Renewable energy culture wars: playing for time with a bad hand
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Renewable energy culture wars: playing for time with a bad hand

Now that the tram war has finally been won, it is probably time to get back to arguing about renewable energy again. Regardless of whether the Canberra Liberals stick with their new-found support for the ACT's 100 per cent renewables target or not, the hard right in the Federal Coalition has already made it clear that state-based renewable energy targets will be at the heart of the culture war that is Australia's climate policy.

The ACT government is on track to deliver all of Canberra's electricity from renewable sources by 2020. The Queensland Labor government has a 50 per cent renewable energy target for 2030, the Victorian Labor government has a 40 per cent target by 2025, the Australian Greens are pushing for 90 per cent by 2030, and Bill Shorten has committed federal Labor to a 50 per cent renewable energy by 2030. It's a race to the top, and the fossil fuel industry does not like it.

Opposition Leader Bill Shorten visits the Mount Majura Solar Farm in Canberra.

Opposition Leader Bill Shorten visits the Mount Majura Solar Farm in Canberra. Credit:Alex Ellinghausen

While some people debate whether such commitments represent bold leadership or sensible planning, the problem for the Liberals, at both the local and national level, is that it might be both. Renewables are not just increasingly popular, but the cost of wind energy has fallen steadily in recent years, the cost of solar faster still, and the cost of batteries is in free fall.

In picking the political and pricing trends early the ALP now has the advantage of looking principled while supporting a policy that becomes more pragmatic by the day. Needless to say, the Coalition is doubling-down on its weak hand. Shorten mustn't be able to believe his luck.

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While economic forces have already determined who will win the war between renewables and fossil fuels, political forces will determine the timing of the victory. And while the transition from a dangerous pollutant will be a big win, the climate science suggests any delay may well make it a pyrrhic victory.

Unfortunately, history teaches us that incumbent firms are very good at using politics to slow the march of their competitors. Kodak got $30 million from the federal government before digital cameras sent them broke, the taxi industry is spending up big on lobbyists as Uber threatens its profitable monopoly, and, of course, the coal industry is fighting tooth and nail to ensure that government policy protects its vast profits for as long as possible. While the industry knows it will ultimately lose the war, every year of delay is a profitable year.

When Shorten, and colleagues Mark Butler and Andrew Leigh stood in front of the Mount Majura Solar Farm in Canberra's north this week they were standing on the new front line in the war between renewables and fossil fuels, and between conservatives and progressives. Since Tony Abbott scrapped the carbon price and slashed the renewable energy target there was no new investment in wind power in Australia for 16 months until the ACT government's renewable energy target drove the construction of the Ararat wind farm in Victoria. Similarly, the Hornsdale Wind farm in South Australia was built as a direct result of the ACT's ambitious policy.

Having bet its house on Abbott's willingness to scrap the carbon price and renege on his promise to protect the RET, the fossil fuels industry has left itself dangerously exposed. Not only is the coal industry vulnerable to the kind of state-based renewable energy policies being pursued by state Labor and Labor/Green governments, but it left itself unprepared for a pivot away from carbon pricing policies and towards regulatory measures to drive investment in renewable energy. South Australia has been copping it for having the temerity to produce a lot of wind and the ACT's 100 per cent target will soon come under attack for the insult of its ambition.

One of the new problems faced by the fossil fuel industry is that people like regulating business more than they like the idea of new taxes. The only reason that all cars sold in Australia have seat belts and airbags is that regulation requires it. Sure, they "drive up the cost of cars" but they also make our roads safer, and the community is willing to pay the price. The fluoride in our water, the relative silence after midnight and the lack of asbestos in our buildings are all the result of regulation. Australians are comfortable regulating to protect our environment and our amenity, and, in turn, they are supportive of policies to reduce the pollution from our electricity industry by mandating that a growing proportion of it comes from clean sources.

The other emerging problem, for the coal industry and conservatives alike, is that it is not just renewable energy that is getting cheap fast, it is batteries as well. The perception of unreliability has always been a problem for renewables. But the perception that energy companies are greedy oligopolists who demand a lot and deliver little has always been a problem for the electricity retailers. Many people can't wait to buy a battery and dump their electricity company, even if it costs them a bit more money.

Which brings us back to politics. Having come to the prime ministership as a strong supporter of renewable energy, Malcolm Turnbull has joined the fray in the recent attacks on the cost and reliability of renewables. But Turnbull's problem is that while he may be a better communicator than Abbott, the cost and reliability arguments still don't stack up.

When Abbott appointed the climate sceptic Dick Warburton to hold a review into the Renewable Energy Target, it backfired badly. The modelling commissioned by Warburton showed that removing the RET would push up the electricity price. Whoops. And since then the price of renewables has fallen further.

The government's latest trick is to try to paint the roughly $50 billion in renewable energy required to meet the federal ALP's 50 per cent renewable energy target as either a "cost" to the budget or a "cost" to the economy when economists usually describe such private sector investment in income-producing assets as an "investment". Of course, money will be spent to build the wind turbines, solar panels and batteries a sustainable Australia will need, but money will be earnt on those investments, and jobs will be created.

Talking about the $50 billion "cost" of Labor's plan is a risk for the government in more ways than one. First, more than $57 billion has been spent upgrading our poles and wires in the past seven years and, as South Australia's blackout showed, that didn't even make the transmission towers very wind proof.

Second, the government wants to spend $50 billion on submarines to "create jobs" in Adelaide, but is arguing that spending across the rest of Australia is something to be avoided. And finally, the Coalition is betting that most Australians aren't happy to hear that our 60-year-old coal-fired power stations are finally being replaced with a cleaner alternative.

The culture war about our energy policy is clearly unavoidable, but the end result is as clear as the current battle lines. The Coalition and the coal industry are playing for time and the ALP is setting itself up for the future. Canberra's 100 per cent renewable energy target will definitely be in the firing line, but, in a year's time or 10, like the fight about the tram, I suspect the fight about renewable energy will look just as petty and politically foolish.

Richard Denniss is the chief economist for the Australia Institute.

Twitter: @RDNS_TAI

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