A submission to the Victorian Government’s issues paper
“driving investment in renewable energy in victoria”
ENERGY ISSUES PAPER 40
The Victorian Government is proposing a major expansion in wind power. It intends to boost renewable energy to 10 per cent of the total electricity supply by 2010. This is double the likely share of renewable energy under present trends at current subsidy levels.
The cost impositions of this additional generation are estimated to be $78 per MWh compared with $34 per MWh for commercially produced electricity. Cost premia also include the intrinsically higher cost of wind derived electricity and the expenses associated with back-up plant that the poor reliability of wind energy makes necessary.
The Victorian Government proposal would require a tax on existing commercial energy supplies or new subsidies to selected projects. The tax equivalent of the new subsidies necessary to make additional renewable energy viable amounts to a new impost on the Victorian consumer of between $108 and $135 million per annum. Because this
proposal would require assurances of subsidies for at least 15 years, it involves a “wealth tax” on Victorians of between $981 and $1,230 million. Additional second round cost imposts will also be incurred because of electricity’s essentiality within the modern economy and the particular importance of low cost energy to Victoria’s industrial and commercial structure.
It has been argued that such measures will also create jobs. However, protectionist policies involving job subsidies have proven to be unsuccessful in Australia and elsewhere. This is because the increased costs result in job losses that more than offset any that are created. Moreover, the subsidy equivalent per job of wind generation makes this proposal especially undesirable. The subsidy for wind generation is estimated at between $600,000 and $1,000,000 per job.
Policies regarding greenhouse gas emissions are the responsibility of the Commonwealth Government. State Governments do not have the appropriate national perspective or the expertise to undertake such activities. To the extent they seek to implement separate policies, they are likely to encourage a job migration to jurisdictions that avoid incurring the costs.