Saudi Arabia and other Middle Eastern oil-producing states are making big investments in solar energy despite having huge oil reserves. The reason is simply that they can get a better price for their oil on the world market than its value as fuel for their local power stations.
Australia is taking the opposite path.
For example, when the New South Wales Government recently partly privatised its electricity assets, it was advised that no-one would be interested in buying them if the supply of coal could not be guaranteed or if its cost to the power stations was to increase to world parity – currently about $100 to $125 a tonne. As a result, the Government decided to develop the Cobbora coal mine, near Dunedoo, so that it could guarantee supply to the power stations at a lower price.
A recent report by the Auditor-General has revealed that the lower price is just $31.16 a tonne.
So, the Government is to spend at least $1.5 billion to develop a coal mine to supply an estimated 30 million tonnes of coal a year to the power stations, giving revenue of about $900 million. If it sold the coal on the world market, its revenue would be $3 to $3.7 billion. A part of the extra revenue could build renewable energy power stations, so that the coal-fired power plants would not be needed.
It seems that, in effect, the Government is giving a subsidy of up to $2.8 billion a year to coal-fired power stations.