Labor Determined to Smash the Poor & Put REAL Australian Businesses to the Sword

mark butler

Mark Butler: Labor’s spokesman for “Lining Labor’s Pockets at Your Expense”.

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A little while back we covered the lone-wolf efforts of the Coalition’s Energy Minister, Ian “Macca” Macfarlane to salvage the Renewable Energy Target from its inevitable collapse.

Macca – whose links to near-bankrupt wind power outfit Infigen are far from “healthy” (see our posts here and here) tossed a ball into the Labor Opposition’s backyard, in the hope that Labor’s apparatchiks might do a compromise deal on the current 41,000 GWh target set by the Large-Scale RET. Macca only had eyes for the National interest – of course – provided you believe the national interest coincides with propping up crooks like Infigen, by smashing struggling families and businesses with ever escalating power bills?

STT predicted that there was no way Labor would agree to any significant changes to the LRET (see our post here).

Labor’s political war chest is filled to the brim by the returns made by its Union contributors controlling the $billions that are siphoned through Labor Union (Industry) Super Funds – run by the likes of former Labor Climate Change Minister, Greg Combet – with help from his best mate, Garry Weaven.

These funds have poured $billions into wind power outfits like Weaven’s Pac Hydro – backed by IFM Investors (controlled by Weaven and Combet); and – with a 41,000 GWh LRET – Union Super Funds were keen to throw $billions more at new wind farms in order to wallow in the $50 billion in REC Tax that would be added to power bills over the next 17 years and directed as subsidies to wind power outfits (see our post here).

The proposed cuts to the 41,000 GWh LRET not only throw a spanner in the works for Labor’s plans to cover Australia in thousands of giant fans in future – and to have their union buddies reap obscene profits at the expense of every power consuming household and business – the very fact of the proposal will result in a collapse in the price paid for RECs. An actual cut to the LRET would see the REC price plummet.

Any fall in the REC price threatens the viability of every established wind farm; witness IFM Investor’s recent $685 million profit forecast write-down due to the collapse in the value of its Pac Hydro wind farm investments. Pac Hydro has had $220 million knocked of its value due to “uncertainty” surrounding the RET (see our post here).

Investment in new wind farms has ground to a halt, as banks get ready for more wind farm asset write-downs; the risk of outright collapses among wind power outfits; and prospective investors look elsewhere – for very good reasons (see our post here).

So, with everything to play for, there is no way Labor will ever agree to any cut to the LRET. Here’s The Australian on Labor’s inevitable RET dummy spit.

brat

Oi! Get your mitts off. We set this 41,000 GWh LRET
rort up & we ain’t giving it up for no-one.

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Labor abandons energy target talks
The Australian
Stefanie Balogh
12 November 12, 2014

LABOR has walked away from formal talks to break a political impasse over the renewable energy target, accusing the government of refusing to budge from proposed “deep and devastating” cuts.

Opposition environment spokesman Mark Butler has written to Industry Minister Ian Macfarlane informing him that Labor is abandoning the negotiations because it “will not be a party to a plan that kills jobs and investment, increases pollution and forces power prices to rise”.

“Considering the government’s fundamental position remains a 40 per cent cut to the RET, I do not see there being any value in continuing discussions at this point in time,” Mr Butler writes.

The government has proposed cutting the large-scale renewables target from its current 41,000 gigawatt hours to a real, or “true”, 20 per cent target by 2020, or about 27,000GWh. Labor argues this would represent a 40 per cent cut.

Mr Butler has held talks with Mr Macfarlane three times and received department briefings. He says Labor has “considered alternative proposals including the need to protect aluminium and other emissions-intensive industries’’ but the opposition “remains opposed to the deep and devastating cuts to the sector proposed by the government”.

He argues the government’s position of advocating a 40 per cent cut to the RET — or a real 20 per cent — has not changed during the course of negotiations.

Since last year’s election, the Coalition has dismantled large planks of the Rudd and Gillard governments’ climate policies.

