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STT hears the queue outside Environment Minister, Greg Hunt’s office is becoming rowdier and larger by the day. Real power generators are keener than ever to get rid of the mandatory Renewable Energy Target – and see the potential for the Coalition’s Direct Action policy to do just that.
Operatives from Queensland’s biggest power generator, Stanwell Corporation are among the throngs lining up to see the RET scrapped in its entirety. Here’s The Australian’s take on the attack.
Gas prices force switch to coal for power stations
The Australian
Annabel Hepworth
6 February 2014
QUEENSLAND’S largest power generator will today declare that Australia is one of the world’s most expensive countries for energy and warn that the electricity market is being distorted by the carbon tax, mandatory renewables target and solar-rooftop subsidies.
After Stanwell took the extraordinary step yesterday of announcing it would mothball its biggest gas-fired power station and resurrect a coal facility built in the 1980s – sparking predictions that gas-fired power plants would be withdrawn in other states – it will today call for a scaling back of the renewable energy target.
Before the introduction of the carbon tax, the RET scheme and solar feed-in tariffs, the abundance of coal had made Australia a source of low-cost electricity, the company will say.
“These policies appear to have been implemented for ideological reasons with little analysis of the impact on electricity prices and economic growth,” Stanwell chief executive officer Richard Van Breda will say.
Stanwell will issue its warnings as part of its submission to the federal government’s energy white paper, being developed by Industry Minister Ian Macfarlane.
The submission will caution that a raft of energy policies is eroding Australia’s competitiveness in manufacturing, which is a sensitive issue for the government amid internal tensions over taxpayer handouts to businesses, including SPC Ardmona.
Yesterday, Stanwell revealed it would withdraw its Swanbank E power station, near Ipswich west of Brisbane, from service for up to three years from October so it could sell the gas rather than use it in electricity generation.
Mr Van Breda said with “subdued” conditions on the wholesale market and increasing gas prices set to continue, Stanwell could make more money selling the gas.
A unit at the Tarong coal power station – in cold storage since late 2012 – will be returned to service later this year.
In some parts of the world, cheap coal has pushed out gas, which is considered “cleaner”.
Germany is shifting back to more coal-fired electricity generation, reopening some of its dirtiest brown-coalmines that have been closed since reunification, despite having spearheaded Europe’s push into renewable energy. China has plans to add another 860 million tonnes of coal production by 2015.
Labor said the development at Stanwell did not cast doubt on its climate change policies, which had prompted Wayne Swan to declare in 2011 that gas-fired electricity was projected to increase by between 150 per cent and 300 per cent over the period to 2050.
“This example of one company returning to coal-sourced energy says more about the Coalition’s Direct Action policy than Labor’s climate change policy,” said a spokeswoman for Labor’s climate change spokesman, Mark Butler.
“Stanwell Corporation may very well be anticipating a transition to the Direct Action policy, where they will be free to pollute as much as they like, without fear of penalty.”
Environment Minister Greg Hunt hit back, saying Labor would use anything to justify higher electricity prices and Stanwell had made a commercial decision based on infrastructure refits that began some time ago.
“Clearly there is a shortage of low-priced gas, which has been made worse by the carbon tax,” Mr Hunt said.
“The test for Labor in the coming weeks is whether they will block repeal of the carbon tax and continue to increase the pressure on family electricity bills, or whether they will listen to the Australian people and how they voted at the last election.”
Origin Energy managing director Grant King has previously said it would take a carbon price of $40-$60 to create “fuel switching” — to make it more economical to build a gas-fired power station than a coal-fired plant for baseload generation.
National Generators Forum executive director Tim Reardon said that “as the gas prices increase trickles down into other states, we would expect to see other gas plant withdrawn”.
“The carbon price would need to be much closer to $100 a tonne before it changes the economics of electricity generation,” he said.
Mr Van Breda said it would be more lucrative for the state-owned Stanwell to sell its gas, given the high prices on the east coast, which are driven by the boom in liquefied natural gas projects.
He briefed affected staff yesterday at the 385-megawatt Swanbank E power station on a voluntary redundancy program.
Mr Van Breda insisted he would be making the decision regardless of the carbon tax. “We see gas prices increasing and it makes more sense for us to sell our gas rather than burn it,” he said.
He predicted that others could also sell gas instead of using it in their own operations. “People are going to sell their gas if there is a better price for it,” he said.
Mr Van Breda said he was concerned about the oversupplied nature of the energy market.
Demand for electricity had fallen due to a slew of factors, including the decline in manufacturing and falling demand from households stung by higher power bills.
The Australian has learned that analysis by the National Generators Forum finds that if electricity consumption continues to decline at the same rate as it has over the past four years, the electricity sector could achieve a 5 per cent reduction on 2000 emissions levels as early as 2017-18 without government intervention through the RET or Direct Action Plan.
