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Let’s talk about Energy Subsidies

By Peter McCarthy

On March 13 2017, there was an opinion piece in the Australian Financial Review entitled Wind and Solar can only win on a tilted playing field. Not surprisingly, penned by Brendan Pearson, the chief exec of the troubled Minerals Council of Australia.

Knowing the track record of trickiness from the Minerals Council, I thought it would be interesting to see what a little background check might reveal. I must admit to some trepidation because, when politics is involved, you have to be careful about the sources you use, but as it turned out, by using the same sources as Mr Pearson, International Energy Agency, the picture is far more interesting.

As it turns out the figure quoted is just about right, but what Brendan failed to mention is that subsidies for the Fossil Fuel industry are 4 times the size of those for renewables. Ouch.

Let’s look at the Global figures for 2014 so we get a fair comparison:

  • Fossil Fuels $550 billion a year and climbing.
  • Renewables $120 billion and climbing too, but remember Renewables is gaining market share so it is to be expected.

Currently Renewables are meeting an impressive 30% of the Energy market just with current technologies and new developments like Reposit are heading towards covering peak demand issues. It’s just a matter of time before the basket of technologies cover the market. Maybe before they finally get “Clean” coal off the ground.

To me, those figures look about even given the percentage of the Energy market both serve. That alone makes a strong case for Renewables because on current figures, the attempt to meet 2DS (limiting the temperature rise to 2 degrees scenario) is predicted to fail when we hit 3.6 degrees. A horrifying figure almost double the target. (World Energy Outlook figures). We simply can’t afford to generate any carbon without serious damage to the climate.

Not feeling nervous yet?

Here is the killer punch. The US EPA did an in depth study of the cost that fossil fuel pollution has on the health of Americans. Bear in mind that chaps like Brendan Pearson give a wide berth to any consideration of the health impacts of his product.

On US figures, the fossil fuel industry gets a free pass to the tune of 14 to 35 cents per kilowatt hour which is actually higher than the unit price in some areas. To put that in perspective that’s a full 6% of US GDP. Compare that to the official subsidy of about 0.7% of GDP and you start to see how serious that oversight is.

Interestingly, this is not an issue with Renewables with the possible exception of manufacturing plants depending on what chemicals may end up being used. It will certainly be many orders of magnitude less than the problems caused by fossil fuels where everyone cops a serve.

Even leaving aside the health impacts, the case for Renewables is a strong one and unfortunately for Mr Pearson, the Industry is well aware of the problems facing his product. He may be able to influence a few pollies with things like “clean” coal, but it’s a non-starter with Energy companies and Financiers. Unless the taxpayer foots the massive bill, the sums just don’t add up. Even if a political party starts funding it via the taxpayers, at best it will only last until the next Election and then the Voters will deal with the incumbents.

Our Pollies get a 3 year term, the Industry needs about 20 years to turn a profit. Unless you can buy both sides of the political spectrum, you have 3 years to break even. No wonder only a few short sighted pollies are up for it.

This article was originally published on 1petermcc’s Blog.


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  1. Jaquix

    Good punchy article, thank you. The 550 billion subsidies to fossil fuel industries shocked me. Imagine what a monumental difference clawing back just some of this would do to Australia. Even 10% would see the budget deficit wiped out, funding restored to support services, and so much, much more.

  2. Michelle Petrat

    I find it mind boggling how our political “ELITE” refuse to acknowledge (I have to assume they actually know) the unstoppability of renewables..

    There is no way back, they simply paint themselves into a lonely, dark corner where they join company with the fossil fuel barons.

    Malcolm can “THREATEN” as much as he wants, nobody believes he actually will punish the fossil energy industry.

    And even though, I am not 100% aligned with the Weatherill plan (GAS comes to mind), I take my hat off. The analysis that the Australian public is defrauded by the privatized energy providers is spot on. I hope the other states see the light and let the entire LNP disappear into bleak, dark fossil world.

  3. paulwalter

    Ahhh…downstream costs? You will never read Murdoch columnist or IPA megaphone admit to holism as the better way to examine real world problems. Buy now, pay later, when you are kept in the dark.

