Jeff Dimery has a habit of saying the quiet part out loud: “Australians will have to pay more for energy in the future….And, I don’t think the average Australian is prepared for that reality.”
This isn’t the message we’ve been getting for years from the renewables sector and from politicians. The “renewables are cheaper” mantra has not only been repeated endlessly, it has been reflected in numerous modelling studies, most famously RepuTex’s work for the ALP before the last federal election.
These forecasts of a cheap energy nirvana are being mugged by reality for two key reasons:
1. Construction costs are going through the roof. Two years ago Dimery said it would cost $8B to replace his Loy Yang B coal generator with renewables and storage, but now, after the supply-driven inflation burst, he says it would cost $10B. A 25% increase in two years is game-changing.
2. It’s the journey, not the destination. A future where the economy uses so much more electricity that the unit cost can go down even accounting for the massive investment required may be still possible, but we’re nowhere near that yet. We’re seeing the costs of the transition starting to hit power bills, but progress is slower on seeing widespread benefits such as better asset utilisation and households being able to flex usage to minimise bills. The costs are coming well before the benefits.
Dimery warns that Australians aren’t ready for this and I tend to agree. Dimery compares the scale of the energy transformation to the post-war rebuild in Europe and Japan. The problem is, public support for a rebuild is assured – everyone wants to recover from a recent war and appreciates the investment required to do so. With climate change, we are talking massive investment to avoid a future disaster, a disaster that is hard to understand and success is stopping it from happening.
You could say that Europeans have implicitly agreed that they will have to pay more for energy since 2005 when the EU Emissions Trading Scheme started putting a price on carbon. Following a scare campaign about power prices, Australians voted to end our carbon price in 2013, so emphatically it’s now bipartisan policy to not have an Australian ETS.
A recent CSIRO survey found a majority of Australians want a "moderately" paced transition but are unwilling to accept higher bills to pay for it. Yet scientists tell us we have to reduce emissions faster as climate change won't just slow down if we ask nicely.
Given all that, it would be a brave politician who would try and sell to the voting public, in the middle of a cost-of-living crisis, Dimery’s cold hard assessment of what’s ahead of us – energy decarbonisation must happen but it will be costly, so we need to do it as efficiently and fairly as possible.
And yet somehow, that’s what needs to happen. Maybe that’s why policy makers are trending towards measures that are government-funded rather than paid for via power bills.
