Australia’s Energy Efficiency Policy

The other day I was asked three questions I thought I had answered several times in previous posts. These questions are:

  • What is the role of technological disruptors in the creation of a coherent national energy policy?
  • What is the role of energy efficiency in the creation of a coherent national energy policy?

And

  • What is the role of gas as a transition fuel in the national energy policy Roadmap 2030 / 2050?

Let’s consider these questions.

During a wind conference in 2016 I shocked some of the delegates by telling them that technology is a facilitator for change. It is not a business disruptor. It may only be seen as a disruptor by businesses operating under a government sanctioned preferred trading status. In all developed and emerging nations the business disruptors are inconsistent and contradictory government policy, regulatory failure and an inability to articulate national business and industrial priorities that align with a national energy policy framework. Australia has no coherent national energy policy framework. It has no national energy policy. It does not even have a national industry policy that articulates industry priorities. Australia has operated on a set of assumptions for over 100 years. These assumptions simply state:

  • Australia’s mineral wealth will provide sufficient export income and generate real economic growth indefinitely.
  • Australia’s land mass and low population density will generate enough agricultural export opportunity and real economic growth indefinitely.
  • Australia’s position in the Asia Pacific will ensure relative competitive advantages compared to the EU and US economies for ever.

All three assumptions are wrong. Nothing demonstrates this more vividly than the Queensland’s government dealings with Adani coal. If the mine becomes operational the jobs it will bring to Queensland will be the most heavily subsidized job creation scheme in Australian mining history. Even if the mine goes ahead there is no guarantee that the mine will ever be profitable without ongoing Australian and India government support. This is true if the international coal price remains relatively stable. If international coal prices remain at current levels the question is whether the Indian government is prepared to subsidize Australian coal imports. Why is this so? Notwithstanding the approval of several super massive coal plants by several Indian states in the last 12 month, not one of these coal plants can be built without the Modi government digging deep into the national budget. Apart from the cost of the new coal plants the Modi government will have to spend somewhere between 10 -25 billion USD in national transmission grid infrastructure. It will have to maintain its state based energy subsidy program for poor and marginal households, agriculture and small business. It will have to address the massive problem of energy theft and look at reforming all state based energy markets into one national market. India’s unwieldly post-colonial bureaucratic structure, unpredictable electoral system and endemic corruption, make these reforms unlikely in the next 2 years. Now that several Indian states are offering 100% rooftop solar rebates, the economic viability of Australian coal is put further into question. At current Indian state solar rebate rates, Adani coal would have to be priced at less than $30 USD per tonne in India. Even at this price Australian coal would not be competitive with Indian rooftop solar rebates, or local Indian coal. This market reality has not escaped the international bankers. So why is the Queensland and to some extend the Turnbull Federal Government flogging a dead horse?

In conjunction with Scott Morrison’s federal budget several confusing announcements were recently made by the Turnbull government. The expansion of the Snowy Hydro and the Tasmanian Hydro projects are welcome by the electorate. In reality, neither of these projects addresses Australia’s energy security or price affordability problem. Australia’s current energy price needs to be between $36-$40 per MWH if we are going to tackle the jobs, growth and national productivity crisis. The current energy price hovers around $155 per MWH. The most conservative futures analysts have no alternative but to conclude that current commodity exports, including mining revenues, would have to be somewhere in the miracle range, if the projected budget surplus is going to eventuate. We can reach no alternative conclusions under the current federal government ‘National Energy Plan’. We cannot even reach a conclusion under the current federal government ‘National Industry Plan’, or the much talked about ‘Jobs, Growth and National Productivity Agenda’. The federal government subsidized gas pipelines from the Northern Territory and Western Australia to South Australia will have no impact on future energy prices and energy security. The assertion that the Northern Territory has enough gas to supply Australia’s needs for the next 200 years is an irrelevant side show. It is just as irrelevant as the Gillard Labour government announcement that Australia has enough gas in the ground to last the country for a thousand years. The reality is that Australia has enough solar, wind, tidal, wave and geothermal potential to power Australia for ever. So why does any government minister spruik our gas and coal potential? It is clear that the two gas pipelines announced in the Turnbull budget will assist Arium and the South Australian navy defence contracts. The announcement will reassure international gas industry investors that their long term profits in Australian gas exports are guaranteed by high domestic gas prices. This guarantee comes at a high cost to Australia. High domestic energy prices have a negative impact on all other industries relying on low cost energy inputs in order to remain internationally competitive.

So here we have the triple threat. Australia has no national energy policy framework. It has no national energy plan and it has no industry policy that is fully integrated with a national energy policy. I predict that sometime between now and 2030 Australian voters will be shocked by the election of truly intelligent governments at both state and federal level. They will be shocked by intelligent energy policies that will be integrated with a targeted national industry program, backed by state and regional development priorities. Such a program might focus on energy efficiency including storage and heat exchange technologies. Such a program might begin with a simple ‘ Zero’ budget impact policy statement that states:

‘In accordance with Australia’s international obligations and under its 2030 and 2050 Energy Roadmap, Australia will phase out the sale and importation of all 240 volt white goods and appliances by 2030. Australian manufacturing and research into 12 volt white goods and appliances will receive state and federal government support under a new export guarantee. The reason for this policy is that the government recognizes that the domestic manufacture of 12 volt and all related high efficiency low energy consumer and commercial products for the Asia Pacific, African and South American markets is potentially unlimited’.

Let me give you a simple example. Australia’s domestic refrigerators and freezers consume approximately 10 million KWH of energy every day. There are more than 1 billion people living in the Asia Pacific region. Many of them will be purchasing domestic refrigerators in the next 30 years. With most Asia Pacific countries struggling with an unmet energy demand averaging 20% per year under persistent brown out and black out conditions, both the potential for low energy products as well as their commercial application, can only be described as staggering. Despite this Australia has no industry policy that targets this market. Australia has no energy efficiency policy that addresses either the domestic, or the export market opportunities such a simple energy efficiency plan promotes. We have a government in Queensland promising to give away our coal to India. We have a federal government trying to buy back its stake in the Snowy Hydro while it shores up the profits of the gas companies who are busy exporting Australian gas overseas. We have a federal government waiting for the outcome of various enquiries into the Australian Electricity market, whilst it refuses to deliver a National Energy Plan that authorizes the creation of autonomous regional smart-grids. So what do you think about ‘Smartgov.au’ now? Are you depressed yet or simply disappointed in our politicians? After all, they have refused to get themselves up to speed with Australian Energy market policies for the last 30 years. Perhaps you are wondering what Mr. Turnbull means when he talks about smart manufacturing, innovation and high technology industry becoming the corner stone for the smart economy of the future? I know what you are thinking! Mr Turnbull is actually the Prime Minister for some other mythical nation that we are all waiting discover one day!

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