A new study claims that inflation from the net zero push was “ill-founded.”
The report cited economic modelling saying it would cost the country $625 billion (US$406 billion) to replace 38 gigawatts of generation capacity from ageing coal and gas power stations to meet a maximum forecasted demand increase of 20 gigawatts by 2050.
Meanwhile, the forecasted cost to replace the above 60 gigawatts with fossil fuel-powered generation would be around $400 billion.
While the report acknowledged the significant cost difference between the two approaches, it said the additional $225 billion was “small” when spread over several decades from a macroeconomic perspective.
At the same time, the report argued that the $625 billion spending required for the renewable transition would not add to inflation as it helped households and businesses avoid blackouts and price hikes caused by volatile oil and gas markets.
The researchers also stated that infrastructure spending would be required to ensure that energy assets were reliable regardless of whether the transition occurred, and thus, this spending needed to be considered in any debates around inflation.
“The difference in cost between a fast green transition and any alternative scenario is small, and unlikely to be macroeconomically significant.
Mr. Debelle noted that this was not the first time Australia had a massive scale of infrastructure development, and the country could use experience from previous investment cycles to ensure a smooth transition.
“Not only will it set us up as a global leader in green technology, it will safeguard Australia’s energy future and, most importantly, reduce emissions and mitigate climate change,” he said.
Trillions of Dollars Needed for Net Zero Transition: Research
While the Centre for Policy Development claimed that the renewable energy transition would have an insignificant inflationary impact on the economy, research by Net Zero Australia pointed out that it would cost Australia up to $9 trillion to achieve net zero emissions by 2060, which is four times of the country’s 2021 GDP.The amount was needed for the mass construction of wind and solar farms, transmission infrastructure, and energy storage.
The research also found that the pace of developing new large-scale renewable projects needed to double to meet the national renewable energy generation target of 82 percent by 2030.
“A future built on renewable energy with new technology, such as electric vehicles, is something to look forward to,” he said.
“But delivering the energy transition, given the scale of investment required, will undoubtedly create upward pressure on energy bills.”
The CEO also warned that the sharp price increases could cause the community to turn their back on the transition, noting that households and businesses around the world were struggling to access secure and reliable energy.
