Energy White Paper – Right direction but gaps between theory and practice

The Energy White Paper provides a timely reminder of the critical role played by low cost energy in contributing to jobs, better living standards and the competitiveness of Australia’s export and import competing industry sectors.

Low cost energy, built on coal-fired power, has long been an essential element of Australia’s comparative advantage. Over the last decade, this economic edge has been lost, due to costly and ill-considered policy interventions by successive Commonwealth, State and Territory governments.

The Energy White Paper rightly identifies that there is a tremendous opportunity for Australia to meet the energy needs of developing economies, with energy demand expected to increase by one-third by 2040.  Important progress has been made by the Abbott Government in rebuilding the competitiveness of Australia’s export sector, with the repeal of the world’s biggest carbon tax and the mining tax as well as new initiatives to remove structural barriers to exploration.

The paper also highlights the need for continuing reforms to streamline project approvals and other regulatory barriers. The Senate should heed this message and pass the ‘one stop shop’ reforms at an early opportunity.

Unfortunately the pro-competitive message in the EWP is not always reflected in practice. The paper argues the case for “a technology neutral energy policy  and regulatory framework” while simultaneously supporting the costly Renewable Energy Target (RET) which guarantees up to 28 per cent market share to selected high cost energy sources, notably wind and solar. 

This cross-subsidy from consumers to a select group of producers is measured by the government’s own independent panel at $22 billion over the next 15 years, in addition to $9.4 billion so far. This is broadly in line with other assessments by Principal Economics (at about $21 billion) and Deloitte ($17 billion).  This subsidy represents a substantial ongoing burden on households and industry, adding between 9 and 15 per cent to the energy cost of a typical mining operation.

The Energy White Paper identifies nuclear power as an issue but falls short of making recommendations that would facilitate a rational treatment of this technology. The ongoing unilateral ban on an energy source in which Australia has a comparative advantage and that accounts for 12 per cent of global electricity use is at odds with the commitment to “a technology-neutral policy”. Simply pointing to the South Australian Royal Commission into the nuclear industry is a disappointingly passive approach.

The minerals industry welcomes the Government’s commitment to an ongoing partnership with the coal industry to develop low emissions coal technologies. The minerals industry strongly welcomes the Government’s firm commitment to rebuff misguided efforts by other nations aimed at preventing international lending institutions and bilateral aid programs from supporting the uptake of high efficiency, low emissions (HELE) power generation in developing countries.

The benefits flowing from HELE technology are equally applicable in Australia and policy makers should ensure there are no impediments in replacing older coal fired plants, as they reach the end of their design life, with efficient ultra-supercritical technology.

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