Finkel fail at Inside Story

Two of the best articles on the Finkel Review are at Inside Story – Giles Parkinson’s On climate, the consumer’s vote will be more important than the party room’s and Tim Colebatch’s The devils in Finkel’s detail.

Parkinson highlights the difference between promise and performance. Back in December, when the interim report came out, Finkel’s future looked exciting:

    We were in the midst of an unstoppable energy transition, he said, one based on cheap renewables, storage and smart software. And the technologies to address the reliability and security issues were at hand, though they were not being encouraged by the design of the market.

    The energy system, Finkel went on, would need to shift dramatically from a centralised model (aka coal plants) to a decentralised model (aka rooftop solar and storage). The power, quite literally would return to the people. It was all rather exciting.

What Finkel gave us in the final report in June, says Parkinson, is a minor tweak of what we’ve got now. After 2020 the RET is replaced with a CET (clean electricity target), giving a path to 28% renewables by 2030. Finkel says the CET is better for this than an electricity intensity scheme (EIS) but has modelled no other strategies, such as a high RET (which elsewhere is Parkinson’s preferred choice).

Also he does not road test his chosen strategy against a 2°C warming pathway, which would, in anyone’s language, require close to 100% renewables by 2050.

Parkinson says that Finkel is normally the smartest person in the room, and would know which way is up. Finkel says, for example, that storage is “arriving like a freight train”. Moreover he would know, beyond what the modelling told him, where renewable prices are going. He also says that gas is no longer necessary or viable as an interim technology.

Parkinson says the document was an exercise in the politically possible, giving the system a nudge in the direction it needs to go without alarming the climate denialists in the party room.

Ultimately, Parkinson says, consumers will decide the issue:

    If SA Power Networks, the grid owner in South Australia, is predicting that solar and storage will cost just 15c/kWh by 2020, less than half of the cost of grid power, then how many consumers are going to remain connected in thirty years’ time, when solar and storage have fallen even further and the grid is still ridiculously costly?

So:

    Ultimately, it will be this that brings sense to the policy-makers. The possibility of climate catastrophe doesn’t seem to do it.

Colebatch says there are two risks in the Finkel Review:

    The first is that the Coalition party room will find the recommendation’s ideology-free realism too much to bear, and either reject the target or accept it only with absurd add-ons like making taxpayers underwrite a new coal power station.

    But the other risk is that the Coalition, and Labor, will accept it as it is, and saddle Australia with a second-best solution – a solution that will be expensive and contentious to change once it becomes clear that the targets it’s designed to achieve are inadequate. (Emphasis added)

The second of those is my big worry. I suspect Finkel knows that we will wake up in fright in the future. So his real view is quite short-term. He has himself said that the CET is not scalable, which in all honesty then makes it irresponsible unless it is replaced fairly soon.

Colebatch’s piece has much detail. I thoroughly recommend it. I’ll highlight a few aspects that impressed.

Colebatch points out that no generator has built a new coal-fired station anywhere in eastern Australia for a decade. Finkel’s modelling concluded that no further coal-fired or gas-fired stations will be built within the national electricity market.

    Only an ideologically driven government would contemplate adding – or guaranteeing – a new coal-fired station now. The three big electricity firms (AGL, EnergyAustralia and Origin) have made it clear they won’t build one. But to placate the Abbotteer minority in its ranks, Malcolm Turnbull and Josh Frydenberg are now considering offering taxpayers’ money to guarantee the finances of a coal-fired power station, if anyone will build it.

He says Turnbull and Frydenberg are probably hoping that if the government moved to building coal, no-one will want to take it up.

Colebatch says the shortcomings of the modelling, carried out by the respected Jacobs group but under instructions from the Finkel team, were well demonstrated in Monday’s Australian by Adelaide economics professor Paul Kerin. The problems could have come from the assumptions provided by Finkel, which are not detailed.

Even so Colebatch, following Kerin, says:

    the Finkel report failed to disclose that its modelling found very different abatement costs for the two schemes [the EIT and the CET]. With an EIT, it found, greenhouse gas emissions could be reduced for $7.50 a tonne (a mere fraction of the price we expected a decade ago). But to reduce emissions via a CET would cost $10.50 a tonne – 40 per cent more. The gap in resource costs was similar.

