IPA Today

Victoria’s Winter Of Discontent

Written by
18 June 2022
Originally appeared in The Herald Sun

The power supply crisis hitting Victorian families, small businesses and manufacturers is not an accident. These are the blackouts Australia did not need to have.

The crisis has been caused by deliberate policy choices made by low-voltage politicians, on both sides of politics, cheered on by corporate and media elites, for more than a decade.

On the first day of winter this year, the Australian Energy Market Operator, the government body in charge of our energy system, made the extraordinary admission that Soviet-style gas rationing would need to be introduced.

This warning meant you may be forced to switch your heater off or shut your business to avoid system-wide collapse, and just a week later the Portland Alcoa aluminium smelter was forced to curtail its operations to take pressure off the energy grid.

It is not an unreasonable expectation that in 21st-century Australia the light turns on when you flick the switch, and the heater turns on when you press the button. Yet on Wednesday the AEMO went further when it took the extreme and unprecedented step of taking over the energy grid because the system is fundamentally broken.

And this is only the beginning of Victoria’s winter of discontent.

Over the next decade, six coal-fired power stations are scheduled to be decommissioned, destroying one-fifth of Australia’s reliable and affordable energy supply.

Australia does not lack the resources to end this crisis once and for all.

As a nation, we are blessed with an abundance of natural resources such as coal, gas and oil that can be deployed to ensure Australians can keep their heaters on during winter.

What Australia does lack to solve this energy crisis is leadership. Both sides of politics at the federal level remain stubbornly committed to the policy of net-zero emissions by 2050, even though many nations around the world, such as Britain, are pausing their commitments.

A recent survey commissioned by the Institute of Public Affairs identified that 72 per cent of respondents indicated that affordability or reliability should be the focus of our energy policy, while only 28 per cent believe meeting the policy of net-zero emissions.

In a prophetic sign of things to come, the energy regulator this month announced that baseline household electricity bills would rise by at least 18 per cent as a result of supply shortages.

This would add close to an extra $250 to the annual electricity bill of the typical Victorian family, which currently forces out around $1300 a year.

Further, IPA research shows that 92 per cent of Australians were willing to pay only $100 for Australia to cut its emissions to net zero. Yet Victorians are facing energy price rises 2 1/2 times what they are willing to pay for Australia to meet net zero.

Such explosive energy price hikes and chronic supply shortages mean many Victorian families will soon need to choose between putting food on the table and staying warm and keeping the lights on.

Australians understand that if you can’t provide enough energy to keep basic manufacturing like aluminium smelters operating, then something has gone very wrong.

The unattainable green dreams of the political class and inner-city elites will not just result in a cold, dark night under the quilt but the loss of sovereign defence and manufacturing capabilities.

Remember, Australia did not send Ukraine 70,000 tonnes of solar panels to aid their defence effort against Russia, we sent them 70,000 tonnes of affordable and reliable coal to power their fight.

At the state level, our political leadership has not been any better.

The Liberals got the ball rolling when they slapped an unscientific and uneconomic moratorium on all onshore gas exploration and development in Victoria in 2012.

In 2017, the current Andrews government did one better and permanently banned all fracking and coal-seam gas extraction, while extending the moratorium on exploration until 2020.

A year later, the unprecedented step was taken to put the ban on fracking in our state constitution.

Yes, it is true that common sense prevailed last year when the Victorian government finally lifted the moratorium on onshore gas exploration and development.

But even the government acknowledged that the industry won’t start up again until 2024 at the earliest.

The reason is simple.

Having been hammered by both sides of politics with bans and red tape, industry knows there is northing stopping it happening again, so why throw good money after bad.

Victoria currently has around 30,000 petajoules of onshore gas. This is enough gas to power every single home in Victoria until the year 2240. Yet almost all of it is locked up.

You don’t need a PhD in economics to know that cutting off supply will dramatically push prices up.

Australia might be resource rich but we are leadership poor and with the current crisis, we are getting a glimpse into our energy future.

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Daniel Wild

Daniel Wild is the Deputy Executive Director at the Institute of Public Affairs

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