Australia’s energy crisis is making it uncompetitive globally
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Australia’s energy crisis is making it uncompetitive globally

SOARING energy prices have long been notorious among Australians trying to settle the house bills.

The country of 25 million has been plagued with energy woes for decades with blackouts in South Australia, the shuttering of coal-fired power plants, and a surge in energy poverty, causing major headaches for regular Australians and hours of political debate in parliament.

The impact on everyday Australians has been building for a long time, and a new report from the United States Studies Centre (USSC) highlights the detrimental effect it is now having on the country’s economy.

As other countries master their energy woes, Australia’s soaring prices are affecting its standing in the world. China is the world’s biggest investor in renewable energy, the United Kingdom now generates more electricity from wind farms than from coal power plants, and the United States has one of the world’s largest installed solar photovoltaic capacities. Australia, however, is still in a deadlock over renewable sources and environmental policies.

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This uncertainty and Australia’s struggle to get to grips with its energy crisis is pricing it out of the international business market.

Economy and global business

In a globalised economy like Australia’s, high energy costs pose an immediate threat to industries such as manufacturing, chemicals and steel, which consume high levels of energy, the USSC report said.

A 25 percent increase in electricity generation prices and domestic gas prices would cost more than 33,000 Australian jobs and 1.15 percent of GDP.

With energy prices so high, business will look elsewhere – and they have plenty of options. The report found Australian households and businesses pay two to three times more for their energy than their American counterparts.

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Tesla Powerpacks in Hornsdale, Australia. Part of the world’s largest litium-ion battery. September 29, 2017. Source: Tesla/Handout via Reuters

On top of being overpriced, Australian energy is also unreliable and offers less tariff transparency than the US.

The study of individual businesses currently operating in Australia found some firms will cease operations altogether if they cannot secure economically viable gas prices for 2019 and beyond.

Impact on the people

The Australian people are also feeling the pinch with 70 percent saying power bills are putting pressure on household budgets. The cost of energy is also top of the list of issues that Australians want the government to make a priority, according to a survey by Australian Futures Project.

Almost all Australians are taking measures to keep their costs down (94 percent). Ninety-one percent make sure to switch off lights when not using a room, and 74 percent use energy efficient light bulbs. Australians are also looking around for better deals with a different energy provider, with 21 percent saying they have switched energy providers in the last 5 years.

The burden of higher electricity prices is falling disproportionately on the shoulders of low-income households.

SEE ALSO: Energy cooperation between Canberra and Tokyo could help keep the lights on in Asia

A report from the Australian Competition and Consumer Commission (ACCC) found over the past 10 years the average bill went up by 56 percent. Real wages, however, have only increased by six percent over the same period.

People want answers as to why the prices are spiralling out of control, and the majority are not buying the party line that it’s due to the transition to renewables.

What’s going on?

Much of the official blame for skyrocketing prices has been placed on this renewable transition and the need to invest in the nationwide network either to increase capacity or to improve it due to underinvestment in maintenance.

Another component is the uncertainty of environmental policies.

Political infighting over climate change and carbon pricing has led to a tug of war when it comes to effective policy. Amid the wider debate around coal-fired power and Australia’s transition to low-carbon generation, high energy prices have at times been wielded as a political club.

The contentious issue of climate change has ended several political careers. But the partisan squabbles over coal and renewables is only part of the problem.

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Cattle on a dry paddock in the drought-hit area of Quirindi in New South Wales, Australia, August 7, 2018. Source: Glenn Nicholls/Shutterstock

The USSC report urges Australia to increase the supply of cheap domestic gas, pointing to America’s successful policy and infrastructure that has allowed US gas and energy prices to remain flat or decrease over time for homes and businesses.

While Australia may well have the supply to do this, gas companies are locked into long-term contracts to export the vast bulk of their supplies to Asia, limiting the resources back home and contributing to price hikes.

USSC suggests an increase in gas usage could solve both political and economic problems. With its dramatically smaller carbon footprint relative to other fossil fuels, natural gas could act as a transition fuel while the renewable infrastructure – and political agreement – is put in place.

But by requiring Australia’s electricity sector reduce emissions by 26 percent, old wounds were reopened which split the government along ideological grounds, forcing then-Prime Minister Malcolm Turnbull to strip requirements for reducing greenhouse emissions.

What the USSC is suggesting is major reform to Australia’s energy markets before they stand a chance of being competitive with the US. But with only five more sitting days of parliament, things are unlikely to change before the next election.