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Published 13 April 2012 13:04, Updated 18 April 2012 08:47
There have been calls in Canberra recently to lock off part of Australia’s new-found east coast coal seam gas reserves for domestic use to drive manufacturing. It seems a reasonable argument but like many reasonable arguments the details reveal the flaw.
It is not access to more reserves of gas that is holding back advanced manufacturing in this country; it is the cost of electricity and its ever spiralling price due to government policy.
One of the biggest causes for the massive jump in electricity costs over the past decade is the 20 per cent renewable energy target that requires big electricity users and retailers to use 20 per cent renewable energy by 2020 through the purchase of renewable energy certificates.
When a business such as a wind farm or large-scale solar energy complex needs to be subsidised to produce electricity and than paid above market price to continue to exist it makes a joke of using renewable energy and sustainability in the same sentence.
And then there are the feed-in tariff schemes that pay inefficient and high-cost micro-generators like households and small businesses an above-market price for electricity they feed back into the grid. A 1.5 kilowatt solar panel system currently receives subsidies of $6200. It’s unsustainable, it’s stupid and it all adds up to no additional large-scale manufacturing for Australia until there is fair, transparent and market-dictated pricing for electricity.
Instead we are heading deeper into opaque pricing with the carbon tax and carbon trading scheme to impose further overlays and costs on electricity pricing.
While the imposts being heaped upon electricity generation have ratcheted up in recent years, it has been a long-term issue. Well over a decade ago, the first generation of gas-to-liquids plants to produce bulk petrochemicals looked at Australia as a location for multibillion-dollar facilities. None were built here and they ended up in places like Qatar and Malaysia were there was both gas supply and low electricity costs.
The impact can also be seen in the aluminium business, which is rapidly retreating from Australia. Aluminium is also referred to as solid electricity as energy makes up such a high proportion of the costs of producing the metal.
On the gas side, ABARE estimates reserves in Western Australia and the east coast from conventional and coal seam gas sources at 317 trillion cubic feet of gas. There is an additional 400 trillion cubic feet of gas in oil shale deposits.
By 2020, after an expenditure of some $80 billion, Australia will be exporting 2.2 trillion cubic feet of gas a year and the domestic market is estimated by that time to require 1.8 trillion cubic feet a year.
So even before shale gas is taken into account there is at least 80 years’ supply of both domestic and export reserves which will no doubt lengthen as more reserves are found.