The Australian’s Dennis Shanahan has come out swinging against the RET – calling it the “secret” carbon tax that simply has to go.
Abbott finds energy to act on ‘secret’ carbon tax
Dennis Shanahan, comment
18 February 2014
AFTER years of shadow boxing, Tony Abbott has finally decided to act on the secret carbon tax that has been pushing up electricity prices for households and industry — taxpayers’ subsidies to renewable energy.
Economically and politically, Europe is approaching “peak renewables” as industry and households rebel against energy bills inflated by taxpayer-funded subsidies. It’s time Australia seriously addresses what has been treated as a sacred cow protected from logical, economic and environmental assessment.
The terms of reference for the Renewable Energy Target review are essentially a black-letter directive to change the 2020 target of producing 20 per cent of electricity from renewable sources and reduce the electricity price pressure created by renewable subsidies while preserving the existing renewable energy industry.
It is clear the days of unsustainable, uneconomic and inequitable subsidies for renewable power are over but that the Prime Minister doesn’t want to go so far as to create a sovereign risk over existing investments or discourage future reasonable expansion of renewable energy.
Abbott, before the election, skirted the issue of the costly and illogical target because the RET was bipartisan policy and he wanted to concentrate on the carbon tax. But the RET has, in some cases, as big an impact on businesses as the carbon tax, distorts the energy market and pushes up household electricity bills.
A large slice of those price rises comes from a contradictory and self-defeating policy of favouring renewable energy forms over fossil-fuel energy to the extent of subsidising their creation despite contrary economic and practical arguments.
Predictably some of the responses to the review yesterday were that Australia would become an international pariah on climate change and would fall behind Germany, yet this review puts Abbott in step with the German government. During the past month Germany’s Economic and Energy Minister, Sigmar Gabriel, has started to roll back renewable subsidies to cut electricity prices to homes and factories after declaring the German economy had “reached a limit” on encouraging renewable energy, and that consumers could not be asked to do more in renewable subsidies.
Australia is perhaps best placed to take advantage of solar and wind power production but, like Germany, policies put into place for political purposes are distorting the electricity market.
The only point of disagreement with Dennis’ piece is where he says that Australia is best placed to take advantage of wind power production.
Australia has hundreds of fans situated at dozens of wind farms in South Australia, Victoria, Tasmania and New South Wales – all hooked up to the Eastern Grid – and spread over an enormous geographical expanse.
As STT readers are acutely aware – despite the number of fans and the huge geographical spread – wind power fails to contribute any meaningful output into the grid almost every day of the year and – on plenty of occasions – for days on end (for a few examples see our post here).
In Australia – as elsewhere – wind power has been a ridiculously costly experiment that has completely and utterly failed.
As a consequence of the mandatory RET – wind power has driven up power prices (10 years ago, Australia has enjoyed the lowest power prices in the world – now they pay the highest) – and provided no measurable reduction in CO2 emissions in return (see our post here).
STT was delighted to see this letter (among others) that appeared in The Australian the following day in response to Dennis’s article.
Renewable energy is an expensive delusion
DENNIS Shanahan is right to hail any move to amend the 20 per cent Renewable Energy Target, the first and perhaps the worst carbon tax to hit households, business and jobs (”Abbott finds energy to act on ‘secret’ carbon tax”, 18/2).
Now that the decline of our manufacturing sector has reduced energy use and made the 41,000GW/h target excessive, the Abbott government has a pretext to act, but there are many other reasons why this “secret” tax is wrong. We pay for 20 per cent renewables when there is really only about 12 per cent in the system, mainly hydro-electricity. The rest goes to subsidise wind farms and solar rebates. Wind and solar power are both expensive and their contributions to the grid are only notional because coal and gas-fired generators have to keep spinning anyway to provide the base-load that these intermittent sources can’t.
And we all pay for this delusion.
John Morrissey, Hawthorn, Vic
It took a while – but Australians are fast waking up to the greatest economic and environmental fraud of all time – Dennis Shanahan and John Morrissey among them.
The line being spun hard at the minute by Meridian (joint owners with AGL of the non-compliant Macarthur disaster) and their paid hacks at the Clean Energy Council – and it’s the only line they’ve got left – is that wind power has caused a decrease in wholesale power prices. Well whoopdy do!
True it is – that during the hours of darkness – when wind power occasionally hits its maximum output (on a “good” night, around 2,000 MW of its 2,660 MW capacity on the Eastern Grid) the dispatch price falls to Zero – or even goes negative – as wind power generators happily dump power into the grid for few brief hours.
