Andrew L. Urban
Startled, I stared at my electricity bill. My consumption over the quarter had decreased by 4.62%. The bill, however, was 20% higher, at $542.66. I live alone. (Cat doesn’t count…) And that’s before the 9% price rise coming in July.
As one of thousands of households who have had to seek ‘financial flattening’ as a way to manage rising energy prices, i.e. changing payment frequency to monthly, I bring you more bad news. Don’t shoot, I’m just the messenger; the real sender is not going to willingly come forward.
The bad news is that the amount on my bill doesn’t reflect the full cost I am paying. That’s not stated on my bill. Or yours. What’s missing is your share (and mine) of those generous subsidies for renewables.
Recent media reports say that average household electricity bills have gone up to about $1,000 a year. That is incorrect. That is what’s on the bill. There is much more that is not on the bill. It comes from the common purse into which we all pour our taxes. But that much transparency would be politically untenable. Read on.
“The true cost of renewables is masked from our power bills, with taxpayers also bankrolling them through Chris Bowen’s Capacity Investment Scheme—modelled after Matt Kean’s renewables auction and underwriting program in NSW—which guarantees a revenue floor for these projects.” says Michael Wu, Senior Policy Analyst – Energy Program, at the Centre for Independent Studies (CIS) in Sydney.
In Wu’s June 2024 research paper for the CIS, he noted: “The introduction of the Capacity Investment Scheme in late 2023 represents a significant step up in the government’s effort to subsidise and incentivise investments in renewables. While this initiative may help mitigate financial risks for investors and attract new investments, the lack of transparency regarding the scheme’s financial details raises concerns about its true economic impact and the feasibility of a renewables-dominated electricity grid.”
There’s worse to come, as Wu points out. Wholesale spot prices will be further suppressed as more subsidised renewables come online, forcing taxpayers to write increasingly larger cheques to renewables and their financiers as prices fall below the revenue floor. Or, as Minister Chris Bowen would put it, renewables will get cheaper still …
“Estimating CIS (Capacity Investment Scheme) subsidies will be difficult, however, because the government has chosen to not publish contract details or the overall budget for the CIS program.”
(The Capacity Investment Scheme is a Government revenue underwriting scheme to accelerate investment in:
>renewable energy generation (generation), such as wind and solar
>clean dispatchable capacity (dispatchable), such as battery storage.
The scheme provides a long-term revenue safety net that decreases financial risk for investors. This ensures more renewable energy projects get built.)
In his paper Counting the Cost: Subsidies for Renewable Energy, Wu reports that “Our analysis reveals that over the past decade, over $29 billion in subsidies have been provided by the federal government to the renewable energy sector. The dominant source of subsidies has been the Renewable Energy Target scheme, which has seen around $2.7 billion per year channelled towards large-scale and small-scale renewable energy. These subsidies have undeniably played a crucial role in the rapid growth of renewable energy in Australia, increasing its share of electricity supply in the National Electricity Market from less than 1% in 2000 to 39% in 2023.”
So now we can see how renewable energy is “the cheapest form of energy,” as Bowen keeps telling us. This is 1984-speak where ‘cheapest’ means ‘most expensive’…
Wu makes the point that “The list of subsidies discussed in this paper is not exhaustive. It does not, for instance, consider the following subsidies which are collectively substantial:
>Energy infrastructure projects directly funded by federal and state governments, such as Snowy Hydro 2.0, which has an escalated total cost of $12 billion;
>The Safeguard Mechanism requiring major carbon-emitting companies to reduce their emissions or purchase carbon credits, with one estimate putting the cost at $906 million per year. This mechanism is more focused on abating emissions rather than directly incentivising renewable energy generation;
>State and territory solar feed-in tariff schemes which have provided households with hundreds of millions of dollars in incentives to install rooftop solar systems; and
>Subsidies to fossil fuel generators to keep them operational in order to manage energy reliability risks resulting from the aggressive replacement of these stable generators with intermittent renewable energy sources, which do not produce sufficient electricity during solar and wind droughts. For instance, the NSW Government would have to pay Origin Energy an estimated $200 to $400 million a year to keep the Eraring Power Station open.
The analysis also does not include the cost of administering the government schemes through various bureaucratic bodies. The research is confined to government subsidies that directly benefit the renewables industry and are amenable to policy changes at the federal level. Therefore, the findings presented here should be taken as a conservative estimate of the total amount of subsidies received by the renewables industry.”
I’m willing to bet that the total of all subsidy costs would add, what, $275 to the average household bill?