Never waste a good crisis

The Clean Energy Council have come out early with their bid for a share of the expected post-lockdown fiscal stimulus, set out in their document A Clean Recovery.

The document is a masterpiece of contemporary lobbying, replete with buzzwords such as “empowerment”, “leverage”, “world-class” and “smart”. Inevitably there is a lack of detail and limited justification for the specific recommendations, except lots of promises of lower power prices and plenty of jobs.

We covered the latter of these claims in a previous blog, so let’s look briefly at the former. It is based on the simple proposition that more supply will result in lower prices. For example, they recommend a commitment to 100 per cent renewable energy for government agencies. This would stimulate new supply, because switching contracts to renewable only would require additional renewables to be built. But it’s not new demand, it’s just being switched away from traditional sources. With lower demand for their non-renewable output, some of those sources will exit sooner than otherwise which will in turn put upward pressure back on prices. This is the capital cycle and we have already seen it play out once with the Renewable Energy Target and the subsequent closure of plants like Hazelwood and Northern.

Elsewhere, the paper is full of solutions looking for a problem. There are several recommendations aimed at funding certain types of network expenditure such as distribution level digitalisation and interconnectors. But these are regulated expenditures and as long as they pass a cost-benefit test, they are easily funded through the regulatory system. If they can’t pass the cost-benefit test, should we be funding them at all?

Energy efficiency is curiously absent from this wish list, especially given the CEC has wisely looked to broaden support for the plan by including other sectors in the largesse, such as networks, hydrogen and electric vehicles. If we are going to raise mandatory standards for new buildings, better energy efficiency should be the first cab off the rank rather than rooftop PV. As AEMO’s Renewable Integration Study shows, the grid is struggling to keep up with the rate of rooftop PV installation as it is, without making it harder through mandated deployment.

If this all seems unduly critical, it’s not meant to be. Governments are already dipping their fingers into our wallets (as either taxpayers or energy users) to help fund their favoured technologies. Some recommendations such as a co-ordinated approach to workforce development are overdue (this having been one of the Finkel Report’s ideas). Renewable energy zones will only succeed with governments taking a co-ordinating role and streamlining the planning framework to allow multiple projects to get lined up. Any fiscal stimulus is going to entail riding roughshod over market signals to some extent and if we’re going to throw money around, we could do a lot worse than the clean energy sector.

The seductive selling point of such wish lists is that it appears churlish to reject them out of hand and picky to work through the individual recommendations. But there is always devil in the detail and to make the best recovery possible, we should try to get the best bang for buck where possible. A Clean Recovery deserves proper scrutiny to get the best ideas out of it.