The "net zero" counterfactual argument in 2 questions

I want to spend some time collating my thoughts on a counterfactual arguments for the current state of Energy policy in Australia. 

With a Federal election announcement imminent and some significant policy differences across the spectrum of possible power holders, including minors in a hung parliament situation, there is very likely to be yet another change in energy policy.  

In addition , global political influences, particularly from the US, may push policy far further toward the other end of the spectrum that could have be imagined even just a few months ago. 

Australia has a terrible track record on Energy policy stability, as I will explain  with a short background on recent history and how we got here.

Australia’s climate policies has flip-flopped like a dying fish for decades. The reasons for this are relate to the political economy of electricity prices. As I have mentioned previously , there is strong evidence to suggest Australia's care about climate policy but only when it has marginal cost impacts on them. Once energy prices go up too much, support evaporates and politicians run for the hills. 

The Renewable Energy Target or ‘RET’ was legislated in 2000, but due to the dynamic described above has been reviewed at least 6 times, watered down, paused, unpaused , renamed and in the end failed forward to deliver a low-ball target and a half-baked certificate system in lieu of a price on carbon, or a carbon trading scheme.  Along the way energy policy, including carbon policy, has seen the end of many an Australian Prime Minister. Four if I remember correctly.

With this in mind Australia's investment path in VRE has been a stop-start affair which continues to this day.  Early on , even with the policy vacuum , investments slowly grew and RET targets, although watered-down were met in 2019.  By that time the cost for new entrance has fallen low enough that large-scale VRE was a realisable investment that could compete against existing thermal plant.

But it's all easy in the early days , in simple terms adding up to 20% VRE into the grid has no material impact aside from the cost of the generators. After that technical issues start to emerge and the re-architecting of the system as-a-whole has to occur... then come the costs.

The political history of energy policy means that politicians are keenly aware that energy price rises sink policy so the status-quo from all sides of politics is to obfuscate facts and bury costs inside other programs.

And this is where we find ourselves today. 

As we enter an election, neither side of politics will answer a straight forward question of costs and the bodies that should be providing independent advisory have very obviously been told to tow the political line. 

Climate Change and Energy Minister Chris Bowen has repeatedly said that renewables are the cheapest form of electricity production and that the total cost to 2050 of the new generation, storage and transmission required to reach net zero emissions is $122bn as listed in AEMO's ISP .

But this is very easily disproven on three very obvious and simple points.

1. The ISP is based on estimates of projects, not real world costs.
2. The ISP is missing parts of required investment that have multiple investment paths that are yet to be determined by NSPs.  
3. There is no account of the wholesale market dynamics caused by the introduction of VRE and the flow-on impacts of that to consumers bills. The initial infrastructure costs are only half the story.

The other point is that the ISP takes input from the CSIRO GenCost report which, by design, only considered future mechanisms of electricity generation that could meet the government's environmental policies. So it's not the cheapest form of electricity production at all, it's just the cheapest under the constraints of zero-emissions future, as defined by the government.   

It's obvious by now that no-one actually knows the final costs of the required infrastructure build out , and secondly they certainly have no idea of what the wholesale costs will be either.  

The only thing that is obvious is that consumer prices are going one way, and that is up.

And this brings me to the counterfactual that anyone arguing for the continuation of the green energy transition in this environment, especially the pollies, will have to have good answers for  .. in two simple questions.

1. If you remove the net zero and environmental constraints on the energy system then do the whole-of-system costs  for the renewables still make sense in comparison to any new or existing sources of electricity generation ?
2. Whether you believe in human-driven climate change or not, much larger nations continue to grow their thermal fleet at huge pace, completely offsetting any effort Australia could possibly make in regards to global CO2 emissions. Why give away our natural resource advantage, have higher energy costs, and wear the risks of the unknowns of re-architecting our energy network when the overall outcome on the world's environment will be inconsequential. 

And here are a couple of charts to back-up that second dot point.