  4. jim

    “at best it will only last until the next Election and then the Voters will deal with the incumbents”. Yeehaaa just like WA SA,VIC, QLD,ACT,Etc..

  5. 1petermcc

    Why thank you Jaquix. You can sheet home the blame to Kaye Lee. The amount of data she sources for her regular articles forced me to make more of an effort.

  6. 1petermcc

    They know all right Michelle. Even older Liberals have been on MT’s case but he projects the view of him being impotent. Lately I’m not sure that’s not an act.

  7. 1petermcc

    Jim, you would think the penny would drop by now with the regular evictions. I see sometimes the MSM bitch about how often Governments get the boot but I believe it’s a necessary training exercise we have to inflict on them to get them to start looking outward. I’m just worried how much damage they can inflict in a 3 year term.

  8. Harquebus

    Renewable energy devices are net energy sinks. There is no case for them. They are a waste of precious fossil fuel reserves.

    “Renewable energy sources are often advocated for their low CO2 emissions at point of use, but the overall product lifecycle is often forgotten about completely. In addition, many chemical products are needed in mining operations, leading to severe long-term pollution.”

    Is renewable energy really environmentally friendly?

    “in other words, if there were only ‘green’ sources of electricity, there would be no grid.”

    Absolution, Deceit and Renewables


  9. 1petermcc

    Harquebus, Off topic for this one so I suggest you wait for further posts but I must address the energy sinks comment. It appears your data is based on the frigid climate of Europe. There are a lot of factors that come into the figures and with special interests all bending the data, it’s hard to find anyone who agrees with anyone else over the definition. (Thanks for the links though. They will come into play on further aspects of this intensely interesting topic after I plough through the material.)

    Be that as it may though, new mining operations on the drawing board are costing in Renewables with diesel support because it is far more economic to generate power on site than build wasteful power lines out to remote areas. Current EOREI is rated at 4 years on current technology panels with a 25 year warranty on panel performance. I’m guessing that figure is lower when you factor in transport to site.It makes good business sense for the companies and also gives energy security. That figure is nowhere near as impressive as for coal,(if you neglect transmission) or Hydro, 25% better than coal, or for Nuclear about 250% better than coal, but you have to consider environmental impacts, line losses, and availability.

    Still the overriding concern is ( and back to the actual topic), Renewables make more sense than coal power by a huge margin. MCA claiming they are hard done by is just plain wrong. Both Economically and Environmentally and it is mischievous for Brendan Pearson to claim otherwise. He is currently getting a belting in the AFR for his sleight of hand.

  10. Miriam English

    Excellent article Peter.

    Harquebus is wrong about renewables being a net energy sink. He’s dealing with old information mostly promoted by fossil fuel advocates.

    Technology is a moving target. It doesn’t stay still. Ever. It gets more efficient almost every day. Now we have new perovskite crystal technology that blows away all previous records for solar voltaic efficiency because it can generate electricity from light of multiple wavelengths instead of a single narrow one. Also it can be made at low temperatures instead of requiring high temperature furnaces. And it dopes the crystals with trace quantities of common metals instead rare ones. Oxford University has already set up a factory in Germany to build panels (BREXIT seems to have decided them against building in UK). Many groups around the world are racing on this so it looks like the prices will plummet to a fraction of the current cost for solar panels. Wonderful news.

    Fossil fuels are over. They just don’t know it yet. And the politicians who pimp for them? They are going to have nowhere to hide after this is all over.

    And clean coal. Even the fossil fuel wonks don’t believe that one. It would cost so much to do, even if it was possible, that it would make coal into one of the most expensive fuels of all.

  11. totaram

    Miriam: Thank you! Like many faux “economists” of various persuasions, Harquebus is rooted in a kind of technology time-warp, where everything will remain static and not change, just like the gold-standard for currencies and other primitive ideas. S/he refuses to admit that technologies develop and change. There is no fundamental scientific reason why renewables will always be “energy sinks”. As I have pointed out previously, plants have a EROEI which, no matter how you calculate it, beat everything else hollow. And we have come nowhere near what plants do. Unfortunately, that fact does not fit with H’s narrative, so s/he ignores it.

