You can’t eat your fossil fuel cake and be renewable too

Among the many commentaries on the budget, here’s our two cents’  worth as the budget relates to renewable energy and climate action.

First, the big item is that the diesel fuel tax rebate for off-road use has remained. Had this been scrapped or altered, it would have of course raised a lot of revenue from the main users of off-road diesel vehicles: miners and farmers.

It would also have made solar panels and wind turbines much more competitive with diesel generators in remote locations. As Tristan Edis at Climate Spectator explained:

Removal of this excise exemption… would tip the economics decisively in favour of solar PV instead of diesel for off-grid remote power generation. Diesel generators are approximately 20-35 per cent efficient in converting diesel into electricity. This means you need about 265 to 460 litres of diesel per megawatt-hour (MWh) of electricity.

Excise for diesel is 38.143 cents per litre, so this equates to an additional cost per MWh of electricity of around $100 to $175. When it is considered that solar PV is likely to generate electricity for a cost of around $250 to $400 per MWh excluding any subsidies, this is a big deal (inclusive of 30 per cent business tax).

On the other hand, there will not be a mooted tax break for businesses that make energy efficiency upgrades to commercial buildings. And while the budget defers til later $75 million of funding for research into the fantasy CCS technology (carbon capture and storage, aka “clean coal”), it hasn’t cut funding entirely for this coal industry smokescreen.

There’s also been a cut to a scheme that would have provided major assistance for linking up good wind and solar generating areas with the national grid. Climate Spectator reports:

The Connecting Renewables program has been subject to major funding deferment. Now no money will be spent in 2012-13 and half the planned expenditure for 2013-14 has been cut, making a total of $72m shifted to later years.

Grid connection is one of the major hurdles for many planned renewable energy projects.

Once again, Labor wants to be seen to have done it’s work on climate – but it wants to have its cake and eat it. This budget certainly hasn’t changed that.

And what a cake. It’s a great big cake of fossil fuels, a layer-cake with pockets of natural gas in the coal that makes up the sponge, thick layers of oil for icing, and perhaps a flambe of diesel for good measure.  Add a few solar panels and wind turbines on top for decorations (in lieu of candles) and there you have it.

3 thoughts on “You can’t eat your fossil fuel cake and be renewable too

  1. G’day Ben, while I understand the need for the removal of the diesel rebate, I have a few issues on this matter regarding the farming community, for farmers, there’s really no alternative to diesel, particularly those in the cropping regions, but really, for all food growing enterprises. We already import more than enough food and contribute to degraded environments elsewhere in the world where regulations aren’t nearly as strong as here. Unless or until somebody can come up with a viable, reliable alternative, I think you’ll find there is resistance among farming communities whenever the discussion turns to scrapping the diesel rebate.

    No doubt miners have a far greater ability to absorb these additional costs and I’d be happy to see the rebate scrapped for them. I just think it’s much more problematic for farmers.

    1. That’s a fair comment, Blair. In fact farmers are feeling the pinch, in part, because of the mining boom pushing up the dollar.

      Tristan Edis pointed this out in an article today, with a possible solution:

      “It was always going to be a tough ask to expect that the government would take on both the mining and farming lobby in removing this tax break, when most of the diesel is used for transport for which there aren’t alternatives.

      “For the PV sector a more realistic ask would be for the excise exemption to be removed for diesel used in power generation, although this would pose enforcement challenges for the Tax Department.”

  2. For once i agree, the removal of the diesel rebate would almost sound the death knell for farming, its allready on its knees, and really why should farmers pay what is meant to be a road tax when they are not using roads? sounds unfair to me.

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