Future Of Energy Is Costly

Written by:
13 March 2024
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In this article, Rocco Loiacono contextualises and disseminates the findings of the IPA’s research into the economic cost of net zero.

I believe it was Albert Einstein who stated that the definition of insanity is doing the same thing repeatedly but expecting a different result.

This, it seems, is Energy Minister Chris Bowen’s modus operandi – insisting renewable energy is “cheaper and reliable” when around the world the evidence is clearly demonstrating otherwise.

Danish renewables giant Orsted, the world’s biggest offshore wind project developer, announced a few weeks ago that it is scaling back production, development targets and  it would be making job cuts.

In the third quarter of 2023 it lost £2.5 billion as its revenues halved on the same period in 2022. Further, it suspended its dividend payouts to shareholders and announced the loss of 800 jobs. It also lowered its target for renewable- generating capacity by 2030 from 50 gigawatts to 35-38 gigawatts.

This isn’t the only such instance. Last July, Swedish company Vattenfall withdrew from a North Sea wind project which it had won the right to build in a UK government auction just a year earlier. Two months later the government held another auction and there was not a single bid. Reuters reported last month that Siemens Energy, the world’s largest maker of offshore wind turbines, expects a 2024 loss of around two billion euros. Rising prices for raw materials and components as well as regulatory delays have caused write-downs and losses across the wind industry.

As Bloomberg reported in August last year: “Developers want to renegotiate their previously-agreed offtake deals which are no longer profitable while some are trying to cancel their contracts altogether.”

What that means is that the economic viability of these renewable energy projects is non-existent without huge government subsidies, paid for by you and me through ever-increasing power bills.

In a just-published report I co-authored for the IPA on the proposed renewable energy transition by 2030 for Western Australia, our analysis shows that to maintain the network in the absence of coal and gas, there would have to be a massive overbuild of renewables.

Once transmission easements, poles and wires are added in, we calculate the total cost to be more than $52 billion.

What about the Snowy 2.0 pumped-hydro scheme, originally supposed to cost $2 billion and be operational by 2022, that’s now expected to cost $12 billion-plus and not become operational until 2029?

All in a reckless pursuit of emissions reduction. Let’s not forget that Australia is responsible for just over one per cent of the world’s emissions and that solar panels and wind turbines and all the associated componentry is produced in China in factories powered by fossil fuels.

Is it any wonder, then, that the NSW Government is looking to extend the life of the coal-fired Eraring Power Station beyond August 2025?

Surely all this money would be better spent keeping coal and gas-fired power stations open for the foreseeable future and exploring options for nuclear power as a proven way of delivering 24/7 power that is almost 100 per cent emissions free.

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