Tomorrow’s election in South Australia will be a referendum on electricity and renewable energy. If re-elected, Labor has promised to double down on its favouritism of renewables by increasing South Australia’s renewable energy target to 75 per cent by 2025. This is madness.
South Australia already has one of the most reckless energy policies in Australia, with heavy confiscation of taxpayer funds and forced cross-subsidisation feeding the present 50 per cent renewables target.
And with the rise of renewables have come skyrocketing prices, reduced supply reliability and economic dislocation.
Recent analysis by the Australian Energy Council shows electricity prices in South Australia during the recent summer were about 260 per cent higher than in the summer of 2014-15. That is an eye-watering 41 times the growth in average wages.
It is no wonder businesses and people are fleeing the state. According to the Australian Bureau of Statistics, private-sector business investment in South Australia has collapsed by 29 per cent in just three years.
The unemployment rate sits at 6 per cent, the second highest in the country behind Queensland. And 23,000 people have abandoned South Australia over the past five years for a future elsewhere.
Beneath these statistics are real people and businesses that have been thrown against the rocks.
According to the Australian Competition & Consumer Commission, the annual electricity bill for a South Australian small-to-medium enterprise is $16,000.
Imagine if just half of that could go to higher wages instead of paying the bills. In June last year, a family-run recycling business in Kilburn, in Adelaide’s inner north, announced it would be closing after 38 years, putting 35 people out of work.
The trigger was a spike in its monthly electricity bill from $80,000 to $180,000.
And even South Australia’s world-class wine region isn’t safe. According to the ACCC, a large winery in South Australia faced a 160 per cent annual increase to its electricity costs, seriously jeopardising its export potential.
The culprit for this damage is renewable energy, and the shortsighted government policy that forces it on the market too early and in too great a quantity.
First, renewable energy is more expensive than coal. If this were not the case, then there would be no need for it to be subsidised.
Yet, as analysis on these pages last September showed, the renewables industry is set to receive $60 billion in subsidies by 2030.
Second, renewables are unreliable. According to the Clean Energy Regulator, in 2016-17 coal-fired stations in the National Energy Market operated at 76 per cent capacity, while wind operated at just 32 per cent capacity.
And during January and last month, wind farms in South Australia operated at less than 50 per cent of their registered capacity 89 per cent of the time.
Third, renewables cannot cope with surges in demand, such as when it is very hot or cold. During January and last month, South Australia was importing electricity from Victoria 64 per cent of the time. And what is the main source of energy generation in Victoria? Brown coal.
If renewables boosters really believe South Australia can stand on its own with renewables, then perhaps they should cut off the interconnector with Victoria. Now that, to use the words of Premier Jay Weatherill, would be “a bit of an international experiment”.
However, the most bizarre aspect of the obsession with renewables is the absence of any offsetting benefits. Renewable energy subsidisation is notionally designed to reduce carbon emissions.
Yet Australia accounts for just 1.5 per cent of global carbon dioxide emissions.
And according to the International Energy Agency and the Climate Council of Australia, the national RET resulted in just 0.0004 per cent less emissions a year on average from 2001 to 2014. South Australia contributes to just a fraction of that.
Energy policy should not be a contest for who can get the most favours from government. Energy generators and retailers should be focused on providing affordable and reliable energy to households and businesses. Governments should be completely technologically neutral.
South Australia is not without prospects, but it has been let down by years of government mismanagement.
This has been most apparent in the electricity market. Renewables do, and will, continue to play a role. But it is economic self-harm to force them on to market before they can deliver reliability and affordability. And on this count, coal is still king.
Daniel Wild is a research fellow with the Institute of Public Affairs.