired power typically ignore the new transmission costs for the renewables while also simplistically assuming costs for completely new coal- or gas-fired power stations, rather than the lower cost of continuing to operate the existing power stations.
Victorian wholesale electricity prices have more than doubled, from an average of $40/MWh (1999-2015) to $88/MWh (2016-23) under the Andrews Government, even after some impact from COVID lockdowns in 2020-21 (Figure 1). South Australia, the most advanced in the transition to renewables, is the canary in the coal mine as its wholesale electricity prices have consistently been Australia’s highest.
Victorian wholesale spot electricity prices by financial year
The latest Net Zero Mobilisation Report[4] modelled linear reductions to net zero by 2050 for domestic emissions and 2060 for fossil fuel energy export emissions. Six scenarios were modelled – Reference, Rapid Electrification, Slower Electrification, Full Renewables Rollout, Constrained Renewables Rollout and On-shoring (domestic iron and aluminium).
The Reference scenario [4] has no emissions objective. All other scenarios track in a straight line to net zero emissions by 2050 (domestic) and 2060 (export). None of the scenarios are forecasts, suggesting considerable uncertainty of outcomes. As Emeritus Professor Robin Batterham, Chair of the Net Zero Australia Steering Committee, has said “There are too many uncertainties to map a single path to net zero”.
The Net Zero Mobilisation Report [4] highlights what actions Australia must complete by 2030 to reach net zero by 2050. The Mobilisation Report does not consider whether we should reach net zero, nor critique past or proposed actions by governments or companies, nor express preferences. However, the Net Zero Mobilisation Report does express one preference by explicitly excluding nuclear power.
The final Net Zero Modelling Report released in April 2023 illustrates the immense scale, extreme complexity, and breakneck speed required to transition to net zero by 2050. Net Zeros predict capital investment of up to $9 trillion ($9,000 billion) on the transition in the next 37 years to 2060[4].
Funding that transition cost of $9,000 billion over 37 years requires spending $243 billion per year. To put this in perspective, it represents 36 per cent of the entire federal government budgeted expenditure for 2023-24 of $684 billion and roughly equates to the annual federal government spend on social security and welfare of $250 billion per year and more than twice the federal government expenditure of $107 billion pa on health. Have those waiting months and years for critical surgery been told this.
Spending $243 billion per year on energy transition is equivalent to spending 17 per cent of Australia’s GDP, and so far without a business case nor final investment decision report.
According to Net Zero, the transition will be among the largest and fastest economic transformations in history, with major new infrastructure required, however, progress is slower than modelled and Net Zero call for accelerated action [4]. We also have a call for accelerated action for those awaiting critical surgery!
Nick Cater[5] described the enormity of the challenge as “the irrational pursuit of renewable energy as the antidote to planetary pain must eventually confront the immutable laws of physics and the scarcity of land”.
The report by Net Zero calls for a huge list of expensive strategic actions as follows (with my comments in italic):
♦ Accelerate all options that could make a material contribution to decarbonisation.
There is no rigorous cost benefit analysis, nor analysis of the opportunity costs, nor the risks of a reckless rapid transition.
♦ Clean energy and clean processed minerals should be pursued as export opportunities.
Australia’s electricity costs are now well above world parity such that Australia is unlikely to be internationally competitive processing of iron ore into steel and bauxite into aluminium.
♦ Considerable land use change will be essential and requires proactive management, particularly for indigenous communities and farming communities.
Up to 12 million ha of land may be required, equivalent to half of Victoria or 77 per cent of private land in Victoria. Many rural communities face acquisitions and easements, loss of scale economies in food and fibre production, and a plethora of ugly new transmission lines, wind turbines and utility solar panels.
♦ Benefit sharing must be prioritised based on principles of partnership, inclusion, and net gain.
Most households are more concerned about how the costs are to be shared.
♦ Net gain for environments and biodiversity should be pursued in parallel with net zero.
This suggests degrading the environment is OK provided it is in pursuit of the ideal of net zero.
♦ Minimising public impacts requires orderly asset closures, supported by multiple policy mechanisms.
Government has already locked in the exit of fossil fuel generated power, prior to development of a plan for orderly asset closures and the so-called policy mechanisms are not yet supported by rigorous strategies, feasibility studies, business cases and investment decisions.
♦ Low-income households and fossil fuel regions will need support to mitigate impacts.
