Our obsession with energy costs is irrational and is going to kill us
Why have we become obsessed with the cost of energy to households? Obsessed to the point that the noise drowns out the obvious impacts of climate change which are contributed to by… the amount of energy we use. Our new Energy Minister was described by our, new, Prime Minister as “minister for getting energy prices down.” and he has clearly tied energy costs to emissions targets and renewable energy sources: “The obsession with emissions at the expense of reliability and affordability has been a massive mistake, Ray”
As with most things in life the answers are not as simple as right-wind radio commentators would have you believe.
If we believe the pundits and dog-whistlers the average Australian family is doing it tough thanks to energy costs. Certainly on its face the cost of energy has gone up (see graph from the ABS). However as with a lot of statistics, you need to be careful in just looking at the raw cost in isolation from what’s happened to household incomes in the same period.
Now there’s no question energy is a significant expenditure for some people and an underlying necessity is hard to control for – but how tough are people really doing it thanks to energy costs?
The HILDA data is the place to go to find answers like these – and they have the answer, or at least the underlying statistics. Over the ten years to the latest report energy costs have gone up. In the 2006-2008 period mean household expenditure on home energy was $1,727 per year (at December 2016 prices). In the 2015 to 2016 period, mean household expenditure was $2,118. So there was an increase.
But, and this is a big ‘but’, when we look at home energy as a percentage of income that rise is from 2.5% to 2.8% – so an increase of 0.3%. There has been a larger impact on low-income households. For households in the bottom quintile home energy expenditure represented 5% of income in 2006-2008 and 5.6% in 2015-2016. So if you’re doing it tough, home energy costs have had a more significant impact; but not nearly as dramatic an impact as the noise might suggest.
And there is a further ‘but’: home energy costs as a percentage of income peaked in 2011-2012 when they represented 3.1% of income for everyone and a whopping 7.6% for the households in the bottom quintile. Since then they have fallen, up until 2017.
Finally it is clear that some small, but appreciable, amount of the increase in costs is simply because we are using more energy, in spite of energy-saving options like LED bulbs. I guess that ten years ago there weren’t as many iPhones to charge up.
It’s also worth noting, when you take a look at ABS figures on household expenditure, what has increased more than energy costs: Medical and healthcare, Transport, Recreation, Education, and of course the elephant in the room – Housing costs. None of these seem to figure for the shock-jocks and politicians though.
All that said, although these more general stats run up until 2015/2016, electricity prices in 2017 and 2018 are definitely significantly higher than in previous years across most of the country. And therein lies a legitimate complaint. Although prices have come down a bit this year in comparison to last year and that decrease is expected to continue in coming years according to the Australian Energy Market Commission:
On a national basis, residential electricity prices are expected to decrease by an annual average of 6.2 per cent from 2017-18 to 2019-20. The trends in residential electricity prices largely reflects falling wholesale costs in 2018-19 and 2019-20, driven by expected new generation (approximately 4,100 MW across the national electricity market), the return to service of Swanbank E generator (385 MW in Queensland) and reduced short-run costs for South Australian gas plants due to the state’s Energy Security Target.
Importantly the increase in 2017 was in no significant way attributable to emissions targets or renewable energy. And, in any case, the prices are falling without the government taking a knife to either targets or sources.
Given all this it’s not unreasonable to ask why we are (a) fixated on prices and (b) why we keep linking them to emissions targets.
The obvious answer is that it has nothing to do with facts or science. It’s all about politics.
Energy prices have become a political football tied up with climate change and the switch to renewable energy sources. If you don’t ‘believe’ in climate change – and clearly much of our government and all of our shock-jocks fall into that camp – energy prices are a perfect dog-whistle call to action. You’ve got the battlers, you’ve got faceless big companies, and you’ve got the loony-left climate change-believing greens to take aim at. That all makes for an easy and satisfying target when you refuse to see any link to drought and bush-fires and rising sea-levels.
And let’s face it, no politician is going to tell voters that education and recreation are costing them much more than electricity. Just as it appears no one in our current government wants to say that the only reason coal is viable is because of the massive subsidies provided to it, and maybe we should be looking at moving those subsidies to renewable energy sources. It is clear that any rational discussion of this issue is a political suicide-note for those on the right of politics – and it remains to be seen if Labour can manage any better.
We live in a country that is the envy of the World in terms of economic stability and growth. We have good health care, education, and an amazing standard of living. This isn’t a Pollyanna view that everything is perfect – sure there are problems – but in perspective we are amazingly fortunate as a whole; and maybe we should focus less on griping about the negatives and more on how we could be sharing some of that good fortune.
I’m not saying that energy costs should be ignored. However, I am saying we seem to have fixated on them to the exclusion of good sense and the energy-cost headlines are in grave danger of overwhelming the discussion we should be having on how to deal with our energy sources – not because of costs, but because those of us living in a State that is 100% in drought and ravaged by bush-fires out of season ought to be having a more informed and intelligent discussion about what to do next.
When history looks back on today’s politicians it beggars belief that they will be lauded for reducing household expenditure on energy by a percentage point or two. But it’s pretty easy to see them, and the rest of us, being derided for saving a few dollars while our world dries and burns around us.