As part of its response to climate change, the Rudd Government has announced that it will secure 20 per cent of Australia’s total energy needs by 2020 from renewable energy sources such as solar, wind and geothermal energy. The policy of the former Howard Government was that 5 per cent of Australia’s energy needs should come from these sources by 2020.
The Federal Government scheme offers up-front subsidies to homes and small businesses which install solar electric, small wind-turbines and micro hydro-electric projects.
The Rudd Government’s other method of encouraging renewable energy is through the so-called Carbon Pollution Reduction Scheme (CPRS), which effectively will impose a tax on energy-using industries, particularly coal. The tax will then be passed through to consumers in the form of higher electricity charges.
The question must be asked whether the Rudd Government’s targets are realistic.
According to the BP Statistical Review of World Energy, the largest form of renewable energy, hydro-electricity, currently produces just 6.3 per cent of the world’s energy needs (p.41). Other forms of renewable energy (including wind power, solar electrical and hot water, small-scale hydro) contribute only as much as a third of total hydro-electric output. (Renewables Global Status Report, Update 2009, p.9).
Despite heavy investment in alternative energy sources in many countries over the past 20 years, these alternative energy sources supply only about 2 per cent of world energy consumption.
In Australia, renewable energy output is of the same order. The idea that Australia will be able to increase renewable energy to 20 per cent of total energy output in 10 years is, in Canadian humourist Stephen Leacock’s immortal words, “a moonbeam from the larger lunacy”.
The Australian system, based on a requirement of power-generating companies to acquire “renewable energy certificates”, is highly bureaucratic, and inevitably will translate into higher electricity costs.
As these costs will be transferred to all consumers, there will be little incentive to cut electricity consumption. And as Australia’s capacity to expand renewable electricity production is limited – particularly in hydro-electricity – the scheme will simply add to costs, with little or no benefit to anyone.
It is interesting to note that, early this year, Federal Government subsidies for roof-mounted solar electricity units were phased out, because the industry was simply unable to provide them, and there was a large backlog of orders.
In contrast to the extravagant claims made for renewable energy in Australia, and the attempt to use higher costs to force energy efficiency, it is interesting to note that Taiwan, a country with a population comparable to Australia’s, has gone down a fundamentally different path.
Its government has set voluntary targets to reduce energy consumption, and backed them up with tax concessions. Large industries are expected to reduce their CO2 output by 10 per cent by 2015, and the government is encouraging this by promoting the use of energy efficiencies, particularly with electric lighting.
Overall, 12 per cent of all Taiwan’s electricity is used for lighting, and savings of around 40 per cent are possible, using newer, more efficient lighting technology.
For residential customers, the Taiwanese Bureau of Energy is offering discounts on energy usage. Between July 2008 and March 2009, the bureau gave a 5 per cent discount to users who reduced electricity consumption by 5 per cent, while a 20 per cent discount was given to households which reduced electricity consumption by 10 per cent or more.
The result was that 40 per cent of consumers cut their electricity consumption over the period. (Taiwan Review, July 2009, p.45).
With its high technology industries, the government has also encouraged the use of more energy-efficient lighting. Incandescent light bulbs, which are inefficient, are being phased out and replaced by fluorescent tubes and bulbs, and very efficient LED lights, which use about 10 per cent of the electricity of the old incandescent bulbs.
Because of strong government support, the output of LED industries in Taiwan is expected to grow from less than $2 billion in 2008 to about $20 billion by 2015, much of which will be exported.
LED lights are about four times as expensive to produce as incandescent bulbs, but last 10 times longer, as they do not run hot.
The Taiwanese Government is also sponsoring the replacement of the existing T9 fluorescent tubes with energy-saving T5 tubes, saving around 40 per cent on electricity usage and cost.
Additionally, large businesses which spend more than $20,000 a year on energy-saving equipment are entitled to a reduction in their business tax, giving them a powerful incentive to invest in newer, more technologically advanced equipment.
The use of improved technology and financial incentives has already achieved beneficial results, without imposing higher costs on business and consumers. Surely there is a lesson for Australia here.
– Peter Westmore is national president of the National Civic Council.