Saturday, April 22, 2023

Point of Order: A good energy policy is a good climate policy

Germany’s government shut down its last operating nuclear plant at the weekend.

Simultaneously, major utility EON announced a 45% increase in the price of electricity. Some German consumers will pay NZ$0.87 per kilowatt-hour.

And a day or so later, fellow-EU member Finland started regular output at Olkiluoto 3, Europe’s newest and largest nuclear reactor.

At $12 billion, it’s way over budget. But as a thought experiment, if it could achieve its rated 1,600 megawatt capacity 24/7, and sell the electricity at the EON rate, it would generate $7.6 billion of revenue a year.

Sure, Europe has particularly contorted energy policies.

But the current dominance of political goals – and non-transparent and conflicting ones at that – is a near-universal phenomenon. Coupled with a determination to override market signals, rather than pay attention to what they might be saying.

With the result that market participants try to make money through costly subsidies. Or decide not to invest because of the risk of success being penalised by windfall taxes.

Does anyone have a sensible policy then?

Time to check on our old friends in Singapore.

A nation with few natural resources, minimal energy security and not much stretch on the environmental side.

Nearly all their electricity is generated by fossil fuels, and their main contribution to decarbonisation has been recently switching from using oil to natural gas for electricity generation.

They focus on future options that are feasible and practicable, namely:

“the four supply switches of natural gas, solar, regional power grids, and low-carbon alternatives, together with more efficient use of energy, will allow us to overcome our energy challenges and achieve energy supply that is sustainable, affordable, and reliable.”

And look to a broad-based and steadily-increasing carbon tax to efficiently reduce consumption. (It’s possible that this is just a revenue-raising exercise – but then, it is Singapore.)

It’s a bit sad to realise that so many of the rich world’s governments have failed to match this level of common-sense simplicity.

But the standout difference (which the current NZ government might have profitably reflected on) is the unwillingness to sign up to aspirational political goals without a feasible plan to achieve them.

Singapore gives productive businesses (you know the ones that pay for healthcare and stuff) reasonable clarity to plan:

“We aim to peak emissions at 65 million tons of CO2 equivalent (MtCO2e)around 2030 and halve our emissions from its peak to 33MtCO2e by 2050, with a view to achieving net zero emissions as soon as viable in the second half of the century.”

As soon as viable.

That is: do the cost-effective stuff now; be adaptable; and deal with circumstances as they evolve.

Understand climate policy is a subset of foreign policy. So factor in geopolitical implications (ie, avoid Germany’s expensive political mistakes).

Never forget a small country has remarkably little control of its own destiny. And even less over others’.

Not bold enough for Greta. But one suspects it’s more reliable than most.

Oh – and one other benefit. It gives time to consider if the sustainability and ever-improving safety record of nuclear power makes it a feasible, practicable and geopolitically sensible option for rich and cramped little Singapore.

Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton

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