The reason that they’re delighted to dump all they can produce is that their returns are secured with Power Price Agreements (PPAs) that guarantee minimum returns of around $90-110 per MW. The generator collects a REC – which forms part of the contracted “sale” to the retailer. That minimum price compares with coal-thermal power which can be pumped out around the clock for less than $25 per MW/h, with the generator making a sustainable margin at that (Carbon Tax aside).
Last time we looked, power punters were still being served by retailers with power bills which – funnily enough – involve the RETAIL – not the wholesale – price. South Australia – wind power capital of Australia – pays the highest RETAIL power prices in the Country and, indeed, in the WORLD – for a very obvious reason (see our post here). The 50,000 households in SA that have been chopped from the grid because they can no longer afford what was – until recently – a basic commodity couldn’t care less what the wholesale price is at 2am when a few hundred – otherwise lazy fans – finally get enough wind to add something more than a trickle to the grid.
So one thing you won’t hear Meridian or the CEC talk about are Power Purchase Agreements that spell out what retailers are bound to pay and, therefore, what consumers end up paying at the pump for wind power. If you get the chance, why not challenge them to “show us your PPAs?” Remember, that if weren’t for the mandatory RET (backed up with the threat of a $65 per MW/h fine – the “shortfall charge“) no retailer would have ever entered a PPA.
Another topic these champion spinners run a mile from is what happens at base-load thermal plants during the brief spurts when wind power amounts to something more than just nuisance value to grid managers.
STT followers are acutely aware of the FACT that close to an equal amount of wind power capacity has to kept as “spinning reserve” – which means coal or gas is being burned to keep boilers boiling without adding a single spark to the grid. This means millions of tonnes of coal and gas are being wasted (at enormous COST) – not to mention all that “dreadful” CO2 being pumped out for no benefit other than to allow wind power to (spuriously) claim it’s able to play with the big kids in the schoolyard (see our post here).
And, of course, you’ll never hear them mention the critical need for “investment” in – or the ludicrously high operating costs of – fast start up peaking plants – principally highly inefficient and costly Open Cycle Gas turbines that are marshalled into gear in an instant (once spinning reserve is exhausted) to keep mines and factories up and running – and the lights and ACs on in offices and homes. Peaking power “investment” (some cynics might call it a clever and well-planned RORT) has been driven by the industry’s self-generated need to provide instantaneous back-up when wind-watts go missing every day – and on plenty of occasions – for days on end – hundreds of times each year (see our post here). It’s point we’ve hammered – and they simply hate.
The truth is that the wind industry is in a state of high level panic. The Head Boy’s RET review team will not allow the current debacle to continue – and the sparks market knows it.
The REC price is in free-fall at the minute. Having traded at around $35 for most of 2013, the price has dived in the last week – with the spot price battling to top $25. Retailers – Origin among them – are dumping RECs as fast as they can find suckers to take them. At anything less than $35 it is totally uneconomic to sling up fans; at anything less than $30 the operators of existing wind farms can expect a call from their bankers; but, at $25 they can expect a knock on the door from the receiver.
Cowboys like Infigen – aka Babcock and Brown – run a fleet of clapped out Suzlon s88s – that are all out of warranty and are wearing out fast. Changing over main bearings, generators, gearboxes and blades is about as cheap and “economic” (relatively speaking) as fixing up the engine of a 30 year old Mercedes Benz. Cranes cost a couple of hundred $thousand to get on site and $50-100,00 per day or more.
Wind power generators admit (very privately) that they were all sucked in by the fan maker’s tales of their products being a “set-and-forget” proposition that would last for 25 years – with a grease and oil change every few months. Those operators with a choice admit that piling into fans was an immensely expensive lark – with repair and maintenance cost way outstripping their budgets – and, therefore, killing their expected bottom lines. Little wonder that Infigen (an all fan “wonder”) is bleeding cash – backing up a $55 million dollar loss in 2011/12 with an $80 million loss last financial year.
This is a desperate industry in which desperate men will do and say desperate things. Expect to hear more complete twaddle over the coming weeks from the CEC and other parasites as their ship lists and heads to the bottom. Although we note they’ve largely been reduced to writing snippy, misleading letters to the Editor and running confected outrage pieces on Green-Left friendly ABC outlets.
STT has just clocked 400,000 hits – and we know from our follower’s list that Coalition Members are all reading with interest – we hear it’s a Monday morning ritual among Federal staffers. We also have quite a few followers at The Australian. STT started out as a lonely sniper – but a year-and-a-bit-on we’ve been joined by Officer quality journos like Dennis Shanahan in an all out assault on what is – without doubt – the greatest environmental and economic fraud of all time.
Waking up to it was only a matter of time.