Australia's renewables reality check

This is somewhat of a follow up to Friday's post on the energy debate. Basically, I think Australia needs to work towards energy abundance and I don't care how we do it, just that we get there!

In my view, to achieve that goal requires an 'all of the above' energy policy. I also think the Albanese government's current approach is problematic because it's making similar mistakes to those that were made nearly two decades ago.

Back then various state governments, along with the Rudd/Gillard/Rudd federal governments, attempted to pull-forward Australia's renewables uptake with large rooftop solar PV subsidies.

They meant well, and it worked well. Almost too well:

According to a 2015 report by the Grattan Institute:

"Subsidies driven by the federal and state governments have made solar panels affordable for nearly 1.4m households. And, many of these consumers invested in solar panels to make a contribution to addressing climate change as well as to save money. The problem has been that the subsidies have been very high and paid for, not by governments, but by other consumers. There have been benefits in reduced electricity production from big fossil-fuel power stations and reduced greenhouse gases, but the benefits have been outweighed by the costs to the tune of almost $10bn."

The number of households with rooftop solar has since doubled to around 2.8 million, yet none of the problems with rooftop solar – all well known back then – have been addressed:

"Most data suggest that residential solar PV, the major focus of government in Australia, has little impact on reducing residential peak demand because the times of peak demand do not tend to coincide with substantial output from solar panels. A different picture emerges with commercial electricity consumers where demand more closely matches solar PV output."

What the Grattan Institute is describing is the dreaded duck, where solar pumps most of the electricity it generates into the network precisely when it needs it the least, then fades away right as the peak period approaches:

It's also inequitable. The subsidies that flow to the relatively well-off households with rooftop solar are paid by households that do not have solar, because "network businesses are allowed to recover the costs of these subsidies from their customer base, [so] subsidies paid to one group of consumers must be funded by another".

Solar power is basically free once it's installed, but the electricity network is about a lot more than just the cost of generation. Households with solar PV require just as much network infrastructure as any other household, because while solar stops generating at about 6:30pm, peak demand is around 7:00pm. And rising network costs were the key driver of the run-up of prices between 2007 and 2013, due to aging infrastructure, the rapid solar roll-out, and some state governments opportunistically gouging households as a means "to fund government services instead of either increasing other taxes or cutting services".

I've plotted electricity prices alongside food prices in the following chart, because while there have been a dozen or so supermarket inquires launched in just the past year, far less political energy has been spent asking the tough questions about the nation's electricity prices (with the caveat that food makes up a significantly larger portion of a contemporary household's spending than electricity):

Solving the duck

State governments could have at least partially resolved the problems created by the rapid rise of solar PV by having prices reflect the relative scarcity of power but, well... we all know what politicians think about prices, let alone owning up to past mistakes.