The high cost of renewable energy subsidies

The report, undertaken by economic consultancy Principal Economics, found that Australia’s renewable energy sector received subsidies (including the Renewable Energy Target, feed in tariffs and other green policy costs) worth $2.8 billion in 2013-14.  This dwarfed the public support for research and demonstration projects for low emissions coal technologies being conducted by the CSIRO and other research bodies (and matched by the coal industry).

On an output basis, these renewable subsidies translated into almost $412 per megawatt hour (MWh) for solar technologies, $42 per MWh for wind and $18 per MWh for all other renewable sources (including hydro).

By comparison coal fired power received less than $1 per MWh and natural gas less than 1 cent per MWh delivered.

In 2013/14, these renewable energy subsidies added between 3 to 9 per cent to the average household bill and up to 20 per cent for some industrial users.

The report uses the World Trade Organisation’s definition of subsidies, an approach similar to the method used by the Productivity Commission in its annual Trade and Assistance Review.

At face value, increasing Australia’s share of renewable energy is a laudable goal.  The minerals industry is a user of renewable energy and hopes that it will provide a solution to provision of competitively priced energy, especially in remote areas.  And renewable energy depends on the minerals sector – after all, every off shore wind turbine contains 250 tonnes of metallurgical coal.

But renewable energy must win increased market share on its own merits, not be guaranteed it by expensive mandatory targets and feed-in tariffs, the cost of which is simply borne by householders and industrial users. For household consumers, the burden falls heaviest on low income households.  For industrial users, the burden shackles export and import-competing businesses in many sectors. 

You can read the report here: 

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