The government will need to throw billions of everyone’s hard-earned taxes at income support and worker transition. This approach has so far failed in the Latrobe Valley where despite the Andrews Government spending hundreds of millions of your taxes, the number of jobs in the Latrobe local government area are down 8 per cent over the last decade.
♦ Private sector investment risk will be too high in many cases, unless mitigated by government.
This means that net zero can only be achieved by 2050 with huge government subsidies accompanied by huge opportunity costs – we will have to forego opportunities to fix our failing health, social housing, emergency services, triple 0 and education systems.
♦ Net zero supply chains require certain, large, and a long investment pipeline.
Unfortunately the current supply chain mostly traces to overseas, particularly to China where things like solar panels are made, using power derived from fossil fuels including huge imports of coal, gas and oil from Russia. Chinese imports of fossil fuels from Russia tripled immediately after the invasion of Ukraine. The reckless haste with the transition is just exporting or offshoring jobs and emissions. We need time to gear up for greater Australian domestic content of renewable components.
Options to achieve net zero
The Net Zero Mobilisation Report essentially calls for the development of wide ranging options including a couple of sensible options (that may not garner support from idealistic and powerful activists), such as gas-fired peaking generation and carbon capture, utilisation and storage4:
- Strengthen deployment drivers of renewables, transmission, and electricity storage.
- Build a large fleet of gas-fired peaking generation to help accelerate renewable growth.
- Plan and develop clean hydrogen infrastructure, including hydrogen storage.
- Determine whether bioenergy has a serious role to play through research.
- Ambitious energy productivity standards for new buildings, and incentives for retrofits.
- Decide the future of gas distribution to household and commercial customers.
- Develop plans and mechanisms for industrial decarbonisation.
- Implement mandatory emissions standards for all road vehicles, and support EV charging.
- Prepare carbon capture, utilisation and storage (CCUS) networks and basins for large-scale use. Private investment in a CCUS industry will require targeted government support.
- Research, develop, and scale up land sector abatement pathways, policies and technologies.
- Do not factor nuclear power into renewable, storage, and firming targets.
Recent analysis shows that investment in utility solar and onshore wind has slowed, and the current pipeline of projects risks falling short of the Net Zero required build rate. Offshore wind has the most uncertain pipeline and faces the highest barriers, due to the need for large subsidies and long lead times to develop initial projects, establish supply chains and provide grid access [4].
The Net Zero Mobilisation Report does not present a pre-feasibility analysis, nor feasibility reports, nor business cases nor final investment decision (FID) reports. Governments have locked in the transition timeline without completing all of these critical aspects that are vital in ensuring that your hard earned tax dollars are invested optimally, and without huge ‘opportunity costs’ – such as underspending on health, social housing, education, emergency services etc.
Australia is undertaking a gigantic socioeconomic and environmental experiment on a scale that is unprecedented, and cannot be justified given the many unknowns, the uncertainty, and considerable risk associated with the total costs and benefits. Australia’s reckless transition is unwarranted given our miniscule impact on global climate. This is particularly the case while large consumers of fossil fuels such as China, India and Russia pursue only token transitions.
As Mark Lawson puts it in his book, Dark Ages, “In order to avoid a climate crisis that never seems to arrive, activists and governments are about to plunge us all into a very real power crisis”[6].
Quadrant
[1] Net Zero Australia (2023). Mobilisation Report, July 2023.
[2] Nick Cater 2023. Renewables Vision blind to the cost of calamity, Australian, 17 July 2023.
[3] Source: AER; AEMO 2023. Annual flat tariff bill for domestic customers assuming an annual usage of 4,000 kWh.
[4] Net Zero Australia (2023), How to make net zero happen – Mobilisation Report July 2023. The Mobilisation Report has been prepared by academics at the University of Melbourne, The University of Queensland, Princeton University, and management consultancy Nous Group. Net Zero Australia is funded by gifts and grants from its sponsors: Worley, Dow, Future Fuels Cooperative Research Centre, Future Energy Exports (FEnEx) Cooperative Research Centre, APA Group and Minderoo Foundation).
[5] Nick Cater (2023). Victoria’s energy policy is all at sea. Menzies Research Centre Report, 29 March 2023
[6] Mark Lawson (2023). Dark ages, the looming destruction of the Australian power grid. Connor Court Publishing.
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