Labor’s green gamble

Chris Bowen’s utopian models collide with reality as gloomy projections and fears of Foreign reliance haunt the government’s flagship project. BY NIck Cater

The good news is that the green jobs revolution we were promised in Labor’s Powering Australia plan has begun. The bad news is that most of the new jobs are in China, where a third of a million workers are employed manufacturing panels alone.

China controls 95 per cent of global photovoltaic panel production and its grip on the market is increasing. Manufacturing clean-energy units is a dirty business requiring a lot of energy, 60 per cent of which comes from coal. The International Energy Authority estimates that global production of solar panels is responsible for 51 mega tonnes of carbon dioxide emissions a year, some 60 per cent more than Australia’s entire industrial manufacturing sector.

Four out of 10 solar panels are manufactured in Xinjiang, the home of the Uighur ethnic minority, an estimated million of whom live in concentration camps. The US Uighur Forced Labor Prevention Act, which came into force this year, creates a presumption that anything made in Xinjiang uses modern slave labour and cannot be imported into the US without clear and compelling evidence to the contrary.

That ugly debate has barely surfaced in Australia where the virtue of Labor’s legislated targets is simply assumed. Energy Minister Chris Bowen has faced next to no scrutiny from the gallery about his failure to deliver cheaper electricity or the wisdom of relying on brutish communist China for our future energy security.

Buried in the fine print of last week’s first annual progress report to parliament by the Climate Change Authority is a warning that our dependence on China for renewable energy infrastructure leaves us vulnerable to a geopolitical shock not unlike that European nations now face because of reliance on Russian gas and coal.

High commodity prices and supply chain challenges have increased the price of solar panels by 20 per cent in a year. There are similar rises in the price of batteries and, while Australia might benefit in the short term as one of the world’s largest sources of lithium, most of it is processed in China.

Bowen said last week that the Climate Change Authority’s warning will “need to be an ongoing focus”, which is some way short of saying he is taking it particularly seriously.

The authority’s statement to parliament exposes the modelling Labor relied upon for its Powering the Nation plan as worthless. A year ago, Anthony Albanese claimed the Reputex modelling was “the most comprehensive modelling ever done for any policy by any opposition in Australia’s history since Federation”. Now we learn its key objective, a 43 per cent emissions cut by 2030, won’t be achieved with the current settings.

Government agencies are sounding the alarm about Australia’s increasing reliance on China for its renewable energy needs.

The forecast of a $275 decrease in household energy bills in Labor’s first term went out the window long ago. Treasury forecasts energy bills will rise by 56 per cent in the next two years.

The promise of green jobs will be partly fulfilled, but it seems highly unlikely there will be anywhere near the 600,000 Labor promised or that many of them will continue beyond the construction phase.

Our reliance on the Saudi Arabia of solar panels is only one of the risks that makes the fulfilment of Labor’s grand plan highly improbable. The authority notes community acceptance, or social licence, cannot be taken for granted.

Australians may be in favour of clean energy in theory but they don’t want a wind or solar mega-plant in their backyard. Nor do they welcome the new transmission lines that connect them. Opposition is growing in regional and rural communities from Tasmania to Townsville.

In summary, Bowen’s timetable of installing 670,000 solar panels and 40 giant wind turbines every month from now until the end of the decade has collided with the roadblock of cold, hard reality. The only way to make the grid accommodate 82 per cent of greenish energy in the mix will be to hasten the exit of coal and gas and shut down heavy industry.

Rather than admit its pre-election modelling was wrong or bow to the economic reality that the huge capital investment in wind, solar, storage and transmission will push up the cost of energy, the government is resorting to coercion. If the markets won’t conform to the government’s perfect plan, they must be forced to do so.

Placing a ceiling on the price of coal and gas is one of the crudest forms of economic interventions known to humankind. Rather than address the shortage of supply, the government plans to add another disincentive to new investment.

Milton Friedman said the surest way to turn tomatoes into scarce commodities was to pass a law to prevent them being sold for more than two cents per pound. “Instantly you’ll have a tomato shortage,” he said in 1978. “It’s the same with oil or gas.”

Rising coal and gas prices are not the fault of Vladimir Putin, greedy energy company boards or a shortage of investment in wind, solar and batteries. They are the predictable consequence of placing unreasonable financial and regulatory burdens on the investment of capital in new and expanded resource extraction.

The distortions are already apparent. Woodside Energy is threatening to withhold new gas investment on Australia’s east coast, where the shortage of gas is most keenly felt. Who can blame it if the size of the return on its capital will be determined by political decisions made in Canberra.

Bowen, sadly, is not the kind of person to reach for a plan B, even if he had one. Those who have dealt with the minister say he does not welcome contrary advice. Just ask Paul Broad, the former chief executive of Snowy Hydro, who resigned after falling out with Bowen over the technological readiness of so-called green hydrogen.

Friedrich Hayek could have been thinking of Bowen when he described the mindset of the central planner: “The man of system…so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it.”

The Prime Minister would do well to use his Christmas break to consider an early cabinet reshuffle.