Investor News

Energy subsidies a hot topic at National conference

The National Party, at their recent national conference, have called on the government to scrap renewable subsidies.

And while many suburbanites may snigger at the recent National Party annual federal conference vote to remove all subsidies from renewable energy (ABC news link below), they do raise an important issue.

Energy affordability and security are serious issues. Various policies have contributed to the current poor outcomes, but none are as confusing and obscured as energy subsidies.

Many households realise there are several forms of subsidy provided to all energy generation sources, but very few understand their full extent or cost.

What's their effectiveness or relative value in achieving the goal of reduced emissions intensity across the national power grid?

And people should be aware, or at least be able to easily find out the answer to this question, because ultimately, these subsidies are funded by everyone who pays an electricity bill or tax.

But strangely, given the amount of regulation and management across the system, solid facts and figures are difficult to come by for most people. Conversely, biased opinions and agenda-pushing abound.

Luckily, at least one group – the Minerals Council of Australia – has published both data as well as their opinions. Their summary table (link below) is based on a very detailed report by economic consulting firm ‘BAEconomics’ (link below).

In 2015/16, the full range of subsidies provided to all energy generation providers was $3.03 billion.

The split of those subsidies by generation type was:

When converting those subsidies to a ‘per unit’ basis, you will see that the average subsidy across renewable generation sources is $85 per MWh, vs. non-renewable subsidies at $0.30 per MWh. For comparison, Victorians pay, on average, $280 per MWh (28 cents per kilowatt-hour) for power (Sustainability Victoria link below).

If the objective is to reduce the emissions intensity of the national grid, ECT believes that the investment should be directed towards the most effective outcomes. Solutions with the best value for taxpayers and electricity consumers should be progressively adopted on a least-cost basis.

For solutions to be environmentally sustainable, they must also be economically sustainable.

Measures that matter, that clearly show how one solution compares to another, such as subsidy per MWh generated and subsidy per tonne of CO2 ‘saved’ should be made available, allowing voters to assess the cost and effectiveness of various policy initiatives, and consumers to shop for the most competitive supplier.