Renewables are the best deal, today, tomorrow and the next day

Australia "could" have carbon capture and storage -- in 2015. Australia "could" have nuclear -- in 2020. Australia CAN have endless clean, green renewable energy -- now. Which is the better choice?

Carbon capture and storage and generation IV nuclear are drawing board technologies. They offer no operational track record and no reliable costs. Solar, geothermal, wind and biomass have long operating histories. They have proven costs and reliably falling prices. Geothermal is cheap, while solar is dropping in price very rapidly.

What's lost in the current debate over Australia's future energy sources is that all new energy capacity requires forward planning. It takes time to plan and to build. By 2010-2020 -- the near-term time frame for installation of new electricity capacity -- renewable energy sources will be cheaper than fossil fuel or nuclear.

Renewables are now firmly locked into a market-driven virtuous circle of innovation, competition and price reduction. By contrast, carbon capture and storage and nuclear technologies still remain trapped in government research labs. Carbon capture and nuclear are characterised by heavy startup subsidies, questionable corporate lobbying and a proven failure to meet deadlines (for examples, look at America's Futuregen carbon capture project and its Yucca Mountain nuclear waste repository). Clearly, renewables are the market's choice. Fossil fuel and nuclear are the lobbyist's/bureaucrat's choice. So, the question is: should markets or industry-captured bureaucrats choose Australia's energy future?

The chart below shows projected future energy prices in Australia using price forecasts drawn from official government sources. The status quo is represented by 8c/kwh black coal-fired electricity with no carbon capture and storage and with carbon emissions penalised at A$40 per tonne. That's the amount experts say is needed to avoid catastrophic global warming.

Large-scale renewables energy sources will be cheaper than nuclear by 2020 -- the earliest any such plant can be built

Sources: ABARE, IEA, ANSTO,

Over the next decade, carbon capture and storage prices are forecast by the Intergovernmental Panel on Climate Change to fall only about 2-3% per year. No one's even brave enough to forecast future nuclear prices. Industry and government studies predict flat prices. More independent studies predict rising prices.

In contrast to guesstimates on future coal and nuclear, renewables have proven records of price reduction that can be conservatively extrapolated forward. In fact, the rate of historical price reduction in renewables may prove an underestimate in projecting future prices. That's because the industry is attracting so much attention and investment, a trend that should continue well into the future. Geothermal and wind are already cheap on a carbon-adjusted basis. Concentrating solar power and solar photovoltaics are falling in price 6-8% per year -- and these prices are proven. By 2015 concentrating solar power will be cheaper than carbon capture. By 2020, concentrating solar power will be cheaper than nuclear. Solar PV will follow right behind.

If the Howard govenment chooses carbon capture and storage and nuclear, they will be white elephant energy-generation sources from their first kilowatthour. And they will become progressively less competitive each year that passes. Over a 25-40 year operating lifespan, these will impose huge deadweight losses on Australian consumers and the economy.

That's because carbon capture and storage and nuclear energy will impose three generations of financial burdens on Australia. The first will be the huge initial subsidies needed to jumpstart them. The second will be the higher energy prices the country will have to pay. The third will be from the higher back end costs society will have to pay for solving the problem properly the first time.

The energy white paper "Securing Australia's Energy Future" stressed that low energy prices underpin Australia's prosperity. Making the wrong energy choices just to placate powerful lobbies could dramatically lower Australia's living standards and cause it to lag behind other nations in dealing with climate change and exploiting burgeoning markets for environmental technology. By picking coal and nuclear, Australia could find itself burdened with a self-conscious national "energy cringe" surrounded by a world economy dominated by cleaner, more lucrative, less subsidy-reliant renewables.

Should Australia invest in second-best technologies tomorrow, or first-best technologies today? The markets have already chosen. Now it's time for voters to choose.