The 'R' Files: Low-Cost Renewable Energy: An Evereceding Prospect
Moran, Alan, Review - Institute of Public Affairs
Low-cost Renewable Energy: An Everreceding Prospect
GOVERNMENT POLICY ON RENEWABLE ENERGY
In his post-Kyoto response to climate change,1 the Prime Minister announced a requirement that 2 per cent of energy from electricity over and above present levels is to come from renewable or specified wasteproduct energy sources by 2010.
The PM's policy announcement is part of a battery of measures designed to reduce emissions of greenhouse gases. Yet, as Robert Bradley has pointed out in a recent Cato Policy Analysis,2 renewable energy is costly and many forms are no less greenhouse-friendly than conventional energy. Moreover, Brian Tucker in this journal and elsewhere demonstrates that any moves to shift from the more carbon-intensive fuels, even if orchestrated among all nations, will have only a trivial effect on concentrations of greenhouse gases in the atmosphere.
The Prime Minister's quixotic gesture will not come cheap. At present costs, exotic renewable energy sources (wind, solar, photovoltaics) are more than double the price of electricity supplied from conventional sources like coal, gas and hydro. Two per cent of additional electricity means some 4,000 GWh of electricity, which is about four-fifths the size of the Snowy hydro output. If the premium on this output is only 5 cents per kWh, this entails additional costs of some $200 million per annum.
There is a possible escape clause in the PM's statement, viz., the notion of `waste-product energy'. If this is extended to include co-generation, or energy that is the by-product of other industrial activities such as oil refining and chemical plants, the cost premium may well be less than 5 cents and may even be zero.
In the wash-up of Kyoto, the US Administration has cloaked its own aspirations for renewables in a Comprehensive Electricity Competition Plan.3 This calls for a federal Renewable Portfolio Standard which will require 5.5 per cent of electricity to be generated from `non-hydro-electric renewable technologies such as wind, solar, biomass or geothermal generation'. The US Administration, under the Svengali gaze of Vice President Al Gore, allows itself no possible escape clause in terms of cogeneration that might readily prove commercial. Though the US Senate voted 95-0 against greenhouse gas reduction targets unless the impossible happens and developing countries also adopt the targets, the Administration may be by-passing Congress by mandating measures like this.
RENEWABLE ENERGY COSTS AND PERFORMANCE
Some would argue that renewable energy costs are coming down and that the imposition will be less onerous in the future. However, this is little more than a broken record that has been playing for 20 years. The fact is that all energy costs are being reduced and saddling ourselves with high-cost fuels will be a burden on taxpayers, consumers and industry competitiveness.
Cost-competitive non-hydro renewables have long been the electricity industry regulators' mirage. The US-and California in particular-has been the trailblazer and accounts for over 30 per cent of the world's capacity. US governments have spent some $US2 billion in tax subsidies for renewable projects with a further $U900 million direct government expenditure.
Back in 1976, the US Department of Energy study estimated that wind could supply nearly 20 per cent of all US electric power by 1995. The outcome, at 0.1 per cent, was one two-hundredth of the Department's estimate. This was despite a subsidy amounting to about half of the current price of electricity from conventional sources and obligations on power suppliers to use these sources. Even the wind power share dwarfed that of solar which, in 1995, was 0.03 per cent.
More cautious than the Department of Energy was a Shell International prediction that renewables will be the primary source of energy 50-100 years from now. …