Wednesday, July 13, 2011

Australia's untapped renewable energy

Jul 12, 2011
By Benjamin K. Sovacool

AUSTRALIA continues to promote renewable sources of electricity the wrong way, with implications for Singapore and other Asian exporters of technology.

Consider a few striking statistics. Australia has more solar energy potential than every country outside of those in northern Africa, yet uses solar photovoltaic panels to produce less than one-tenth of 1 per cent of its electricity needs.

Indeed, if distributed equally to every home in Australia, the country's roughly 200,000 small household systems would not even provide enough juice to cool a single beer in everyone's refrigerators.

Australia needs to do five concerted things to get back on the path to promoting renewable energy so that this potential can be tapped, improving energy security, reducing greenhouse gas emissions, and creating thousands of regional high-paying and highly skilled jobs.

First, the country needs consistency. I have evaluated the energy policies of more than 50 countries around the world, and never before have I encountered the ad hoc, slipshod, inconsistent, constantly changing policies found here.

New South Wales, for example, recently made drastic changes to their feed-in tariff scheme with less than 12 hours notice for businesses and manufacturers to adjust. The Solar Homes & Community Plan, which gave A$8,000 (S$10,500) in rebates for 1kilowatt solar photovoltaic systems, was closed with less than 24 hours notice.

The Renewable Remote Power Generation Programme, which covered up to 50 per cent of the cost of renewable energy systems that displaced imported diesel fuel use in off-grid parts of Australia, was cancelled with no notice whatsoever.

The photovoltaic industry now employs almost half as many people in Australia as the coal industry. Would the coal industry be given that little, or no, notice?

These sudden and unexpected changes make it difficult for investors to make prudent decisions to locate factories and renewable energy facilities in Australia.

Second, Australia needs better standardisation of renewable energy installations, especially solar ones, as well as more rigorous inspection and enforcement. Investments in testing, standards and safety require government facilitation as market forces can sometimes prioritise short-term profits over long-term quality.

Third, and quite likely the elephant in the room: ongoing energy subsidies. These include rebates and concessions to all energy fuels that cost taxpayers and households.

A transparent accounting system has to be set up so taxpayers know what types of energy subsidies exist, and where their money goes. The mountains of subsidies for fossil fuels - and they exist in Australia, in many forms - distort energy markets leading to sub- optimal investments. They need to be accurately identified: from accelerated depreciation of power plants and tax relief for coal miners to reduced rates for coal transport and government guarantees for purchasing fossil-fuelled electricity. The Australian Bureau of Agricultural and Resource Economics (Abare) could improve its annual Energy in Australia report by tracking trends in government interventions and tax advantages.

Fourth, electricity prices must move towards more accurately matching costs. Most obviously, greenhouse emission permits need to be properly valued in the market. Furthermore, many of the other social costs of energy production need to be included. Renewable energy technologies should be given credit for, among other things, displacing pollutants like mercury that cause neural damage in humans; for relieving electricity grid congestion when strategically deployed; for avoiding the deleterious impacts of water consumption and water contamination; and for reducing wholesale electricity prices. Everyone benefits from these positive aspects of renewable energy, not just those lucky enough to own their own solar or wind system.

Fifth and lastly, a true, national, gross feed-in tariff - a scheme that pays local, residential forms of renewable energy - needs to be implemented. This feed-in tariff would require electric utilities to purchase the power produced from renewable resources at a fixed, premium regional rate. It would pay tariffs irrespective of the owner's actual power consumption. Network and transmission operators would provide those wishing to take advantage of the tariffs access to the grid.

Until these five elements - consistency, standardisation, accounting for subsidies, accurate electricity prices, and properly designed feed-in tariffs - are combined into a synergistic package, Australia's renewable energy potential will likely remain just that.

The writer is an Assistant Professor at the National University of Singapore.

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