  12. Harquebus

    For the umpteenth time; I do not support the general use of fossil fuels. They are a precious once only gift to us that should have been used sparingly.

    EROEI results vary depending on the scope and boundaries of the analyses. A desired result can be obtained by shifting these parameters.

    Advances in technology do not alter the laws of physics.

    I have been criticized for over a decade regarding my views on renewable energy devices. Now, recent events and the current political argument concerning energy has shut most of my critics up. Coming events and the resulting political chaos will silence the rest.


  13. silkworm

    “They are a precious once only gift to us that should have been used sparingly.”

    Gift? Are you a religious person?

  14. Miriam English

    Harquebus, I agree that fossil fuels are extremely valuable and should have been used only sparingly. Our incredibly wasteful splurge has gone through them insanely quickly. Future generations will look back in horror at how wasteful we’ve been.

    Also agree that energy return on energy invested (EROEI) depends upon the boundaries set by the study. But it also depends upon how efficient the actual technology is that’s being studied. As solar photovoltaic technology improves, both in manufacture and electrical yield then the EROEI changes too. This is irrefutable. As I mentioned, new perovskite crystal technology that uses low temperature manufacture, common metal dopants (instead of expensive rare ones), and many times more electrical output for the same light have a much higher EROEI, far beyond early photovoltaic cells. Even recent conventional photovoltaic cells easily surpass early ones.

    As for your statement that technological advances don’t alter physics, you’re using a false assumption to support a kind of circular argument, that renewables can’t produce enough, and that this is due to some law of nature. But you’re wrong. There is no law of nature that limits renewable energy technologies in the way you’re saying. The proof is green and all around you. Plants have been doing a very good job of reaping sunlight for hundreds of millions of years. In fact oil, coal, and coal-seam gas are themselves examples of excess solar energy stored by plants.

    Your last statement about recent politics of renewable energy having muted most of your critics is completely wrongheaded. The argument for renewable energy is louder than ever before. All around the world renewable energy technologies are being adopted at a rate never before seen. Perhaps your critics are muted simply because they’ve given up arguing against your willful deafness on this topic.

    And your foretelling of the future based upon each of those things I’ve so far mentioned is clearly deeply flawed. If you’re wrong every step of the way how can your predictions be treated seriously?

    No offense Harquebus, but your pigheadedness on this topic flies in the face of reason. Time and time again you say the same thing, clinging to obsolete data while refusing to acknowledge the real world. Why would you do this? You’re not religious, yet you display this characteristic so typical of religious people of being unwilling to accept what is obvious. This is beneath someone who values information and reason.

  15. Harquebus

    Miriam English

    Here we go again.

    Regardless of improvements, the EROEI must be greater than 1 which, no analysis that I have read has proved. Those that did produce a >1 result were flawed. There is always the problem of where to draw the boundary on all the interacting uses of energy used to manufacture these devices.
    One does not need to add up all of the energy inputs. Eventually, if one delves deeply and wide enough, the value will always exceed 1.

    Solar energy is free but, it is diffuse and collecting it isn’t. It takes a long time, like the leaves that you mention, or it requires a large surface area like the solar farms that are being constructed using fossil fuels.

    Regardless of my views, we have taken the renewable path. Your side won, let’s see it pans out. Myself, I will keep pursuing my self sufficiency in case it doesn’t.


  16. Kaye Lee

    Our revised EROI and EROIEXT values for PV systems in Switzerland, calculated according to the formula adopted by Ferroni and Hopkirk (i.e., as the ratio of the total electrical output to the ‘equivalent electrical energy’ investment), but based on the arguments and numbers presented in this paper are, respectively, EROI≈9–10 (when adhering to widely adopted ‘conventional’ system boundaries as recommended by the IEA (Raugei et al., 2016)) and EROIEXT≈7–8 (when instead adopting ‘extended’ system boundaries that also include the energy investments for service inputs such as ‘project management’ and insurance). It is especially noteworthy that even the latter EROIEXT range is one order of magnitude higher than 0.8 which was obtained by Ferroni and Hopkirk.