So, how come Finkel gets the CET to be cheaper?

The answer, not revealed in the report, is that Victorian brown coal is assumed to keep operating. Finkel’s vision is to have Loy Yang A and Loy Yang B still operating in 2050, even though the first by then will be more than sixty years old, and the second well into its fifties.

No-one in their right mind could take that seriously, says Colebatch, but the Finkel panel did. Otherwise they would have had to admit that the EIS was cheaper. Problem was, an EIS was verboten.

Colebatch says it is quite unreasonable to restrict the targets for saving emissions in electricity to be matched by other sectors.

    It is simply not plausible to demand that farmers cut their cows’ emissions by the 28 per cent reduction that is Australia’s target for 2030 – let alone the 60 per cent reduction in emissions the modelling assumes for 2050.

Ditto for sheep, of course.

Colebatch favours an EIS, so he finishes:

    The technology is progressing so fast that it could sweep the whole debate into irrelevance. But it would help if we adopted the scheme that promises to reduce emissions at least cost, and that can be most easily scaled up to meet bigger targets. That is an emissions intensity scheme.

I can’t put my finger on the source, but I read somewhere in the last few days that many businesses are assuming that there will be zero emissions by 2050.

The people strongly favour renewables over coal, and when asked about the Clean Energy Target, are strongly in favour but not if electricity prices rise. Of course Turnbull and Abbott before him have promulgated the lie that renewables have pushed prices up.

The Climate Institute’s recent survey is perhaps instructive:

    Olivia Kember, the acting chief executive of the Climate Institute, said support for renewable energy had been steadfast across 11 years of the survey and was widely seen as “economically smart” and future-focused. This remained true, she said, “even as the public discussion of energy mix has got a lot more complicated”, with the federal government labelling renewables unreliable and costly.

    “It’s really striking that people have come out the other side of that discussion with really strong support for renewable energy and a strong sense that we need to go towards a cleaner energy system,” Kember said.

People put higher prices down to privatisation and poor policy-making. Seems they are fed up with the political climate wars and are over them. But many still have their heads in a strange place:

    The finding that one-third of respondents believed the seriousness of climate change to have been exaggerated – and that 13% did not believe it to be happening at all – aligned very strongly with political affiliation, in particular One Nation and Coalition voters.

Of course we should continue to persuade the recalcitrants, but in the end politically they need to be defeated.

2 thoughts on “Finkel fail at Inside Story”

  1. A very good overview and assessment of the situation Brian, thank you.

    First, Hewson today in the SMH spells it out why we won’t get sensible policy and government from the current coalition.

    Second, here is an example of why I argue that politicians itself are not the idiots but their backers. It is not Barnaby or Frydenbergs who are the idiots, it is their political backers. Look at their idiotic power base. Your last quote says, it all it is the green armband warriors rooting for their wall banging Big Man politician not akin of what is going on in the New Guinea elections at present. These soulless Murdoch zombies and nihilistic/self-absorbed empire building ghouls appeasing share holder portfolios. How do you communicate to these that; NO, you can’t phoenix out of a cataclysmic event on a global scale and it would be responsible to put risk management procedures into place. How do you deal with the stubborn bone headedness, often encountered in online discussions, and get them to realise, that an opinion is not the same as reasonable and valid established facts and these are more complex now then ever. Therein lies Malcolms Gordian knot, how is he going to untie this one and make his way in history like Alexander the great did? Has he got it within him, we will see.

    Third, I am not even sure wether all this matters. Given the political glacial pace and the current exploding digital startup Uber global changes it could be very likely that suddenly rather than catching up with good policies we will be leapfrogging in more ways than one. I have previously mentioned how the emerging Internet of Things will impact on this issue, there are remarkable undercurrents going on. These are in the main not covered in the MSM, who of course have their own agenda and battles. It will be a generational change and a revolution rather than evolution, thus an opportunity as a nation to grow up, learn from our past mistakes, buildup our resilience and be blessed with leaders with integrity as well as more mature citizenry.

  2. The trick, Ootz, will be to quietly get on with it, one household or micro network at a time, one small or medium business at a time; word of mouth, BBQ enrichment, chat to the builder, help out a neighbour, tweak a council by-law…..

    and hope the Big Govt doesn’t notice lest they tax the living daylights out of us!

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