Renewable energy has a bright future in Australia

Comments on Paul Kelly, Editor-at-large for The Australian “Renewable energy target initiative is mad, bad tokenism”, 19 /08/2009, http://www.theaustralian.news.com.au/story/0,25197,25949700-12250,00.html

Paul Kelly is a well respected commentator in Australia and is mostly balanced in his comments. What he says should be listened to very carefully. However, although I hate to say this, I may have to disagree with him on this issue.

I think some comments make sense that the energy consumption worldwide is unsustainable and the market has been unable to price the true costs of energy consumption. It is a market failure in the global scale. Energy consumption is underpriced for two main reasons, one is that fossil fuels, like oil, gas and coal are limited resources and not renewable, current level of consumption means sooner or later they will be gone, but the market does not take that into account.

The other major failure is the carbon emissions into the atmosphere to form greenhouse gases. This means there is a very big negative externality of fossil fuel consumption.

In this context, to develop and use more renewable energies is a correction of the significant and known market failures. Yes, it is difficult to price fossil fuel from long term sustainability point of view, although the price for limiting carbon emissions may be easier to determine. Nevertheless, renewable energies are likely to be competitive if all the costs of fossil fuels are considered.

Australia has a huge advantage over most other countries in developing renewable energies. It has one of the lowest population per land unit. Most of its vast land enjoys excellent sunshine all year round. It is surrounded by sea from all sides. So there are the most enviable natural conditions in Australia to develop renewable energies.

Further, Australia has also been in the forefront of solar energy technologies. It was reported that California will use an Australian firm’s solar technology to construct a large scale solar energy base. So why don’t we put that technology into good use and improve Australia’s energy consumption and contribute to the global effort to combat global warming?

The Australian Industry Group submission, the Business Council of Australia, the Productivity Commission submission and the Ross Garnaut argument, well all respectable, seem all miss the point of market failures, or at least have not take the full account of them. Besides, the AI and BCA are business focused and there is self interest involved.