Aussie Election 2019: More Energy!

Australia has so much going for it as a nation.

Since I first moved Down Under in 2003, the country has achieved double to triple the economic growth of countries such as the US, Germany, UK and France. Despite this, many ASX-listed companies have lagged their international peers. 

In politics, the nation’s Prime Ministers have similarly struggled to turn domestic growth to their political advantage

In politics, the nation’s Prime Ministers have similarly struggled to turn domestic growth to their political advantage. Too many have become obsessed with retail politics, otherwise known as relentless short-termism. The cold, hard evidence of opinion polls and electoral results, however, demonstrates that voters are not impressed. 

It’s time for our leaders to cast aside sound bite policy and focus first on the long term. I warrant they will be amazed by how popular this turns out to be in the short term. To mirror the rapidly approaching twelve days of Christmas, I see twelve areas which are screaming out to be included in any politician’s manifesto for the 2019 election. 

Let’s start with energy, one of the most fundamental human needs, which is logically considered hand in glove with responses to climate change. 

I propose a market-driven approach to energy. This must take account of ongoing changes in the cost-competitiveness of new forms of energy generation. Put simply, renewable energy sources such as solar PV and wind generation are falling in cost year by year, whereas the cost of sources such as coal and gas have continued to increase over the long term. This is because renewable energy sources benefit from Moore’s Law type efficiencies as technology improves, whereas century old technologies have more or less reached maximum possible efficiency. 

The cost of storing energy is also falling rapidly too, for the same reason. This means that Australia is fast approaching the point for where it will be cheaper for some end users to invest in energy storage than it is to maintain the full reach of electricity distribution and transmission networks (let alone build new ones). When the entire cost of providing energy (ie generation, transmission, distribution and storage) is taken into account, local renewable generation plus storage will very soon be cheaper than the conventional approach – indeed in locations which necessitate greater investment in transmission and distribution, this is already the case. 

This is not a religious view. It’s simply science and economics. 

This is not a religious view. It’s simply science and economics. One simple piece of evidence for this is the sheer volume of private sector (free market!) investment funds that are targeting investment in renewable energy as a 21st century asset class, as well as the substantial withdrawal of capital from prospective coal projects.

This highlights the wider benefits from riding the huge multi-trillion dollar wave of investment that will finance the replacement of 19th century fossil fuel energy sources with 20th century renewables (solar PV nor wind are well-established technologies that have only recently become economic for mainstream use). Australia can become a global leader in how to manage this renewal, in urban planning, community development and financial investment terms, just as it has been in infrastructure investment more broadly over the last couple of decades.

To ensure a level competitive playing field, all subsidies for fossil fuels in any form should be abolished. At the minimum, any fossil fuel subsidies that are retained should be matched dollar for dollar by subsidies designed to encourage an accelerated transition to renewable energy and increased emphasis on household energy efficiency. 

And remember this: Australia may have cheap coal, but energy from the sun and wind are both free. Australia has an abundance of solar energy in particular – more per head of population than almost any country on earth. A transition to renewables will translate into cheaper power for everyone in the country, and long-term economic advantage for the whole nation. Forward-looking countries such as China are already well-advanced on this path. 

Australians should see Paris Agreement commitments an opportunities, not obligations. Significant economic upside lies in building our reputation as one of the cleanest nations on earth – this will benefit our massive exports of agriculture and tourism. Education exports many benefit as well, given the positive implications for the already excellent quality of life that the country offers. 

Accordingly, there should be no Government support or subsidy for projects that work counter to these objectives, such as coal mines. Why should inbound tourists heed advertising campaigns urging them to visit the Barrier Reef, if they think Australia cares more about coal exports than its marine environment?

Conversely, measures must be introduced to support the creation of new employment opportunities in communities that will be adversely impacted by the progressive closure of relevant industries. Australia will benefit materially from the transition to renewable energy, so it is important that a little of this upside is set aside to help those who bear the brunt of this once in a century transition. 

Finally, measures should be introduced to encourage an early shift to electric vehicles. With one of the most urban populations in the world, Australia is ideally placed to lead this transition. Whilst range is often cited as a barrier to this shift, the average car in Australia travels just 225km to 275km a week. This is well within the range of the current crop of electric vehicles, even with a single weekly charge. This would be a further significant step that achieved an urban trifecta, benefiting the environment, improving overall national energy efficiency, and reducing emissions.

Update #1: Since writing this, Clean Technica has reported that clean energy investment in Australia has topped $20bn in 2018. As I've explained above, this wave is building strongly and it is an easy one for any politician to catch!

What do you think?

What do you think? I warmly welcome your comments and perspective below. Meanwhile, I know that some people may find these ideas too radical. If you do, please ask yourself the following questions. What would persuade you to change your mind? What would convince you that the economics I’ve laid out above are right, rather than wrong? If your answer is a version of “Nothing!”, then at least acknowledge that your belief is religious, not rational. I’d argue that this is a poor basis for setting policy.

My firm @Pottinger has no political affiliations.