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FRIDAY 12 NOVEMBER, 2010 |

The Cheap Energy Era That Wasn't

by Energy Matters

As the era of "cheap" energy courtesy of fossil fuels draws to a close; it's becoming increasingly apparent it never really existed.

Our addiction to fossil fuels appears to have been a case of "easy credit" - where you get the goods immediately, but the paying is always hard and long and the full costs not always apparent at the point of sale.

"Cheap energy" been a death of a thousand small cuts and the repayments will not only be made by us, but by future generations - both in monetary terms and otherwise.

There has been a great deal of negativity in the media on the issue of renewable energy rebates, but what many people don't realise is they have been paying heavily for "cheap fossil fuel" for years.

According to 1Block Off The Grid, U.S. taxpayers have contributed over $500 each towards fossil fuel subsidies in the past 5 years, compared to just over $7 for solar power. Subsidies do not come out of thin air; they are the result of indirect taxation or tax breaks that see less revenue coming into government coffers. Ultimately, the cost is borne by the taxpayer and the consumer.

1Block Off The Grid states that if solar power received the same financial support as fossil fuel in the U.S., solar energy would be cheaper than fossil fuel generated electricity across the nation. It's worth noting too that no energy sector in the USA has ever been developed without subsidies - so why is solar sometimes portrayed as the bad guy when this is normal evolution? There is a villain, but it is elsewhere.

An issue often overlooked is the real reason why solar power needs to be subsidised at all. All the effort and resources that have gone into propping up polluting fossil fuel industries for decades have been at the expense of clean, renewable energy technologies that have been kept on the outer.

It's worth pondering where solar power would be today and how cheap it would be if governments had focused more on the technology earlier. Even Thomas Edison realised solar power's potential - 80 years ago. Today, we are simply in catch-up mode.

Skyrocketing electricity prices have been a "short, sharp shock" for a variety of reasons and solar is only a bit player.

In March this year, Minister for Resources and Energy, Martin Ferguson said State and Territory Governments have at times endeavoured to hold back necessary price increases and those decisions are now "coming home to roost." This paying of the piper had nothing to do with solar power, but an urgent need to invest at least $100 billion in electricity infrastructure over the next decade; just to meet growing demand and replace ageing infrastructure. Distributed electricity generation, such as can be achieved through rooftop solar power systems, can help decrease these costs.

Just as Australia's massive tobacco tax is used by the government to help reduce smoking, the unwelcome increases in electricity prices will help us to kick another filthy habit - coal. It will encourage energy efficiency and also make clean and renewable energy sources comparatively cheaper.

This situation we find ourselves in is little comfort to struggling families, but the solar industry isn't to blame; it's been the pile of loans we've collectively taken out in the form of fossil fuel that came with a high interest rate - loans that are now demanding to be settled in full.

In a sense, even solar power rebates and incentives are really still just fossil fuel subsidies. It's a puzzling situation and akin to a snake eating its own tail. The solar subsidies exist in part to combat the effects of fossil fuel subsidies that keep those polluting fuels artificially cheap. It's a curious and confusing form of fossil fuel double dipping.

The renewable energy subsidies help to stimulate uptake of solar power and in the process drive down prices so that solar and other forms of renewable energy can become dominant in our energy mix to battle the problems that fossil fuels are causing. Whichever way you look at it, the problems all seem to come back to fossil fuel

While the most logical option might seem to be to just phase out electricity related fossil fuel subsidies in all forms as that may then make unsubsidised solar power still competitive and provide benefits including lower taxes and a healthier environment, that's unlikely to happen.

Thankfully, solar grid parity is rapidly approaching regardless - unless of course the clean energy revolution is somehow derailed.