Coaled, Hard Truth

Australian households are facing a grim new reality: higher electricity bills and an increasingly unstable and unreliable power supply. In NSW, EnergyAustralia and OriginEnergy residential customers have seen a 19.6% ($319.80 per year) and 16.1% ($282) increase in electricity prices respectively since July 1. These costs are pushing many families in the outer suburbs,  already on the edge, closer to relative poverty as they struggle with wider rising costs. This increase means that South Australia has the most expensive electricity in the world, surpassing Danish prices.

 

It isn’t just Australian households that are feeling the hurt, but Australian businesses too. Electricity prices are having a detrimental effect on businesses small and large. Costs of production are increasing and pushing firms closer to shut down. Running equipment and keeping the lights on has become a burden to firms who rely on low cost electricity to remain viable. Furthermore, firms are having to deal with more frequent power outages, putting them out of operation and eroding at their profits. Livelihoods are on the line as firms struggle to stay open.

 

What has contributed to electricity prices rising and power supply becoming intermittent? Why are we suddenly faced with this issue?

 

Simple economics tells us that if supply decreases while there is strong demand then prices will rise. Another detrimental consequence in the energy market context is that with falling supply and high demand the system will eventually give, causing rolling blackouts. A strategy used to prevent a gird wide shutdown known as load shedding averts a crisis, but still leaves thousands of households and businesses in the dark for prolonged periods. Should we not be producing enough power to avert such supply crises in the first place, negating the need for emergency load shedding?

 

Moratoriums on gas and coal seam exploration are the kind of supply-restrictive practices forcing prices up. Renewable energy targets ,not grounded in the reality of the here and now, are strangling power producers with more costs, regulations and standards. Mandated reliance on renewables is undermining the integrity and reliability of the system. Supply is no longer guaranteed. Blackouts become the new norm.

 

Alternative sources of power, renewables, are being put forward as the bulk suppliers of tomorrow, central to any effective energy policy. Policy makers are pushing coal out of the picture. While It cannot be denied that Australia will need to diversify its electricity generation towards renewables moving into the future, this cannot be at the cost of present day energy security and present day standards of living.

 

Currently, renewables lack the technology to make them affordable , reliable and able to supply at the same magnitude as coal. The South Australian blackouts earlier this year highlighted the unreliability of current renewables. Modelling by the Minerals Council suggests that solar power output would have to increase 100 times and wind output would have to increase 35 times to match the output from fossil fuels. Areas greater than the size of South Australia would have to be covered with turbines to meet current levels of demand.

 

Until technology advances to such a level that renewables can match coal’s low cost and scale, then it would not make any sense to go about replacing coal and still expect demand to be met. Elon Musk’s plan to build lithium batteries in South Australia suggests that this technology is perhaps not too far off. However, we cannot lose sight of reality: cheap power, and lots of it, here and now, not at some arbitrary moment down the track. Talk that this one project is “coal’s death warrant” is fanciful and exactly the kind of wishful thinking that leads to shortages and soaring prices. Policy must be grounded in ‘coaled’ reality.

 

Despite the negativity surrounding the use of coal, the reality is that it still remains the cheapest, the most efficient and the most reliable form of power generation in Australia. It is by no coincidence that coal accounts for around 70% of electricity generation in the national grid and around 85% in NSW. On top of its low cost, the coal industry drives the economy through the thousands of jobs it directly and indirectly provides and contributes to government revenues through substantial tax.

 

The environmental agenda has pushed for newer, renewable energies to become an integral part of the grid in an attempt to meet emissions reduction targets. While there is general consensus that Australia has a role to play in global emissions reductions, policy makers have ignored a problem in reduction endeavours. The Minerals Council concludes that this environmental endeavour has left “the fundamentals of the electricity system…forgotten or ignored.” The fundamentals it refers to are those of low cost, high efficiency and affordability which ,having been thrown out the window, are leaving Australian households and businesses to suffer the consequences.

 

The blind pursuit of an ideal, detached from reality, is creating a harsher financial environment for families.

 

We need to realise just how far electricity reliance permeates in not only our developed society but in developing countries globally in order to fully grasp the need for a secure supply at an affordable cost at home. Access to cheap electricity is one of the bottom line prerequisites for economic development. It enables industrialisation and the creation of jobs. It enables communication and internet access. It enables operation of labour saving devices. It is what has made possible what we call a modern lifestyle and it is what will make possible this same lifestyle for millions rising up out of poverty across the developing world. It is what will ensure the ability of thousands of Australian families and businesses in the outer suburbs to make ends meet.

 

It is clear that Australia cannot afford to adopt an uninformed ,cavalier stance of pursuing untested and unreliable forms of renewable energy in the short run. If we are to ensure continued domestic prosperity, we need to ensure current needs are met with coal as a major contributor and future needs are met through a sensible mix of renewables and non renewables.

 

The closure of the Hazelwood Coal Plant in March this year is a microcosm for the energy challenge Australians now face. Its closure has meant the loss of around 750 jobs. More families with uncertain futures. More livelihoods lost. With the plant accounting for 20% of Victoria’s power , a decrease in supply means that power bills will rise. The Victorian Government’s modelling suggests a 4-8% rise in prices due to Hazelwood’s shut down alone. Hostile government policy is largely to blame with a dramatic increase in royalties being cited by Engie as a key contributor to the unfeasible costs of keeping the plant running. The war on coal only hurts Australian workers and families. Hazelwood is testament to this hard truth.

 

We cannot let exorbitant costs of living and living in the dark be the new reality for Australians. We cannot divorce energy security from the broader fundamentals of social prosperity and stability. A prosperous Australia needs coal in the present and into the future. That is the reality we must accep

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