Alan Kohler: no political future for climate denial
Workers install solar panels on the roof of a new building in Wuhan in China, which is now the world’s biggest producer of solar energy. Pic: Getty Images
Sorry Richo, but I’m right.
On Monday a little company named ReNu Energy announced that it was putting solar photovoltaic panels on the rooftops of four shopping centres owned by SCA Property.
RNE will own and operate the solar plant and sell the power to the retailers in the centres. Cost, $4.3 million; annual cash return to RNE’s investors, $700,000, or 16 per cent. The four centres, starting with the Griffith Plaza, will become 11 if all goes well.
Every shopping centre owner in the country is now being approached by firms like RNE wanting to put solar on the roof for “behind the meter” deals, where the power is consumed within the centre. In its statement on Monday RNE said retirement villages and office buildings are also attractive to both debt and equity funders.
This is happening simply because solar photovoltaic (PV) has come down in price, and the average price of electricity in the eastern states, produced by the coal generators, has been $100 per megawatt hour for the past few months. That’s killing businesses that rely on electricity, and is roughly twice the price of the power from solar, which is just the cost of financing the plant, since the power itself is free.
The electricity market is complicated and arcane. It has been hopelessly politicised, has too many bureaucracies running it and is dominated by too few big vertically integrated operators.
But at its heart what’s going on now is pretty standard disruption of a legacy oligopoly by new technology and fragmentation.
Legacy businesses are currently enjoying big profits because a lack of investment over the past decade has crimped supply, but their customers now have a cheaper alternative, and that includes the bureaucracies running the system on our behalf
In The Australian the other day, Graham Richardson said he hoped I was wrong that a flood of renewable energy investment would spell the end of coal. He’s in good company, and not just about that.
A lot of people, myself included, had hoped that newspapers wouldn’t be disrupted by the internet, but it happened — and now there’s a Senate inquiry impotently looking into the future of journalism.
The great electricity disruption has also had an inquiry: “The independent review into the future security of the national electricity market” by the chief scientist, Alan Finkel, due out on Friday.
In his preliminary report, Finkel said the review was needed because: “New technologies are emerging more rapidly than previously envisaged. Variable renewable electricity generation, particularly wind and solar photovoltaic, is increasing.”
The difference between the electricity disruption and others like the media, is that it was preceded by a scientific ultimatum and a political debate dating back to the 1980s.
At first the conservative side of politics, led by Ronald Reagan and Margaret Thatcher, were “believers” in the problem and supported the establishment of the United Framework Convention on Climate Change in 1992, which in turn led to the Kyoto Protocols in 1997.
In those early days, renewable energy was expensive and coal-fired power was cheap, or at least seemed to be if the cost of fixing the effects of climate change weren’t taken into account, so business people were entirely against the UNFCCC process because of what it would do to costs and profits.
They lobbied hard, and conservative politicians listened. Within a decade of Kyoto, opposition to any action on climate change — in fact denial there was a problem at all — had become the key conservative totem.
But then gradually, businesses shifted and left their political allies out on a limb — I think partly as a result of the more general push for Corporate Social Responsibility, and perhaps a desire by CEOs to get everybody off their backs about their salaries.
For example, under Rex Tillerson’s leadership, Exxon Mobil went from being a staunch opponent of action on climate to now having these words on its website: “We are committed to positive action on climate change and dedicated to reducing the risk of climate change in the most efficient way for society.”
Tillerson is now US Secretary of State and was one of the voices in the White House that unsuccessfully tried to persuade President Trump not to withdraw from the latest UNFCCC agreement that had been signed in Paris in 2015.
Trump went with keeping his election promise, one that was made about the same time as Australian Prime Minister Malcolm Turnbull was ruling out any form of an emissions trading scheme while at the same time signing the Paris Agreement.
Like Trump, Turnbull is now on the wrong side of history, out of step with the business world, although not quite as far out of line as Trump is, since Australia’s staying in Paris.
But Trump and Turnbull both have to find a way back from the limb they’re out on for two reasons: first, there is simply no political future for climate change denial any more, either in domestic electorates, businesses or the rest of the world, and second, the scientific/politic debate is now giving way to common or garden industry disruption.
All the passionate arguments and entrenched positions of the past 20 years have been based on the simple truth that renewable energy is much dearer than fossil fuel energy and that any country that switched to using it would be disadvantaged — especially one with a lot of coal, ie Australia.
That’s no longer true.
Although everybody will be reading Alan Finkel’s report on Friday for any political awkwardness for the Turnbull government (will he recommend something Malcolm has ruled out?) Finkel’s work is about managing the inevitable transition from coal to solar, wind and batteries.
It shouldn’t be too hard, or too expensive. After all, Australia has a competitive advantage in sunshine and wind, as well in coal and gas.
So Richo, there won’t be any more coal-fired power stations built in Australia, and carbon capture and storage won’t change that. And eventually Australia’s fabulous coal deposits, that have been so great for our economy, will become stranded assets.
But electricity prices should fall as a result of that, not rise, and the coal miners will find something else to do, along with the journalists and the other workers disrupted out of their jobs.
(20min delay)