Whenever Australians think about the rising cost of living, the Coalition wants them to link any pain in their wallets to the rollout of renewable energy and the government’s climate targets.
The opposition leader, Peter Dutton, this week described the government’s “renewables-only policy” as a “wrecking ball through the Australian economy” and said families “know it because it’s harder in their own budgets”.
“In February of next year, the government’s going to have to sign up to a new target by 2035. Now, what does it mean for families who are struggling at the moment?” he asked.
Dutton’s claims are as unambiguous as they are bereft of evidence but that will matter little if the leader of the Coalition is not challenged to back up the statements with some facts.
All of this comes as Dutton revealed a government he leads would build seven taxpayer-funded nuclear reactors around the country – a technology that experts say is more expensive than solar and wind and probably won’t produce electricity until the 2040s.
Is there a link between renewables and rising power bills?
So what is going on with Australians’ power bills and is there any evidence that climate targets are hitting Australians’ wallets more than, say, rising petrol prices, sky-rocketing rents or jumps in insurance premiums?
Dr Dylan McConnell, an energy systems analyst at the University of New South Wales, says only about $100 of a household’s annual electricity bill is made up of charges related to environmental programs, such as feed-in-tariffs for rooftop solar or financial incentives for large-scale renewables projects.
But McConnell says electricity price rises in more recent years have been underpinned by the rising international costs of gas that was “supercharged” by Russia’s invasion of Ukraine.
Building more renewables would require investments in new transmission infrastructure that would put upward pressure on prices but he says the alternative would be to “build a lot more gas and coal [generation] and that is undeniably more expensive [than renewables] now.”
How significant are power bills to rising cost of living?
Given the Coalition wants to link the rising cost of living to power prices (even where there is little evidence that climate targets or renewables are having a strong effect on those prices) just how significant are electricity costs to rising overall costs?
The Australian Bureau of Statistics publishes its consumer price index (CPI), which pulls in how much Australian households are paying for a large basket of goods and services.
According to the ABS, electricity prices rose 6.9% over the last calendar year, which is above inflation. But data shows those price rises are slowing and are now at 2% annually.
In the last quarter, the biggest price rises were in rents, secondary education, tertiary education and medical and hospital services.
Comparatively, insurance premiums have gone up 16.4% in the last year, the ABS says, driven by “higher reinsurance, natural disaster and claims costs”.
But the ABS data also shows electricity prices are a small part of Australian household expenditure, at just 2.36% of overall costs.
Compare this with 3.35% for takeaway and fast food, 3.85% for wine and beer, 4.71% for hospital and medical bills, and 6% for rents.
The cost of renting is now rising by 7.8% annually, according to the most recent ABS quarterly update, “the strongest rise since the March 2009 quarter”.
Prof John Quiggin, an economist at the University of Queensland, says when it comes to electricity prices compared with the CPI as a whole, “it’s evident that rising electricity prices haven’t been a problem for some time” although they do disproportionately affect lower-income households.
Quiggin says the public and politicians are fired up by their power bills “because they come in a big chunk every three months and so it’s noticeable and they’re politically sensitive for that reason”.
He says relative to the CPI, electricity prices have fallen since around 2013 when, for the 10 years leading up to that point, electricity prices had been climbing largely because distributors were recouping their costs for building out the network.
Dutton’s nuclear ‘plan’ is not a plan
A word (OK, more than just a word) about Peter Dutton’s nuclear announcement on Wednesday, which will have been hard to miss. For many months, the Coalition promised more details but has so far offered very little.
Dutton suggested that the first nuclear plants could be up and running by 2035 if small modular reactors (SMR) were chosen, or 2037 for the 1,000MW or 1,400MW reactors designed by the white goods company Westinghouse.
Trying to assert that plants could be producing power by 2035 without actually saying what kind of plants they would be, or who would build them, or how large they might be (there’s a big difference between a 300MW SMR that has never been built and a 1,400MW plant) leaves an enormous credibility gap.
The Coalition again insisted nuclear power in Australia would be “cheap” but did not articulate how plants that won’t deliver electricity, in their minds, for another decade (or 15 years if you accept estimates from CSIRO and others) will help cut costs in the next few years.
Using the CSIRO’s estimates of nuclear costs, a 1,400MW nuclear plant would cost $12bn to build, but only once a nuclear building program is already up and running. Early plants could cost double that, the CSIRO said.
The CSIRO also said electricity from nuclear would cost at least 50% more than from solar and wind, but again that estimate was based on the assumption that Australia already has a nuclear program … which it doesn’t, despite the Coalition continually pointing to a 20MW research reactor at Lucas Heights in Sydney as evidence that we do.
And while you’re here, consider this. The Coalition said this week that one of the six nuclear reactors it would build in the east coast market would be a small modular reactor … which are not currently commercially available.
So if we generously assume the other five reactors are all 1,400MW units and the SMR is a 300MW unit, that means the Coalition’s nuclear plan amounts to 7,200MW of new generation capacity once they’re all built some time in the 2040s.
Is that a lot? Right now, there is 21,200MW of baseload coal-fired power capacity along the east coast, expected to fall to less than 5,000MW of coal left by 2035.
Perhaps another question for the Coalition might be: how do you fill that gap?
