The ACCC showed the “default short-termism” of Australian thinking on energy.
The National Energy Guarantee is a good initiative but is also an example of “political myopia”, mired in an ideological debate between coal versus renewable energy, according to Dr Shuddha Rafiq, from Deakin Business School. Instead, Dr Rafiq said, all energy options should be considered, including nuclear energy.
Dr Rafiq, deputy director of Deakin’s Centre for Energy, the Environment and Natural Disaster, said that nuclear, in small-scale modular reactors fuelled by Australia’s massive deposits of thorium, could complement the energy mix.
“We have to keep an open mind on technology,” he said. “Nuclear technology has improved greatly, and thorium-powered small-scale modular reactors are a safe base-load technology that could play a long-term role in Australia, which holds the world’s third-largest deposits of thorium.”
The debate over carbon-based power versus renewables meant there was no consistent approach to energy, exacerbating the current crisis.
“We have allowed the energy debate to become ideological, between supporters of renewable energy on one hand, and of coal on the other,” he said. “We have spent too long moving back and forward between coal and renewables as the dominant supplier, and ended up being one of the highest-cost electricity countries.”
Dr Rafiq said this short-sightedness had put Australia well behind the rest of the world.
“We lag 1000 miles behind Europe as far as renewable energy innovations are concerned, and we also lag behind countries like China in cleaner fossil fuels technologies, such as clean coal,” he said.
“We don’t seem to understand the fact that technological advancements, especially in Europe in renewable technologies, have reduced the price of renewable energy drastically. We have to take notice of that.
“At the same time, countries like China are making huge advances in clean coal technologies, and we need to tap into those developments, too.”
Dr Rafiq said that the ACCC inquiry into retail electricity pricing had some “welcome solutions”, but showed the “default short-termism” of Australian thinking on energy.
“The 56 recommendations in the report offer some welcome initiatives for the short term, but for the longer term, we need some strong leadership driving the nation toward having a more sustainable energy supply,” he said.
The ACCC’s recommendations focus on four areas: boosting competition in generation and retailing; lowering network costs and environmental costs; enhancing consumer experiences and outcomes; and improving business outcomes.
“There are three major instruments proposed: setting a default rate of electricity prices; changes to the way that companies advertise discounts; and voluntary writedowns of network over-investment,” Dr Rafiq said. “The first two are linked to retail pricing, not wholesale pricing. The third one is linked to network over-investment. There has been very little initiative aimed at the wholesale market.”
He said that only an efficient wholesale market mechanism will ultimately achieve the expected electricity price reductions. “Nothing in the ACCC report gives us a clear indication that these recommendations will eventually create an efficient wholesale market mechanism, which is what will ultimately achieve the expected price reductions,” he said.
“Secondly, and this is my major concern, all of these are short-term steps. There is nowhere in this report where we’re focusing on the longer term. In the long run, as we all know, we have to move into cleaner technologies.
“When you are talking about wanting to reduce electricity prices in the short term, we know that state governments have to write down network investments. Maybe retail prices are going to go down because of putting up specific price targets. It all seems to rely on price reduction catalysing into the wholesale market, in the short term. “But in the long run, we are moving to cleaner technologies, because only that will give us the cheapest energies, because of renewable resources and economies of scale.”
Australia needs to have several things in place to truly overhaul its power market, according to Dr Rafiq.
“First, we need to have a carbon pricing market that operates well, and which would truly reflect the business case of the competing forms of generation,” he said.
“Second, we have to fully understand, and make use of technological advancements.
“Third, and this is probably the most important, we need to keep an open and non-ideological mind in terms of the forms of generation we consider so we can use an optimal energy mix, which is affordable, clean and secure. We shouldn’t push renewables for renewables’ sake; we shouldn’t push coal for coal’s sake; we simply should have a rational mix of generation that best suits Australia.
“When we wanted to push renewables, we pushed all the generators and retailers to go for renewables, and spent so much money on subsidies and feed-in tariffs. Now the government is trying to push coal, and telling AGL not to close Liddell (the coal-fired power station). Both of these are interventions.
“Now you can see in the market that companies are prepared to move into renewables. Consumers are more aware about cleaner energy sources, so I am pretty sure that if we let this wholesale and middle market move on its own, it will eventually do that interfuel substitution from coal into cleaner technologies.”
Renewable energy plays a major role in Dr Rafiq’s view of the optimal, rational long-term generation mix for Australia.
“I see renewable energy as dominated by hydro (both stream and wave); solar, both large and micro-grids; and wind, considering rapid advancements in storage facilities.”
“But I also see a role for combined-cycle gas, which is cheap and efficient, and, given our abundant coal, new clean-coal plants — but only very few of these. I think coal’s “fans” will have to concede that renewables are going to be cheaper, because we should only use clean coal — and those clean-coal technologies are expensive.”
Originally published on The Australian.