Out of Energy
This opinion piece was first published in the Canberra Times on 29 July 2017.
The final season of Game of Thrones is back and winter is coming for House Turnbull.
The failure of the federal government on energy policy is driving up emissions, driving up energy prices, stalling investment and its harming consumers. And hasn’t it been a cold winter. Unless the Turnbull government can pull energy policy out of the bog Tony Abbott created soon, no amount of blaming the states or renewables is going to save him.
Coalition MP Craig Kelly caused a stir recently when he said that ‘people will die’ due to rising electricity prices. Kelly was wrong to blame renewable energy – more on that later, but he was right about the lethal cost of energy poverty. Of course, it’s hard to believe Kelly truly cares about the poor being able to pay for power when the Turnbull government is simultaneously trying to slash a supplement designed specifically to help struggling Australians to pay their energy bills. That’s ice cold.
The Clean Energy Supplement helps aged pensioners, disability support pensioners, single parents, widows, students, veterans and people who can’t find work to pay their electricity bills. It was introduced to compensate the price increases that came with the carbon price. Of course, when Tony Abbott scrapped the carbon price, allowing polluters to once again pollute our air for free, he promised it would reduce electricity bills. But, as with his earlier claim that climate change is absolute crap, Abbott was wrong.
Though ACT electricity prices are much lower than other states overall, we are not immune from the overall price increases in the national electricity market and from the beginning of July, electricity prices are set to rise substantially. An average Canberra household with both gas and electricity will be paying an additional $11per week or $580 per year.
To an MP or Senator, an extra $11 is trivial – it’s the price of a coffee and croissant. But for a single person on Newstart living on $267 a week, finding an extra $11 hurts. Craig Kelly is absolutely right, there will be people forced to keep their heater off this winter because they can’t afford a bigger electricity bill.
A recent study from The Lancet shows 6.5% of deaths in Australia can be attributed to cold weather, compared to 3.9% of deaths in much chillier Sweden. Why? Craig Kelly tried to blame renewable energy, but Sweden reached its 50 per cent renewable energy target back way back in 2012, so it can’t be that.
It’s actually because Swedish homes are simply better built, with better insulation, than Australian homes.
“Temperatures inside a flimsy wooden Queenslander in winter are often below 18°C whereas Swedish homes will be a comfortable 23°C whatever the weather. Many Australian homes are just glorified tents,” according to Adrian Barnett, Associate Professor of Public Health at Queensland University of Technology.
I suspect any Canberran who has had to get up to go to the loo in the middle of the night during winter would agree with the ‘glorified tent’ assessment. And we largely rely on air conditioning to keep us cool during summer heatwaves (extreme heat causes unnecessary deaths too, about 374 people died in Victoria in the 2009 heatwave) and heating to combat the cold in winter.
But while the ACT government is going to help people keep their heater on, the federal government is doing its best to keep them shivering.
ActewAGL said it will be establishing a $250,000 Energy Support Fund, matched by the ACT government, to help those who will struggle to pay their bigger electricity bill. In contrast, the Turnbull government currently has a bill before Parliament which will strip the clean energy supplement from new recipients of welfare from 20 September 2017.
Abolishing the clean energy supplement will put Newstart recipients 30 per cent below the poverty line, the lowest point since the measure has been kept.
So what is driving up electricity prices and forcing people to turn off their heaters? Craig Kelly blamed renewables, but he also said renewables would cause an increase in children drowning. The Australia Institute studied both wholesale and retail electricity prices and – spoiler alert – it’s not solar panels.
The federal government has used South Australia as a whipping boy on energy. But when we look at wholesale electricity prices in South Australia in detail, there is an almost perfect correlation between wholesale gas prices and wholesale electricity prices and a negative correlation between the share of wind generation in supply and wholesale electricity prices. In other words, it’s nothing to do with renewables and everything to do with gas exports. Even Malcolm Turnbull agrees, telling Kochie “the principal reason for the recent increase in energy prices has been the big increase of the price of gas and that has been driven by a shortage because more of the gas is being exported and there is not a mark now for the domestic market.”
So gas is responsible for recent price rises. But what happens when we look at retail electricity prices over the longer term? Between December 1996 and December 2016 Australian electricity prices increased by 183 per cent—almost three times the overall increase in prices. In those figures the carbon price was barely noticeable.
The promise two decades ago was that privatising and corporatising the electricity sector would deliver cheaper and better electricity supply. Instead, privatisation has seen a blow out in the number of managers relative to other workers in the electricity labour force and it now employs an army of sales, marketing and other workers who do not actually make electricity.
We’ve all heard about the ‘gold-plating’ of poles and wires, well it turns out poles and wires weren’t the only things gold-plated; privastisation seems to have encouraged profit gouging, with energy companies able to inflate the asset base used in calculating the permitted return on assets. The Australia Institute’s research showed an odd process in which high rates of profits are used to ‘gold plate’ the financial asset base of energy companies without improving the ability to generate electricity, but the unproductive capital base is used to increase the price we pay for electricity.
So what should Turnbull do?
If he gives in to the extreme right wing of the Coalition, it’s a recipe for higher emissions, higher prices and more instability. They want to abolish the Renewable Energy Target, which even the government’s own review (by climate sceptic Dick Warburton) found that the Renewable Energy Target put downwards pressure on electricity prices. They oppose a Clean Energy Target that doesn’t include coal – when according to Bloomberg New Energy Finance, ultra-supercritical coal-fired power (ever think they’re trying too hard with that title?) is the most expensive form of new energy to build. Gas prices now make new gas-fired plants equally unappealing. So renewable energy makes the most economic sense.
During the Finkel Review the Turnbull government has talked a lot about the importance of being ‘technology neutral’ when it comes to energy, but the truth is the extreme right wing of the Coalition has been holding Australia’s energy policy hostage with its fanatical hostility to renewables. In Game of Thrones, ‘the North remembers’, and in Australian politics households won’t forget the pain of electricity bills.
If Malcolm Turnbull thought winter was bad, just wait until everyone starts turning on their air conditioners. Summer is coming.
Ebony Bennett is the Deputy Director of The Australia Institute @ebony_bennett