South Australia has one of the highest concentrations of renewable energy in the world. And its government was recently the first to announce a state-based bank tax. But while Australians have been told these "reckless" policies will destroy jobs and discourage investment, some of the world's most-successful entrepreneurs recently chose to invest big in the state. How could this be?
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Tech entrepreneur Elon Musk, who gave the world PayPal, Tesla and SpaceX, recently secured the bid to build the world's largest battery-storage plant in South Australia. English billionaire Sanjeev Gupta, whose family fortune was made in good old-fashioned steel, recently bought the Whyalla steelworks. Either these businessmen didn't do their due diligence or what conservative politicians tell us about South Australia is utter nonsense. I know which way I'd lean.
Before Tony Abbott began his 23 years as a public servant, he dabbled with being a priest and a journalist. And while he clearly knows how to tell a simple story based on blind faith, there is nothing in his education or experience to suggest he knows anything about how to run a power station or a steel mill. But in Australia the ability to "cut through" trumps the ability to talk sense. And Abbott excels at simplifying complex issues into three-word slogans.
Abbott isn't an engineer or an economist, but he claims you can't have a modern economy without coal-fired steam engines. Musk, who is an engineer, is betting a lot of his own money that the future of energy is renewable sources linked to battery storage and smart grids. Gupta, who has a masters in economics and owns the only steel mill in the world powered by waste fish oil, just spent his own money buying a steel mill in the state with the most renewable sources. Someone is completely wrong.
Once upon a time, the Coalition would have slapped down a backbencher who suggested politicians knew more about what companies need than the companies themselves. That was when the Business Council of Australia and the Coalition could get away with pretending that all the federal government needed to worry about was cutting the corporate tax rate, cutting wages and staying out of big businesses' way.
But as the fights between the Coalition and AGL over energy policy, between the Coalition and the big banks over the federal bank tax, and between BHP Billiton and the Minerals Council of Australia over the need for a carbon price show, the very idea of "the business community" is breaking down. Its now clear to the public that Australia has much bigger problems than the company tax rate.
Malcolm Turnbull is trying desperately to keep the Liberal Party's free marketeers, the Nationals' agrarian socialists and peak bodies like the Business Council all inside the tattered old tent that John Howard built back in the 1990s. Meanwhile, Abbott is letting off firecrackers and shouting "fire" to get those same groups to run for the hills.
Chaos may be Abbott's best chance to return to the top job but it won't lead to business certainty or lower electricity prices. Abbott has variously supported, and opposed, carbon taxes, emissions-trading schemes and renewable-energy targets. He once described himself as "a bit of a weathervane" on climate change. He's more like a field of landmines that periodically explodes as Turnbull tries to tiptoe through it. It's a waste of time to try to placate Abbott and the coal industry – you can't negotiate with a landmine.
Australia's Parliament is settling in for another long fight about what not to do about climate change while the rest of the world continues its march away from the age of coal towards energy systems based on renewables and storage.
Leaving aside that Australia is the world's largest exporter of coal and that we will soon be the world's largest exporter of gas, the risks to Australia are not just that we will exacerbate dangerous climate change, but that we will be left behind domestically and left surrounded by big piles of coal that the rest of the world doesn't want.
Last year, China's economy grew by 6.7 per cent and its coal consumption fell by 4.7 per cent. That's the third year in a row that China's coal consumption fell. In 2015, China introduced a moratorium on new coal mines. The existing coal fleet runs at about half capacity and, in 2016, China stopped 30 large coal-power plants already under construction. This year, it stopped a further 103 power stations that were planned or midway through their build. It's true that China is still building some coal-fired power stations, but it is also true that it is investing far more in renewables than it is in coal.
India is on a similar trajectory. Despite claims made by those who are desperate to bail out the Adani coal mine in North Queensland, Indian coal consumption and imports are declining. Not only has the Indian government declared the goal of reducing coal imports to zero but, after the recent cancellation of an enormous 4000-megawatt "ultra mega-power project", Gujarat's Energy Minister, Chimanbhai Sapariya, said: "We already have more than sufficient generation capacity. Our focus is now on renewable energy. The government will encourage solar power."
In the next decade, hundreds of coal-power stations will shut down due to old age and high operating costs. While hundreds of power stations on the drawing board have been quietly dumped, it is true that a lot of stations are still being planned. Of course, it's also true that millions of Australians "plan" to lose 10 kilograms, tidy the garage and consolidate their superannuation accounts.
Turnbull loves a plan but Musk isn't just "planning" to replace coal-fired power stations with batteries; he is betting billions of dollars that his battery factories will do so. Gupta just bought half of South-Australian-based battery company Zen Energy to help make his new steel plants even more heavily reliant on renewables.
Conservative politicians have told Australians for decades that, despite being the world's largest exporter of coal and iron ore, Australia is a terrible place to make steel. Yet a British steel maker just bet that those politicians were wrong. We were also told our wages and taxes are too high to make cars. Ever seen a Volvo? Let's face it: much of what we are told about our economy is complete nonsense.
But as new entrepreneurs, technologies and ideas bust up the complacency of much of our political debate, there is no doubt the old guard will fight till the end. Abbott told us the carbon price would wipe out Whyalla. It didn't. He told us that scrapping the carbon price would give us cheap energy. It didn't. And while Abbott tells us that you can't run an industrial economy on renewable energy, Gupta is betting you can.
Just as facts don't get in the way of Malcolm Roberts' beliefs about his citizenship (or anything else), facts won't slow down Abbott and the coal industry's political war against renewable energy. The problem is that, even if Abbott wins, the Australian economy loses. Again.
Richard Denniss is The Australia Institute's chief economist. Twitter: @RDNS_TAI
