Report points way out of Australia's energy crisis

If you haven’t noticed, Australia’s energy system is a train-wreck. However, a major new report from the International Energy Agency shows us how to get on the path to affordable energy bills. Electricity and gas prices have risen faster in Australia in recent years than any other major country. Our toxic politics have reduced the problem to a pantomime of renewables versus coal, but the causes are more complex.

Gas policy is a shambles. Building big gas export terminals without export restrictions pretty much guaranteed that gas would go up to international prices. And the failure of a number of projects to meet expectations means that many local companies are now paying much more for gas than the international price. In the electricity sector, we encouraged networks companies to spend far too much on poles and wires, which meant that network charges rocketed up. On top of that, a bunch of old generators are at the end of their life and whatever we replace them with, including new coal-fired generators, will be more expensive.

That’s the bad news – gas and electricity prices are much higher than they used to be, and they’re going to stay high for a while. So what’s the good news? Because energy was cheap for so long, our system wastes a lot of it. This means if we help homes and businesses save energy, we can dramatically cut our energy bills.

The IEA’s new report on energy efficiency makes some stark points. First, we can save a lot of energy. Recent improvements in energy efficiency cut gas use by 21 per cent in Germany and 27 per cent in the UK. Australia could easily make these kinds of gains, with many of our manufacturers able to reduce their gas bills by 10 to 50 per cent. This wouldn’t just reduce gas bills – it would actually reduce gas prices.

Improvements in energy efficiency can also help households. The IEA report found home energy bills are 10 to 30 per cent lower thanks to energy efficiency. However, it’s not just about affordability, it’s also about energy security. Energy efficiency was essential to help the UK and France meet their energy security targets, and over here smart energy use could deliver much more capacity than Hazelwood and Liddell power stations put together. What’s more, energy efficiency helps grow the economy. The IEA calculated that improvements in energy efficiency in 2016 increased global GDP by an estimated AUD $2.8 trillion – twice the size of the whole Australian economy. And while it’s delivering this boost to the economy, energy efficiency was also the main reason that global greenhouse gas emissions stabilised. Improvements in energy efficiency accounted for 75 per cent of the reduction in emissions from the energy sector since 2014, far more than renewables or shifting to gas.

However, the IEA found that over the past 16 years, Australia has fallen well behind the rest of the world on energy efficiency policy. And the lack of strong policies is a major factor behind our massive energy bills.  

This means we have a huge opportunity. If we adopt the basic policies common in almost all other developed countries, we can cut energy bills, boost energy security and keep businesses thriving. These policies include support to help manufacturers save energy, minimum standards for homes to protect renters and minimum fuel-efficiency standards for cars. Our governments need to massively ramp up their ambition in energy efficiency. It won’t solve every problem, but it will dramatically cut the pain for energy users and buy us some breathing space to fix up our energy system.

Rob Murray-Leach is head of policy at the Energy Efficiency Council.