How has the carbon tax affected electricity usage?

I am quite old enough to be able to remember the brown-outs of the late 1940s, especially 1949, when the Chifley Government had to fight against the unions in the coalfields, eventually using troops in the open-cut mines in the Hunter. And it is clear to me that cheap energy is the foundation of virtually everything we take for granted in contemporary Australia, as well as the basis for the trebling of our GDP over the past sixty years. Indeed, urban life (94 per cent of Australians) would be made quite difficult if there were to be a prolonged period of unreliable electricity supply.

As many readers will know, the carbon tax was a year old the other day, and a new higher carbon tax ($25.15 per tonne) came into effect on July 1st. So I thought it might be useful to discover what has actually happened as a result of the imposition of the carbon tax. There has plainly been no widespread economic disaster. What has happened is that we pay more for electricity (and lots of other things as well), and we’ll pay even more from now on. But what else?

As it happens, someone called Phil Hutchings has done the work for me, and you can read it on Anthony Watts’s website. Mr Hutchings seems to me to have done an excellent job. His essay is long and packed with data, which he has garnered from all the right sources. He started with the Department of Climate Change’s own account of the first year of the tax, and decided that he should check out its conclusions.

What follows is a most interesting story, which I summarise (but read the original — it is very good). The DCC’s account of things is apparently upbeat, with strong claims for the effectiveness of the tax in reducing emissions. In fact one of its diagrams shows clearly that there was a dramatic drop in CO2 production from electricity generation immediately after the introduction of the tax. And some 75 per cent of our electricity is generated from coal.

That seemed almost miraculous to Mr Hutchings, given the long lead times in almost everything to do with electricity generation, so he dug deeper. It turns out that Australia’s demand for electricity had been declining steadily since 2010, and in fact demand was higher still in 2009. The sudden reduction last year was mostly due to the flooding of a brown-coal plant in Victoria, which took it off line (brown coal produces the highest level of CO2 from all types of power stations).

Why have we gone off electricity? Well, we haven’t, really. But the reduction in demand for grid power has had a number of causes. First, electricity prices have risen by 80-90 per cent over the past five years, and that means we have all been more careful with what we turn on, and for how long, and at what level. Second, there was a rush to rooftop solar for dwellings, and while that has stopped, it had an effect on domestic grid production. Third, businesses in particular went in for energy efficiency measures. Fourth, there was a bit more wind power (but it is still only 2 per cent of supply). Fifth, we had a lot more water in the hydro dams, which made them more productive.

I’ll let Mr Hutchings deliver you his conclusions:

‘The cut in CO₂ emissions from Australia’s electricity sector has been a four year trend. Yes, the sector is responding to Government incentives with wind and solar PV installations. However, the fall in electricity sector emissions intensity in 2012 was due to a combination of events, and not necessarily due to the carbon tax:

a) Australia’s electricity demand was falling anyway due to higher retail prices.

b) There was a massive burst of residential solar PV installations in 2011 and 2012 which further decreased electricity demand.

c) Wind generation is steadily increasing.

d) Hydro generation remains stable.

e) Faced with the falling demand, the coal fired generators have been reducing output.

f) A once-off flood event temporarily closed one of Australia’s four brown coal fired stations in June 2012.

Did the carbon tax have an immediate effect on 1 July last year? On the face of it, it seems longer term policy factors were more at play in delivering this result than the carbon tax itself.’

I liked this piece of analysis, and the elegant way it was organised and presented. We are going to have a good deal of debate about ‘climate change’ during the election campaign, and I for one will point to Mr Hutchings’s careful work when I get told how effective the carbon tax has been.

It has certainly been effective in raising electricity prices, and every bill I get from  Country Energy tells me that ‘NSW Govt estimates that Federal carbon tax and green energy schemes add about $316 a year to a typical 7MWh household bill’.

Since the effect on greenhouse gas concentrations in the atmosphere is completely negligible, I keep wondering why we are doing this, while we are still exporting much more coal to other parts of the world. Then I remember, ‘we’re leading the way’. Oddly enough, I don’t feel at all gratified in this example of Australia’s leadership.