Nothing new under the sun: a nation falls behind

• Royce Millar
• The Age, January 31, 2009
• http://www.theage.com.au/national/nothing-new-under-the-sun-a-nation-falls-behind-20090130-7u11.html?page=-1

JIM Thomson is hot, and bothered. Each day, the outback electrician spends hours in the red dirt of remote stations and communities where he works to keep the power on in the harshest of conditions. Born and bred in mining mecca Kalgoorlie, the 50-year-old has spent his life under the relentless desert sun. And with his far-flung customers unconnected to Australia's power grid, his work these days often involves installing solar generators.

It's a job that has made him increasingly aware of the untapped potential of one of the most abundant of his country's natural resources.

"I'm out here in it day after day, and the more I work with solar, the more I see what's possible. We have this magnificent, natural, clean energy belting down on us and we are not using it as we could and should."

Thomson is bothered over what he sees as the failure of politicians to grapple with the biggest threat to his country: climate change.

Like a lot of Australians, he had high hopes for a brighter future for solar and other renewable energy under the Rudd Government. But he is disappointed with Labor's announcements over the past two months: its lower-than-expected greenhouse targets and its refusal to introduce stronger national support for renewable energy.

Thomson is especially upset about Labor's solar credit scheme, which allows energy companies to claim solar power installed by householders as their own carbon reduction. "In fact, I think renewables are going backwards, not forwards. What the Government is doing is supporting the polluters," he says.

To be fair, even critics acknowledge that since Labor came to power just over a year ago, it has already done more on climate change than the Howard government did in a decade. It has signed the Kyoto agreement, vowed to spend lots on solar and other renewables, promised that 20 per cent of all power will come from renewables by 2020, and put a price on greenhouse pollution for the first time in Australia.

Yet, as The Age has revealed over the past week, Australia is still missing out on major investments in solar energy. Its one solar panel manufacturer, BP Solar, is set to close, and concern is mounting among renewables industry experts that Labor's "solar revolution" may be, as University of NSW energy expert Iain McGill puts it, "more talk than walk".

That view is shared by solar powerbrokers from Europe and the United States — that Labor is still not backing the kind of systemic change in the energy market required to make solar take off as it has elsewhere. In Germany, for example, solar energy has exploded, growing more than 30-fold in this decade alone, and Germany now controls half of the world's solar photovoltaic panel industry.

Why does Australia remain a straggler in the solar stakes and what do we stand to lose if we don't catch up? It is not only Australians asking such questions.

German solar manufacturer Solon visited here in December but left disheartened. Solon director Ulrich Prochaska says that, on the one hand, Australia's "very much underdeveloped" solar marketplace is bemusing. But on reflection, he says, it does make sense given our energy history.

"You had the opportunity to produce power absolutely cheaply because your coal is on the surface and you don't have to go down for hundreds of metres; it's absolutely easy and absolutely cheap."

That, in large part, seems to be the answer. It is not that Australia is anti-solar so much as it is pro-coal; cheap, abundant, accessible coal. For all the years of talk about sun, wind, hydro, waves, geo-thermal and all the other alternatives, the fact is that coal accounts for more than 90 per cent of Australia's electricity.

Wind the clock back to 1990 and Australia could probably claim a spot internationally at the forefront of renewable energy, solar research in particular. Then, Australia, Germany and Japan were installing five to 10 megawatts of solar power each year. But Australia fell badly off the pace in the Howard years and by 2007 was adding just 10 megawatts of solar annually compared with Germany's 1300. As coal accounts for almost all our electric power, it is not surprising it wields big political power as well. (In money and job terms, local coal production and exports are worth about $80 billion a year and coal mining and electricity industries together employ about 100,000.)

Despite the mounting evidence of environmental damage caused by our burning coal, the coal industry dominated energy policy through the Howard years — so much so that former Liberal Party activist and one-time government adviser Guy Pearse argued in his 2007 book, High and Dry, that a "greenhouse mafia", made up of fossil industry powerbrokers, shaped and even wrote Howard's energy and environment policies.

What about Rudd's policies? The answer is a little more complex.

Few industry and government insiders doubt that, under Labor, the fossil fuel industry remains a potent lobby. Its strategic role in the economy and its massive wealth give it formidable political muscle. And while the coal industry attracts more public attention in the climate debate, related electricity-hungry industries such as aluminum have also been active in Canberra.

Evidence of the fossil fuel lobby's work is clear in the trajectory of Labor's climate change messages, from its pre-election rhetoric to December's white paper on carbon pollution reduction.

Key changes have included: petrol omitted from the carbon reduction scheme; the modest 5 per cent emissions reduction targets (far below what the science deems necessary); $4 billion in compensation to polluters, against the recommendations of climate change adviser Ross Garnaut; the abandoning of Garnaut's high-priority plan to make buildings energy efficient; and the scrapping of the $8000 solar rebate.

