Australia May End Subsidies for Renewable Power

Published November 10, 2014


The Australian government should end subsidies for renewable energy sources and renewable energy targets, an independent panel of experts concluded after a six-month review requested by the government. The panel released an August 2014 report on the Australian Renewable Energy Target Scheme (RET).

The RET was designed to ensure 20 percent of Australia’s electricity comes from renewable sources by 2020.

“While it is obvious that the Australian government is constrained by popular opinion that still regards global warming as potentially catastrophic, it can justify modifying the RET because it penalizes poorer Australians the most, for no return in altering global climate,” said Graham Young, executive director of the Australian Institute for Progress.

Creates Financial Incentives

Since January 2011, the RET operated two programs: the Small-Scale Renewable Energy Scheme (SRES), and the Large-Scale Renewable Energy Target (LRET).

The SRES provides financial incentives for households, small businesses, and community groups to install small-scale renewable energy systems such as solar water heaters, heat pumps, solar photovoltaic systems, and small-scale wind systems. The LRET offers financial incentives for building or expanding renewable energy power stations.

“The carbon tax is now gone, many of the subsidies have been reduced, and the RET will be pared down and, hopefully, totally eliminated,” said Alan Moran, former director of the Institute of Public Affairs in Australia. “But the damage has been done. The madness transformed Australia from among the lowest-cost energy sources to among the highest, and retrieving the former position will not be easy.”

‘No Subsidies Are Appropriate’

 A few key points of the August report include: (1) “the RET is a high cost approach to reducing emissions because it does not directly target emissions and it only focuses on electricity generation … [and] [i]t promotes activity in renewable energy ahead of alternative, lower cost options for reducing emissions that exist elsewhere in the economy”; (2) “[t]he RET does not generate an increase in wealth in the economy, but leads to a transfer of wealth among participants in the electricity market”; and thus (3) “the LRET should be closed to new entrants … [and] “the SRES … be closed immediately.”

“[T]he key question is,” said physicist John Droz Jr. of the Alliance for Wise Energy Decisions, “is there scientific proof that this energy source is a net societal benefit? Since no such proof exists for wind or solar, no subsidies are appropriate. It’s as simple as that.”

Government Response Uncertain

The Australian government said it would consider the findings of the independent panel in the context of the costs and benefits of the scheme, including the impact on electricity prices and markets.

Some analysts speculate the issue has divided the cabinet, with Prime Minister Tony Abbott wanting to close the RET to any new investment, while environment minister Greg Hunt and industry minister Ian MacFarlane hope the RET will be pared back instead of closed.

‘Parasitic Power Producers’

The chairman of the Carbon Sense Coalition, Viv Forbes, urged the government to end the program. “As a first step, all green energy subsidies and targets should be abolished,” Forbes said. “Wind and solar are parasitic power producers, unable to survive in a modern electricity grid without the backup of standalone electricity generators such as hydro, coal, gas, or nuclear. And like all parasites, they weaken their hosts, causing increased operating and transmission costs and reduced profits for all participants in the grid.”

“Near the end of his treatise Human Action, Ludwig von Mises spoke of ‘the exhaustion of the reserve fund,'” warned Robert Bradley, CEO and founder of the Institute for Energy Research. “Those countries that made the biggest bets on renewable energy are reaching the end of the fossil-fuel-created reserve fund,” Bradley added.

“Green zealots posing as energy engineers should be free to play with their green energy toys at their own expense, on their own properties, but the rest of us should not be saddled with their costs and unreliability,” Forbes said.

D. Brady Nelson ([email protected])is a Washington, DC-based economist, writer, and speaker from Brisbane, Australia and Milwaukee, Wisconsin, and a regulation policy advisor to The Heartland Institute.