I, too, rise to take note of answers, in this case from Senator Gallagher to the first supplementary question by Senator Smith, who pointed out that the minister for aged care said, ‘This is a budget that will put downward pressure on inflation,’ and Senator Smith highlighted that that was ‘in contrast to economists from countless banks and rating agencies who called this budget “expansionary”‘.
Senator Gallagher gave a response, and she mentioned, pleasingly, the concept of frameworks. It’s really important that, if we’re not just going to look at short-term perturbations but long-term impacts, we understand the consequences of the frameworks we have in place.
When we come to the issue of the cost of living—and I go here to the cost-of-living committee, which has been inquiring into that—I notice that in their interim report one of their key findings is that energy prices have risen and are a major contributing factor to the cost-of-living crisis in all sectors of the economy.
What has that got to do with frameworks?
The government’s rejection of the expert opinion of a number of economists in terms of inflation—it’s not the first time. They have form on that.
I was flabbergasted to see Mr Bowen say in response to a question in the House that every sensible economist would tell you that nuclear energy is the most expensive form of energy there is. I’m paraphrasing there. I haven’t got his exact words, but that was the sense of his answer.
The OECD, who, globally, are probably the most reputable group of economists looking at economic cooperation and development around the world, issued a report last year, in April, where they looked at the frameworks that countries put in place around their energy systems.
On page 35 of their report, which was a strategic briefing on meeting emissions targets, they look at the levelised cost of electricity across the OECD for various forms of energy generation, and they highlight that ‘the lowest cost option for generating electricity is long-term operation of nuclear power plants’. That quote is from work done by themselves and the IEA, the International Energy Agency, in 2020. But, as they highlight in their report, that is only part of the equation.
When you look at the systems costs and also the context in which we are seeking to reduce emissions by 2030 and getting to net zero by 2050, for anyone interested, I highly recommend looking at pages 37 and 38 of the report.
The OECD highlight that as you constrain emissions and you take fossil based fuels out of the system—and you must remember that here in Australia our national electricity market still uses nearly 70 per cent fossil fuels—the costs will go up exponentially beyond about 2030.
The policy implications of these systems costs findings are significant. It may be possible to reduce emissions to meet 2030 targets by growing the share of variable renewables in the mix. However, the costs of reaching net zero with high shares of variable renewables are likely prohibitive.
They go on to make the conclusion, which is backed up by the IPCC and the IEA, that the only way we can still have reliable, affordable power and reach net zero is to embrace a form of baseload power which is either hydro, if you have suitable conditions, or nuclear power.
This is why so many countries—such as the US—are looking to double their amount of nuclear power.
To the issue of expense, they found not only that long-term costs of electricity show that it’s cheaper but also that from a grid scale, as we seek to reduce emissions, the framework says it will be cheaper.
If we look at the lived experience of nations like Germany, with high levels of variable renewables, they have the most expensive power in the OECD by a country mile. Nations like Canada, which has the lowest penetration of variable renewables, using hydro but also 19 nuclear reactors, have the lowest energy price in the OECD. In Ontario, the province which has those reactors in it—and the majority of their power comes from those reactors—it is among the cheapest in Canada.
Frameworks matter, and the framework of this government will just drive up prices further.