Garnaut himself has described the industry's lobbying as "unprecedented", its message enthusiastically supported by key unions, notably the Australian Workers Union with 130,000 members including in mining, manufacturing and agriculture.

Together, the industry and unions have warned of disastrous impacts of tough carbon pricing: lights going out, industries abandoning the country, massive job losses. Such messages coming from business and labour leaders, reiterated over and over again and by the best lobbyists in the business, is enough to rattle the greenest of pollies, especially amid a global financial crisis.

Australian National University adjunct professor and energy consultant Hugh Sadler says there is no question about who has real clout under Labor: "The green groups have absolutely no influence and the big industries and key unions, and in particular the AWU, completely wipe the floor with them."

The industry association representing the big players in coal, oil and manufacturing, the Australian Industry Greenhouse Network, did not want to comment on speculation about its influence on government. Yet chief executive Michael Hitchens did acknowledge important changes to Labor's policies since its election, which he said had made everyone a little happier, both industry and environmentalists.

Not according to Australian Conservation Foundation president Don Henry. "From our observations, the Government probably spent 100 times more time talking with industry than they did with the community sector. They (industry) seem to be the ones that have mainly been listened to in the formulation of this package."

Inside government, the solar and renewables message is struggling to get through. Environment Minister Peter Garrett is solar's obvious potential champion. But he has been largely sidelined, it seems, playing second or third fiddle to Climate Change Minister Penny Wong, Energy and Resources Minister Martin Ferguson and Treasurer Wayne Swan.

Twelve months ago, Wong was vocal in warning industry to brace for real change as Labor attacked carbon emissions. As time passed, her emphasis has shifted to preparing the public for a more cautious approach.

For solar, it is significant that Wong is understood to be opposed to the German model of long-term subsidies for solar panels — known as a gross feed-in tariff, and credited with that country's solar success — on the grounds it would be too expensive. The Australian Industry Greenhouse Network is also opposed.

Ferguson is an important player, with responsibility for the country's energy future. An old-school Labor and union man, he is renowned for his commitment to protecting jobs, particularly in the heavily unionised mining and energy sectors.

Several solar industry businesses have told The Age they have found Ferguson to be surprisingly interested in solar. Last Monday, he paid a private visit to a solar thermal plant in California run by Ausra, a US-based company chaired by former Sydney University professor David Mills.

But when it comes to the big picture, Ferguson, and the Rudd Government more broadly, still see coal and other fossil fuels as the lifeblood of Australian industry for decades to come. That attitude can be seen in the shaping of Australia's energy policy out to 2030 and beyond.

As part of that process, a number of industry leaders were invited onto a "high-level consultative committee".

The list of companies invited is interesting reading: Shell, Rio Tinto, Xstrata Coal, BHP Billiton, Santos, Woodside Petroleum, AGL, Origin Energy, the Energy Supply Association of Australia, and the Australian Petroleum Production & Exploration Association. The renewables industry didn't get a seat.

Then there is the bureaucracy. Notable is that some of the Howard government's senior energy and climate bureaucrats have remained on under Labor.

Dr Martin Parkinson, who heads the Department of Climate Change, also played a key role in John Howard's climate policy, overseeing a paper on emissions trading that included the kind of industry compensation the Rudd Government has now adopted.

Treasury has been influential upon the shape and detail of the Carbon Pollution Reduction Scheme. Its prime concern, of course, is growth and revenue, so anything that might reduce electricity demand, production and the revenue that flows from it is less likely to be appealing.

Critics say Treasury remains dominated by free-market devotees who resist the idea of government intervention or playing favourites — as in, giving solar a kick-start in the marketplace. This view underlines the Rudd climate change policies: emission reduction and renewable energy targets are set, but after that it's up to the marketplace to sort out how such things are to be achieved. Renewables experts argue that under such conditions the fledgling and currently expensive solar option is not likely to fare well.

The industry lobby, the Australian Industry Greenhouse Network, is in furious agreement with the Treasury approach. It has confirmed to The Age that it has lobbied against what chief executive Michael Hitchens describes as the "picking of winners", such as solar.

"That is entirely unnecessary if you have an emissions trading scheme doing its job. There's no special need to create special markets for solar or wind, or for coal for that matter … The white paper agrees entirely with that approach."

For all its sabre-rattling on climate change, in practice, Labor's centrepiece policies are not dissimilar to where Howard was heading. "He's (Rudd) not too far away from where John Howard or the Coalition would have ended up," Howard's former chief of staff, Grahame Morris, said on Monday.

So, just as there are climate change sceptics, there is a new school of climate change response sceptics, wary especially of government and industry eagerness to be seen to be doing something on solar.