    In the end, measuring the performance of energy technologies is a complex task that ought not to be approached by using a single metric, however relevant and important it might be. There are fundamental aspects of an energy system that EROI does not capture, i.e. the renewable or non-renewable nature of different energy resources, the associated environmental externalities, and the distribution of a system’s energy output over time.

  17. Harquebus

    I have actually read that original report and have it somewhere. I will have another look.

    If one uses defined “boundaries as recommended by the IEA” then, the argument moves on to what value is required in order to power our desired level of civilization. Lowering the former increases the latter.

    “despite a string of optimistic choices resulting in low values of energy investments, the ERoEI is significantly below 1. In other words, an electrical supply system based on today’s PV technologies cannot be termed an energy source, but rather a non-sustainable energy sink or a non-sustainable NET ENERGY LOSS.”


  18. Kaye Lee

    That paper has been totally discredited by the paper I linked to. As Miriam so often says, you work with outdated info H.

  19. Miriam English

    Harquebus, the paper Kaye linked to specifically addresses the study reported in your link. It exhaustively analyses all aspects. Some of the problems in the paper you keep referring to are:

    ✦ Inappropriate comparisons of results from their ‘extended’ system boundary analysis to those of other differently bounded analyses of conventional energy systems;

    ✦ Utilization of incorrect data (either because it is out-date or simply wrong) for determination of PV system parameters (including annual electricity yield)

    ✦ Several incidents of double-counting energy contributions (e.g., adding contributions that are already included in the embodied energy of materials).

    Additionally, at the end of the 2017 paper they stress that their study is for Switzerland, but that areas of higher irradiation will deliver much higher EROEI, some as high as 60.

    Coincidentally those regions are generally the most poverty-stricken regions in the world, where solar power is making the biggest difference. Those who put roadblocks in the way of such development potentially make life much worse for the worst off. Those flawed studies are promoted by the fossil fuel industry and passed on by generally well-meaning people who are often unfortunately mesmerised by doom.

  20. Harquebus

    You think so? I will let you know when I have finished reading it. I happen to agree with the extended boundary methodology. It provides a better accounting than does the EIA’s recommendations.
    I notice one of the names “Ugo Bardi” so, I can already see the bias and EIA’s reputation is not good.

    From the “discredited link”.
    “The current methodology recommended by the International Energy Agency is
    not strictly applicable for comparing photovoltaic (PV) power generation with other systems.”


  21. Harquebus

    I am not very far into this discreditation and have found this amongst other things.
    “to date no battery storage is required for grid-connected PV plants in Switzerland or anywhere in the world.”
    According to the discreditation, batteries are not to be included in EROEI analyses. There’s a distortion already for those like Jay Weatherill advocating renewable and battery. I think I am going to have to take notes.


  22. Kaye Lee

    This paper is just plain bogus. The entire methodology is based on numbers that have no physical reality (money) and the authors deliberately cherry pick data to make those numbers “prove” their point, or just make up values out of the air. All of this is glaringly obvious, and is simply yet another example of the sorts of attacks renewables face at the hands of the true believers in the nuclear field.

    Another PV ERoEI debacle

    Might be a quicker read for you H.

    or this…

    The paper by Ferroni and Hopkirk is simply wrong. You can read below a complete demolition of their arguments performed by Maury Markowitz. But, no matter how wrong is the paper – and it is wrong – this story raises some disturbing points about how scientific information is validated and diffused.

  23. Miriam English

    Why would you bring batteries into the equation, Harquebus? You can run solar panels perfectly well without them. Almost all grid-connected systems don’t bother with batteries. (Unfortunately, attacks on solar by electricity companies are gradually driving people to disconnect from the grid and install batteries, as I’d like us, at this house, to do.)

    Even if you do add batteries the system has a sufficiently high energy return in Australia (particularly QLD, where I live) that it still gives positive returns.

    I don’t particularly like batteries, even though I built a solar powered pump that uses a battery. Battery technology is still pretty primitive. Lithium ion batteries are a great improvement, but are still not optimal. Luckily the technology is improving by leaps and bounds. By the time existing battery installations reach their end-of-life I expect we will have much better options available to us. I’ve pointed you to videos before made by inventor Robert Murray-Smith who is currently working on an electrical storage device that has energy density similar to petroleum.

