Bill shock

Labor's cheap renewable energy narrative could cost them power at the next election. By Nick Cater.

The prospect of presiding over the steepest rise in energy prices since records began should be headache enough for a Prime Minister elected on a promise to cut power bills by $275 a year.

The 56 per cent increase in power prices forecast by Treasury in the next two years will beat the previous high of 47 per cent under Malcolm Fraser between September 1980 and August 1982. Fraser was destined for an ignominious defeat the following year, having presided over one of the highest levels of sustained inflation in Australian history; highest personal taxation levels, historically high interest rates and a growth in business bankruptcies.

Anthony Albanese does not have to read the history books to grasp the political cost of energy inflation. In the first term of the last Labor government in which he served, the retail cost of electricity went up by more than 40 per cent. It increased by another 40 per cent in Labor’s second term, setting the political environment for Tony Abbott’s landslide-winning campaign against Labor’s carbon tax.

Which makes it puzzling that the Albanese government is committed to a pro-renewables energy policy that will further ratchet up the cost of energy.

Labor should be looking for plan B. Perversely, however, Energy Minister Chris Bowen is painting himself into a corner with every smart-alec tweet and every surly press conference he conducts. His arrogant insistence on sticking to a path determined before the exposure of the renewable energy sham in Europe is the biggest threat to Albanese’s chance of a second term.

The Putin-ate-my-homework excuse won’t work for long; neither will Bowen’s flat-earth promise to bring prices down by installing 22,000 solar panels a day and 40 wind turbines a month for the next eight years. Presumably he hasn’t factored in the $20bn the government is about to spend upgrading the grid to facilitate the development of mega wind and solar generators. Nor has he taken note of the soaring price of steel, copper, lithium and other minerals necessary to produce and connect solar, wind and batteries.

Vladimir Putin may be responsible for the invasion of Ukraine, but he had no influence, as far we know, on Daniel Andrews’ moratorium on gas exploration in Victoria. Nor can we blame him for the self-flagellating policies of NSW Energy Minister Matt Kean or the decisions of the courts that have prevented the development of new gas projects.

The growth of gas as a generator of power over the past decade and a half was not driven by market forces. The rush to install quick-start combined-cycle gas turbines was almost entirely driven by the technical shortcomings of weather-dependent renewable generators. The three-figure cost of a megawatt hour at crucial points of the day has nothing to do with corporate greed, as Bowen would have us believe. It has everything to do with reliance on gas caused by the infestation of unstable, unreliable generation technology into the grid.

Gas and renewables are inextricably linked. When Labor entered office in 2007, gas provided roughly 10 per of our energy needs. Six years later, gas was generating around 20 per cent of Australia’s electricity. In between, Labor had increased subsidies for wind and solar through the Renewable Energy Target mechanism. The amount of wind and solar in the grid increased 10-fold.

The historical link between the introduction of wind and solar into the mix and rising prices is not unique to Australia.

“In every state in the US and every country in Europe where the share of electricity from wind and solar has increased, it has led to higher-cost electricity for consumers,” Mark Mills of the Manhattan Institute told me in an interview last week.

The injection of renewables on steroids Bowen is proposing “is a really dumb idea”, says Mills. “It requires such massive overbuilding. It has a crushing impact on the economy. The scale of resources required is off the charts and the cost of it is stunning.” The increase in wind, solar and battery capacity needed between now and 2030 is “close to impossible to build that fast”.

The persistence of the narrative of cheap renewables depends on the constant repetition of falsehoods, ignorance of the laws of physics and economic illiteracy. Just as during the Covid-19 scare, narrative determines the selection of data, not the other way round.

On Friday, for example, the Australian Energy Market Operator proclaimed that a new record had been set in the proportion of renewable energy powering the grid. At 12.30pm, 68.7 per cent of demand in the National Energy Market was met with renewables, half of it from rooftop solar panels. The wholesale price of electricity in that moment of sunshine was effectively free.

It takes more effort to discover from the data the surge in the cost of energy four hours later as gas generators kicked in to stabilise supply. The average peak price in NSW on Friday was $144, almost three times as high as the daily average a decade ago.

The ideological fixation with renewable energy fits the pattern of what US social psychologist Rob Henderson labels “luxury beliefs”. Like luxury product brands, luxury beliefs serve as markers of social status. Typically, the cost of such ideas is not felt by those who espouse them most passionately.

The doubling of power bills will be little felt in seats such as Kooyong, where teal independent Monique Ryan wants to accelerate the renewable boom to meet a target of a 60 per cent reduction in emissions in eight years. The richest 20 per cent of households spends as little as 1.5 per cent of their income on electricity, according to research commissioned by the Australian Council of Social Service and the Brotherhood of St Laurence five years ago. Low-income households were spending about 6.4 per cent of their income on energy, up from 5.9 per cent in 2008.

The energy price gap will grow wider still with the renewable-induced increase in costs we are beginning to face.

The pain will be felt disproportionately in the mortgage belt as interest rates rise.

For a Prime Minister who was elected with the lowest primary vote his party has ever recorded, the coming electricity shock could prove fatal.