University of NSW academic and solar specialist Muriel Watt says she knew the Government was about to go soft on its climate and energy policies last month when she saw Rudd had flown to a new solar farm in outback Queensland the day before the release of the carbon pollution-cutting white paper. The Prime Minister used the visit to announce he was bringing forward a half-billion-dollar spend on new, clean power plants as part of his "solar revolution".

For Watt, Rudd's Windorah trip was an all-too-familiar signal that Labor's white paper would offer little for renewables. "The (grant money) was only announced because the carbon reduction scheme was going to be so appalling they wanted to say something about renewables beforehand."

Watt welcomes more research funding but says it is being poured into a bottleneck. Without structural change in the marketplace, all the funding and pilot programs achieve is to keep solar alive at the margins of the economy.

David Mills, the Australian founder of Californian-based solar thermal manufacturer Ausra, agrees. "The Government is still playing the handout game and not the systematic change game.

"If you want clean energy installed on a systematic basis, on large-scale projects throughout the country, it doesn't matter whether you're talking about coal sequestration, nuclear or solar, all of those technologies are going to require some kind of systematic price support. They're just not going to get in otherwise.

"My view is that you should put in a structural change — like a feed-in law (for all renewables) — and let the market decide what's the cheapest way to provide the clean energy," Mills says.

Other structural change tried in the US and elsewhere has included loan guarantees to major new power generators — making it easier for new coal, nuclear or renewables facilities to get cheaper interest rates from banks. Rudd announced a similar scheme for the construction industry only last weekend but, so far, there are no signs of such a scheme for new clean energy plants.

Almost all of the many renewables experts spoken to for this story agree that what is required is intervention in the marketplace to give still-expensive solar electricity a price that makes it competitive. Where this has happened, the industry has flowered. As the industry has grown, the price of solar power has started to plummet, and with it the subsidies initially necessary to allow it to mature.

This is so much so that energy experts expect solar in some countries to match the price of other electricity, without subsidies, within the next few years. At that point solar is likely to blossom in ways previously unimagined. For all the talk of solar revolutions, Australia will not be reaping the benefits.

Rudd himself seems reluctant to intervene in the energy market in the way that countries such as Germany and Spain have to boost solar power. In that sense he reflects the still-dominant Canberra ethos that the market is sacrosanct.

There is no doubt that Germany's embrace of solar is in part driven by necessity — its lack of energy sources. It has coal but it is buried deep, it is expensive to mine and supplies are dwindling fast. It has banned nuclear power and does not want to rely on other countries, such as Russia and Albania, for gas.

But there is another factor at work in Europe, seemingly absent here: a belief that elected governments have the right to make big, transformative decisions in what is perceived to be the good of the public, economy and environment.

Martin Ferguson has highlighted his Government's $100 million Australian Solar Institute, the $500 million Renewable Energy Fund and the $150 million Energy Innovation Fund as clear commitments to renewables and solar on top of the carbon reduction and renewable target schemes.

Peter Garrett told The Age that he believes Labor is "on the way to laying the foundation for solar to play the significant role that I've always thought it could".

But Clean Industry Council chief executive Matthew Warren says it is precisely a foundation that is missing. He says that while the German system made power more expensive, it gave investors a strong sense of certainty that the country was behind solar. "If you had a scheme in Australia that was bankable, you could say: 'I know the industry will be there in 10 years' time.' That's the kind of platform these (solar) guys need."

This week The Age revealed that a string of European solar companies had considered investing in Australian solar but had opted to go elsewhere because of a lack of government commitment and support. They warned that our attachment to coal is not only an environmental problem, it threatens to be an economic one as well — as Australia is left clinging to fossil energy and a fossilised economic model.

Germany's booming solar industry now employs 57,000. One company alone, solar cells manufacturer Q-Cells, established in 2001 with 19 employees, now has 1900 workers. It is the largest manufacturer of solar cells in the world. Australia's solar industry employs 3500.

Perhaps even more worrying than cloudy Germany showing us up in the solar stakes is the growing interest in truly sunny places such as the US and Middle East. In the US, hopes are high that new President Barack Obama will follow through on his inauguration pledge to "harness the sun and the winds and the soil to fuel our cars and run our factories" and, at a more practical level, to use $US150 billion of his economic stimulus package to promote clean energy.

Despite the drop in oil prices, a few oil-rich nations led by the United Arab Emirates are pouring billions into solar projects, investing a stake of their current oil wealth to tap their harsh desert sun for the future. Last week the UAE's capital, Abu Dhabi, hosted 15,000 renewable energy experts from around the world at a World Future Energy Summit.

Meanwhile, in the West Australian outback, Jim Thomson is left pondering what could be in his own desert.

With LIZ MINCHINRoyce Millar is an Age investigative reporter. Liz Minchin is an Age writer.