The NSW Government has missed an opportunity to use the budget to support the growth of renewable energy in the State, while also solving looming revenue challenges.
In its first budget following its re-election at the March state election, the Berejiklian government has delivered no new funding to support the clean energy sector.
The Government has missed an opportunity to invest in the state’s energy sector, that would support the growth of clean energy the state, help to lower energy costs for NSW households and secure a reliable revenue stream for the government.
The Government will spruik that funding has been committed to the Empowering Homes program, that will provide interest-free loans for the installation of solar and battery storage. However, as RenewEconomy has revealed, that funding has been recycled from a cancelled $50 million virtual power plant program.
According to a think tank based at the University of Sydney, the NSW Government is facing a major revenue crisis, and investments in renewable energy could be part of the solution.
The two largest sources of income for the NSW Government are stamp duty charged on property sales and payroll tax, with a slowdown in the housing market and stymied wages are set to hammer government revenues. The 2019-20 NSW budget has revealed that stamp duty revenues have fallen $1.7 billion in just the last two years.
In its “Squeezing Services” report, the Sydney Policy Lab sees public investments in renewable energy as an opportunity for the NSW Government to regain control over the State’s emissions, while also providing a re-enforced stream of income for the government budget.
Since 2011, the NSW Government has unloaded major generation assets, including Liddell, Bayswater and Vales Point power stations, ‘poles and wires’ companies Endeavour, Ausgrid and Transgrid as well as electricity retailer Energy Australia.
These sales raised billions in cash that the NSW Government has poured back into major infrastructure projects, but it has neglected the energy sector.
By recycling the proceeds of asset sales into new investments, the NSW Government has been able to continue record expenditure into infrastructure, while still recording budget surpluses. The NSW Government has forecast that it will invest more than $93 billion in new infrastructure projects over the next four years, while achieving annual average surplus of $1.7 billion.
However, cash from the privatisation of NSW electricity assets has instead gone into financing roads, rail and stadiums, with the income flowing from these investments helping to offset the projected falls in stamp duty taxes.
It has also meant that the NSW Government has lost control over some of the State’s largest sources of greenhouse gas emissions, and handed responsibility for managing the transition of the energy sector to private companies.
Sydney Policy Lab points to how the NSW Government once controlled more than half of the state’s emissions but have since been offloaded in a series of privatisations.
“The NSW Government previously had significant direct control over 51% of greenhouse gas emissions that are released from fossil fuel-powered electricity generation in the State.”
“The privatisation of electricity generators over the last 8 years has handed decisions on investment in renewables and the future of fossil fuel generators to the private sector.”
“The NSW government nonetheless has the capacity to lead the transition to a decarbonised economy through investment in publicly owned renewable energy and targeted financing for commercial and community renewables sectors.” Sydney Policy Lab said in its report.
Dr Gareth Bryant of the University of Sydney, who co-authored the ‘Squeezing Services’ report, said that investments in clean energy would not only provide revenues for the Government, it would also lower costs in areas such as healthcare.
“Investment in renewable energy reduces health costs associated with mining and burning coal. Accounting for these savings is essential to identify an income stream that can finance government borrowing.” Dr Bryant said.
“If these savings can be seen in budgeting processes, public investment in these areas will become low hanging fruit for the NSW government.”
The NSW Government has begun deploying funds from the Climate Change Fund, which were collected through a charge on electricity bills, and will be used to bolster the state’s grid through investments in generation, storage and network infrastructure projects across the state.
However, direct investment in new generation projects would effectively reverse the trend of privatisation that has been seen across almost all state governments over the last decade.
NSW Greens spokesperson David Shoebridge agreed that public investment in renewable energy would be beneficial for both the government and NSW consumers.
“What is missing in this budget is any investment in large scale public solar, wind and storage that is the only guaranteed way to reduce power prices.” Shoebridge said.
“Climate change is already destroying lives and livelihoods we desperately need investment in publicly owned renewable energy for both job creation and the climate.”
This has already started at the Federal level through the Clean Energy Finance Corporation, and direct federal investment in the Snowy 2.0 project, both of which will deliver dividends to the federal government.
The model will soon be replicated by the Queensland Government, which recently allocated $250 million in its state budget to CleanCo, which will build, own and operate new renewable energy projects in the state.
At the same time, the Western Australian government faces carrying some of the financial burden resulting from government-owned utility, Synergy, having its coal and gas heavy fleet getting squeezed out by cheaper renewable energy.
Government have a clear role in supporting the transition to a clean energy economy, both by providing a stable policy environment that promotes investment, and through supporting workforces to retool and redeploy to work with new energy technologies.