  24. Harquebus

    The sciencedirect link has failed to convince me. It contains its own inaccuracies and assumptions. The main criticism of Ferroni and Hopkirk appears to be the use of obsolete data. As always, the main disagreement is on the scope and boundaries of EROEI analyses and whose assumptions are more realistic.

    As I said, it’s all irrelevant now. Renewable energy is the chosen path and it now has to prove itself.

  25. Harquebus

    Miriam English
    If you are going to use storage, it has to be factored in the analysis. Jay Weatherill wants to spend $500million on batteries that weren’t previously factored.
    If that was the guy who send his electric scooter a few times around the block then, that is nowhere near the energy density of petroleum.

  26. jimhaz

    I have not researched this issue, but Harquebus has an arguable point.

    This book is from 2008 – so outdated and perhaps old hat to some. Hell of lot of detail though which makes it quite interesting.

    It seems our deserts are going to become quite valueable.

    I noticed on Page 117
    “Among other countries’ renewables, solar power in deserts is the most plentiful option. As long as we can build peaceful international collaborations, solar power in other people’s deserts certainly has the technical potential to provide us, them, and everyone with 125 kWh per day per person”

  27. Miriam English

    Harquebus, what I’m saying is that batteries are a separate issue. You’re fond of making a blanket condemnation of renewables (which is itself wrong — all renewables have different efficiencies). Sure, if battery systems are added to a system they deserve to be factored into energy return calculations.

    Robert Murray-Smith made a battery in his workshop out of paper and graphite and a cheap electrolyte drove the electric scooter much further than a lead acid battery which is about twice as big and many times heavier than his battery. So, yes. That guy. I’m puzzled why you would sneer at that accomplishment. That’s not the electrical storage device he’s now working on. This new device has about the energy storage density of petroleum. Exciting times. Stay tuned.

  28. townsvilleblog

    $550 Billion in 2014 is an outrageous figure, especially when you consider that these are ‘our’ minerals which they are receiving free of charge, and making a King’s ransom on them each and every year, no wonder the tories crawl to these foreign multibillion dollar multinational corporations who I might add pay naught in income tax, to add insult to injury, what mugs they must think Australians are. They (the LNP) have cut all other welfare to the Australian people claiming it was too expensive, it’s time for a massive slashing of corporate welfare, sorry Gina, sorry Clive, well not really sorry!

    It’s time the Australian people got absolutely furious, here we are 3 million plus living below the poverty line, while ‘our’ minerals (owned by every Australian) are ‘given’ to these greedy bastards to make their enormous profits and pay their executives millions each year, while we are wondering what will happen if our old fridge packs it in, and on top of ‘free’ minerals, free income tax, and wait, there’s more $550 Billion in corporate welfare, bloody hell!!

    Wake up Australia, get into the streets and “demand” more for us!

  29. Anomander

    Imagine what would happen if we stopped all subsidies?

    Or perhaps, even better, if we started including the social and environmental externalities into the price of fossil fuels?

  30. Miriam English

    Anomander, the shift to renewables would be so rapid it would be breathtaking.

  31. Alan Baird

    This entire dispute has become a quagmire of impossible aspirations. We already have an unsustainable population kept afloat by fossil fuels. Many of the political elites want to increase population further and then artificially sustain it with even more fossil fuels eg Trump and a whole lot of others. Other supposedly of the left (ie right-left) eg Qland govt want to do likewise no matter how positive one feels about them. There will be no reduction in fossil fuel usage in current world circumstances without renewable energy apart from energy efficiency dividends (which can be quite substantial, but even there, considerable energy will be expended to do this comparatively benign job) but that’s about it. Too much of the world is in deep do-dos. This debate runs the risk of being a fight in a “left-perfect-world-vainglorious-paradise-in-a-parallel-universe-if-only-we-could-swing-it”.

  32. ace Jones

    Why dwell on ‘fake’ trash news

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