TiP

Despite all the pious words she has uttered since trampling Kevin Rudd’s hopes of a comeback to government leadership, Prime Minister Julia Gillard still presides over a regime in spin mode.

We are told endlessly that she aims to deliver a “clean energy future.” It was top billing in her morning after “going forward” interview with ABC Radio current affairs. But, as the sudden chop for the household rebate scheme for solar hot water systems demonstrates, the rhetoric constantly over-runs reality.

As it happens, I was in the New South Wales Southern Highlands speaking to a company’s senior management retreat on the day parliamentary secretary Mark Dreyfus announced the scheme’s closure.

My theme at the forum, in looking at electricity policy, was illustrated by a version of some lines from T.S.Eliot’s famous poem, The Hollow Men: “Between the dream and the reality falls the shadow.”

This sums up the whole “clean energy future” proposition.

For the solar sector, the shadows have been lengthening locally for some time.

The fact is that the Rudd government and then Gillard’s administration have been in a muddle with the solar hot water scheme from the get-go.

The most important failure is that it has contributed over two years to undermining the headline policy aim of delivering 20 per cent renewable electricity by 2020 because it created a glut of trading certificates in the RET market through its (separate) small-scale subsidy scheme.

It is reckoned to be 2014-15 before this problem washes through the market.

And the small-scale RET arrangements continue unaffected by the Dreyfus announcement.

The second important failure is that Rudd, Penny Wong & Co, in their eagerness to demonstrate being green, ignored the benefits to be had from high efficiency gas water heaters – just as they sidelined the Australian-designed BlueGen fuel cell, which is substantially more efficient than rooftop solar panels in reducing greenhouse gas emissions.

Meanwhile, as things have turned out, the high value of the Aussie dollar has made importing gas hot water systems much cheaper, undermining the solar offerings despite the subsidy.

The federal government led a CoAG decision to phase out electric resistance water heaters, used in most homes, but ignored the fact that the decision will increase householders’ costs, not least the upfront capital cost they will be asked to bear. No compensation here.

Meanwhile the government has thrown $320 million in taxpayer funds at the solar hot water scheme – under which households got a $1,000 rebate for installing a PV system or $600 for a heat pump system, an opportunity taken up by 250,000 out of nine million residential account holders – and the industry built around the subsidy was hanging out, with Greens support, of course, for an extension of the hand-outs beyond June this year.

Instead, it got 59 minutes’ notice of the scheme’s closure.

Not surprisingly, there are howls of protest from manufacturers and installers.

Rheem says the crash stop has left “tens of millions of dollars” worth of solar systems sitting in warehouses and, in its business, threatens 400 jobs.

This, as the federal opposition was quick to point out, is a reprise of the pink batts shemozzle, which left warehouses around the country stocked to the roof with unwanted insulation.

This incident is just a tiny aspect of a much bigger “falls the shadow” issue with the Gillard government at home and others arounds the western world.

The divide between the “clean energy” rhetoric and the reality of energy markets could hardly be larger.

Driving down the Hume Highway to the Southern Highlands on Tuesday I picked up a phone call – my mobile is hands-free, built in to my Honda Prelude 13 years ago – to ask if I had read the new BP “Energy Outlook 2030”?

I hadn’t, but I have scanned it now and what BP is spruiking underlines the Eliot thesis.

First, on BP’s outlook, global energy demand will rise 40 per cent by 2030 – the equivalent to adding another China and another America to consumption.

Second, 96 per cent of this growth will come from emerging economies, half of it from China and India.

Third, fossil fuels will supply roughly 80 per cent of demand in 2030.

Fourth, global carbon dioxide emissions will rise by almost 30 per cent.

Fifth, new energy supply technologies are by no means just the realm of renewables – with natural gas being a very big feature of the energy world two decades from now.

However, as the company’s chief economist, Christof Ruhl, points out, in 2030, for the first time since the industrial revolution, there will be no single dominant fuel

BP is especially interesting in its outlook on renewable energy.

This is a company that has spent $US7 billion since 2005 on renewable ventures, says its aim is to create large-scale commercial businesses not dependent on subsidies and has not been shy of walking away from developments, the embattled Moree solar farm project being a case.

Its outlook says that just 11 per cent of global power generation in 2030 will come from renewable energy.

(And it is worth bearing in mind that the biggest single renewable energy supply effort in the world today is China’s 220,000MW of hydro-electric capacity, a long way ahead of its 40,000MW of intermittent wind capacity. But the greens hate hydro.)

Read the BP projection against the endless boosterism of green advocates and rent-seeking renewables wannabees – or vote-seeking politicians.

The rather desperate Bligh government is running at polls with a claim that “Queensland is set to become a major force in Australian renewable energy,” asserting that sufficient green power will be built in the next eight years to deliver 9,000 gigawatt hours a year at the decade’s end.

Read the State government statement more carefully and it is signalling that, like others around the country, it will slash the feed-in tariff in the unlikely event it is re-elected.

Its numbers indicate installation of PVs will fall dramatically from the 2010 and 2011 levels achieved with subsidies. There’s only one reason for that.

This, of course, opens the door to Campbell Newman and the Liberal National Party to take similar action.

The Bligh government propaganda also doesn’t highlight that the 2012 version of its 2009 policy has given away the idea of having 250MW of geothermal power in the State by 2020. It now predicts 5MW.

Read this stuff against the green arguments to us here to follow the European example, with, they say, renewables sure to account for half the EU’s power by 2030.

BP sees 26 per cent of EU demand coming from renewables in two decades – and, in fact, how far the enormous subsidies that have been on offer for the past 12 years will be extended remains to be seen as Europe writhes in the thrall of its economic crisis and a political backlash from workers and families told to bear a large part of the belt-tightening burden.

Or perhaps you could read it against the comments of Zhang Guobao, the top Chinese energy figure, chairman of the advisory board of China’s National Energy Committee, who told a Rio Tinto/Energy Policy Institute breakfast in Brisbane on Tuesday, that his country expects to use four billion tonnes of coal in 2015, more than half the world’s total consumption – and will need to treble its nuclear capacity to 40,000MW by the middle of the decade to ensure that it doesn’t find itself scrabbling to locate much,much more in the way of fossil fuels.

As I have written here and in the Coolibah newsletter, parsing the Bureau of Resources & Energy Economics projections to 2034-35 suggests that Australia will consume more than one billion tonnes of coal over the next quarter century – versus four billion tonnes annually in China.

Eliot’s poem is famous for how its finishes: “This is how the world ends – not with a bang but a whimper.”

Perhaps the new model “real Julia” could give us a real perspective on her “clean energy future” but then her leadership may well be consigned to the whimper basket before we get back to the polls federally.

For investors, the really big question is when might they actually see an Australian energy policy that is practical, durable and not chasing shadows?

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