Are renewable energy policies hurting farmers?

 

Senator Janet Rice
Australian Greens Senator for Victoria


Senator David Leyonhjelm
Liberal Democrats Senator for NSW

Q1.  Relatively low energy costs were previously a competitive advantage for Australian farms and agribusiness, but this advantage is rapidly being lost as energy costs rapidly increase. What do you believe are the main reasons that Australian farmers have experienced such significant increases in their energy costs?

 

Senator Janet Rice

The primary reasons for increasing energy costs for farmers are twofold.

The first is the massive blowout in both the contract and spot price for gas, which not only provides primary energy for many farm businesses, but sets the price in our electricity market. The blame for this price increase can be laid at the feet of the massive liquefied natural gas (LNG) industry in Queensland and both the Labor and Liberal governments who failed to put in the regulation to make sure that the LNG exporters were sure that they had sufficient gas to export before going into these multi-decade contracts.

The second is the ongoing investment strike in the electricity sector because of Malcolm Turnbull’s inability to pass a climate policy. Until the Government puts together a credible roadmap for us to get to a low carbon electricity sector, we will continue to have an investment strike. Wind and solar are already cheaper than gas and new coal, but we need government setting responsible policy to give investors the confidence to put their money in.

 

Senator David Leyonhjelm

For more than a decade Commonwealth and state politicians have discouraged private-sector investment in fossil fuel based electricity generation with the renewable energy targets and incentives, as well as threatening other policies that discriminate against fossil fuel generation.

They have also maintained a ban on nuclear generation, which offers zero greenhouse gas emissions.

By restricting the supply of reliable, unsubsidised electricity in this way, electricity prices have been driven up.

This has had a perverse benefit for state politicians, because higher electricity prices generate more GST revenue.

Unwarranted restrictions on the gas industry, including moratoriums on exploration and extraction have also contributed to the current situation. Victoria even has a ban on conventional gas exploration. As confirmed by the NSW Chief Scientist’s recent report, these bans have no scientific basis.


Q2.  Some have claimed that the switch to renewable energy sources has been a major cause of energy cost increases and supply instability. Do you believe that Australian and state government renewable energy policies have impacted on energy prices and supply stability, and if so, what do you think would be a preferable policy approach?


Senator Janet Rice

No. It is not renewables policies that are affecting price and stability, but rather the complete lack of planning by the Federal Government for an energy transition. While it’s true that the variability of wind and solar does create new challenges for balancing supply and demand, the evidence is in that these can be solved with smart investments in electricity transmission and storage infrastructure. By moving electricity around the country from places where it is sunny and windy to where it is not, or by storing electricity in the form of heat, pumped hydro or the chemical energy in batteries, we can ensure that we maintain secure electricity supply around the clock.

The state based Renewable Energy Targets are a response from some states to a do-nothing government. Everybody agrees that we need to move to a zero-carbon electricity grid as soon as possible, but the private sector will not invest in this infrastructure if they can’t have confidence that they will get a return on these investments. And without a credible national plan for the future of our energy sector, we’ll continue to have policy and investment chaos. It’s time for Malcolm Turnbull to act.


Senator David Leyonhjelm

Electricity prices have skyrocketed, and electricity supply has become less reliable, because Commonwealth and state politicians have discouraged new fossil fuel based generation and banned nuclear power.

To provide households with immediate relief from high electricity prices, electricity should be made GST-free. Water is already GST-free, and electricity is as much an essential service as water. Making electricity GST-free would save households hundreds of dollars a year. State and territory governments have room in their budgets to manage the reduced GST revenues that would result.

In addition, a number of policy changes are required to make Australia’s electricity supply cheaper and more reliable over the long term.

  • The Renewable Energy Target should be suspended and the commitment to reduce Australia’s greenhouse gas emissions withdrawn until most big-emitting countries implement measures to reduce their emissions. That includes Brazil, Russia, India and China. Suspension of the Renewable Energy Target, under which electricity users pay billions in annual subsidies to wind and solar generators, would allow for an immediate reduction in electricity prices.
  • A binding commitment should be given to potential investors in new fossil fuel electricity generation that no carbon tax or equivalent will be introduced unless in parallel with similar measures introduced by the major world economies.
  • The ban on nuclear power should be lifted.

Q3.  There has been a lot of opposition to coal seam gas exploration and development in regional Australia, and the resulting shortfall in gas supplies has been identified as a reason gas prices have increased. Do you think reducing restrictions on coal seam gas would help to reduce gas prices in the long run, and what policies do you think are needed to better manage interactions between gas companies and farmers?


Senator Janet Rice

Coal seam gas has not only put our aquifers and climate at risk, but has failed to stack up economically too. Even today with gas prices through the roof, the major gas companies are sitting on massive coal seam gas fields in Queensland and New South Wales and refusing to develop them because they know that the gas is just too expensive to extract. And with all the excess LNG capacity sitting in Gladstone, no extra supply of gas will be able to bring down the gas price back below the world LNG price. The era of cheap gas in Australia is now over, and it’s up to governments to set a course for clean and cheap renewable energy, phasing out gas while maintaining security of supply as we transition.


Senator David Leyonhjelm

Restrictions on coal seam gas are based on theoretical concerns about fracking and its impact on water. In reality, after decades of fracking in the United States (US) and other countries, none of these fears has been confirmed. If undertaken responsibly, unconventional gas extraction is entirely safe.

Reducing restrictions on coal seam gas development would significantly increase gas supply and lower domestic prices. Subject to price, gas is competitive with coal for electricity generation and also generates lower emissions.

The main policy measure that would significantly increase supply of unconventional gas is to establish an incentive for landowners. A statutory royalty based on gas sales, for example, would ensure landowners had no financial reason to oppose exploration or extraction. A sound complaints process to help resolve disputes between explorers and landowners may also be of assistance.

State governments should also remove restrictions on exploration and extraction on Crown land.

The investment in unconventional gas in the US has transformed that country’s manufacturing sector and dramatically reduced reliance on imported oil. The same benefits could accrue to Australia if restrictions on development were removed.