Pointing to yesterday’s new figures on greenhouse gas emissions that showed a 5.5 per cent decline in emissions from power generation, Mr Reardon said it was important that Direct Action removed taxes on electricity and led to a revival of industrial activity.
The electricity industry has cited chronic oversupply in the market as part of its push for reform of the RET, which mandates that 20 per cent of electricity will come from renewable sources by 2020.
The government will review the RET this year, with Tony Abbott’s comments in December that it was causing “pretty significant price pressures” being seen as opening the way for the RET to be wound back in the review.
Stanwell’s energy white paper submission will raise concerns that the surge in rooftop solar panels has increased the capacity of the market, making cheaper coal-fired power stations run less efficiently. It says solar feed-in tariffs (state government schemes) have resulted in high ongoing costs for network infrastructure.
Stanwell wants the RET scaled back to a “true” 20 per cent of electricity consumption.
It is set for a fixed 45,000 gigawatt hours by 2020, including a mandated 41,000GWh for large-scale generators such as wind farms. But falling energy demand means that the 20 per cent target will be overshot.
The Australian
Class traitor, Labor’s Mark Butler has completely misread the potential impact of the Coalition’s Direct Action policy.
Far from power prices rising on account of a policy still in the design phase – as STT followers are acutely aware – crippling power bills are all about the RET, the REC and the perverse manner in which that policy has favoured insanely expensive wind power – which requires 100% of its capacity to be backed up 100% of the time with spinning reserve (chewing up millions of tonnes of coal without generating a single spark – see our post here) and high cost, inefficient fast start-up OCGTs which can be cranked into gear at a minute’s notice in response to the intermittency of wind power.
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STT hears that young Gregory Hunt is taking his advice from crack energy market economist, Danny Price from Frontier Economics – who knows full well the impact on power prices caused by reliance on intermittent and unreliable wind power – and the critical distinction between it and on-demand renewables, like hydro and truly promising technologies like geothermal. Danny is also keen on using lower emissions from gas powered generation plant to achieve CO2 abatement.
The other point lost on Butler – among others – is that using gas in thermal power plants or modern, highly efficient Combined Cycle Gas Turbines (CCGTs) results in a reduction in CO2 emissions of around 50% – when compared to coal-thermal generation. But the current policy settings are hostile to gas driven CO2 abatement.
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The key function of the Direct Action policy is to bring about CO2 abatement at the lowest possible cost.
At the centre of the policy is the Carbon Capture Unit (CCU) – which is rewarded when 1 tonne of CO2 is “captured” or “abated” – which in the electricity generation sector means avoiding the emission of CO2 associated with that generation source. This would open the door for CCUs to be issued to generators using gas in CCGTs or thermal base-load plants who will be entitled to claim abatement.
The current aim – we hear – is to collapse the Renewable Energy Certificate (REC) into the CCU – where one will equal the other (“equivalence”) and be interchangeable. Under the equivalence rule a REC and a CCU will be issued on the same basis: the party applying will need to present audited proof that 1 tonne of CO2 has been “captured” or “abated”. The REC will no longer be issued simply on the basis that a MW of “renewable” energy is delivered to the grid.
The fact that wind power has to backed up 100% of the time with spinning reserve and inefficient OCGTs – which emit 3-4 times the CO2 per unit of electricity – when compared to a modern coal-fired thermal plant – means wind power generators will never be able to demonstrate meaningful “abatement”.
Worse for wind scammers – the REC price will collapse as a result of the equivalence rule and the fact that millions of CCUs will hit the market at a price expected to settle somewhere between $5-10 per Unit. Wind power operators need the REC to be trading at more than $35 to have any hope of covering construction and future operating costs – in fact the industry has been built on the wind weasel dream of scooping up RECs at over $90 a pop as we approach 2020. Fat chance now.
The whole point of the Direct Action policy is to bring about a reduction in CO2 emissions or CO2 abatement at the lowest possible cost. But, as crack energy market economist Dieter Helm observed “wind power is among the most expensive ways of marginally reducing carbon emissions known to man” (see our post here).
On that basis, wind power faces economic Armageddon. Of course, there is always the remote possibility that the industry’s parasites are right about their wild claims that wind power has no need for RECs or mandated targets and is, therefore, ready to stand on its own 2 feet – but STT doubts it.
Whether they like it or not the Direct Action policy is just about to put all those claims to the test.
who knows all about the market for sparks.
STOP THESE THINGS 
The QLD Government, the owner of many coal fired power stations, was offered free, a means for seriously reducing the Carbon Dioxide-CO2 essinons from their power plants.
A standard 350 megawatt generator needs steam at +600* Celsius, however the same power output can also be obtained by CO2 at +50* Celsius. This technique needs no water for cool back to liquid. This means there is a reduced need for coal burn, reduced CO2 emissions and eliminates the need for lakes of water.
But of course, the QLD Government reply was NO!
Judging by the looks and words coming from Hunt and Macfarlane on TV newscasts in the past 24hrs, they have well and truly heard the mob outside their office doors.