Labor argues the RET is critical to Australia meeting its emission reductions target. “With the price on carbon abolished, the CEFC (Clean Energy Finance Corporation) and ARENA (Australian Renewable Energy Agency) both marked for abolition, and the ERF (Emissions Reduction Fund) nearly universally condemned as insufficient to meet Australia’s 2020 target, the importance of a strong RET cannot be overstated,” Mr Butler says.

He says Labor remains committed to doing everything possible to restore a consensus around the RET to underpin long-term investment decisions but “will not support certainty if that means certainty of destroying the renewable sector”.

Wind, solar and other alternative energy companies have warned the current uncertainty surrounding the RET will put at risk investments worth $10 billion.

Australia now faces a political roadblock on the RET which will freeze investment in renewables. The impasse will need to be broken in about two years or penalty clauses under the existing legislation will force up the price of renewable energy certificates, which underpin the scheme, to about $92 a megawatt hour. They are currently trading at about $35.

Mr Butler also argues the government’s Warburton review found the RET kept power prices lower through downward pressure on wholesale power pricing, and Bloomberg analysis “found that a cut to the RET of 40 per cent (your stated position) would push up power prices by 9.3 per cent from 2015-30, increasing prices by $35 per year after 2020”.

Mr Macfarlane has previously made clear the government believes its commitment to a real 20 per cent target has not changed and, because electricity consumption had fallen, there was a need to recalibrate the target.
The Australian

STT loves the way Mark Butler – in his effort to save the LRET – cherry-picks the Warburton review and the bunkum tossed up by Bloomberg. The pitch that – under the LRET – “wind power is reducing the wholesale price of electricity”  – leading to reductions in retail prices – is a complete red herring, straight out of the wind industry’s play book.

The first point is dealt with fairly simply: households and businesses couldn’t care less what the wholesale price of electricity is; they get served with power bills from retail providers which, funnily enough, set out to recover the retail price.

And there is absolutely no argument that Australian retail power prices have gone through the roof in the last 5 years.

CPI and electricity

Australia’s wind power capital, South Australia suffers the highest retail power prices in the world (see page 11 of this paper: FINAL-INTERNATIONAL-PRICE-COMPARISON-FOR-PUBLIC-RELEASE-19-MARCH-2012 – the figures are from 2011 and SA has seen prices jump since then).

Retail prices are impacted by the mandatory LRET and wind power in at least two major ways.

The first is the price fixed under Power Purchase Agreements (PPAs) struck between wind power generators and retailers. That price guarantees a return to the generator of between $90 to $120 per MWh for every MW delivered to the grid. In a recent company report, AGL (in its capacity as a wind power retailer) complains about the fact that it is bound to pay $112 per MWh under PPAs with wind power generators: these PPAs run for at least 15 years and many run for 25 years.

Wind power generators can and do (happily) dispatch power to the grid at prices approaching zero – when the wind is blowing and wind power output is high; at night-time, when demand is low, wind power generators will even pay the grid manager to take their power (ie the dispatch price becomes negative)(see our post here). However, the retailer still pays the wind power generator the same guaranteed price under their PPA – irrespective of the dispatch price: in AGL’s case, $112 per MWh.

PPA prices are 3-4 times the cost that retailers pay to conventional generators; retailers can purchase coal-fired power from Victoria’s Latrobe Valley for around $25 per MWh – and the dispatch price ranges from $30-$40, on average.

Underlying the PPA is the value of the RECs that are issued to power generators and handed to retailers as part of the deal.

The issue and transfer of RECs under the LRET sets up the greatest wealth transfer in the history of the Commonwealth. However, it’s not one that power consumers are going to thank their political betters for. That transfer – which comes at the expense of the poorest and most vulnerable; struggling businesses; and cash-strapped families – is effected by the issue, sale and surrender of RECs. As Origin Energy chief executive Grant King correctly puts it:

“[T]he subsidy is the REC, and the REC certificate is acquitted at the retail level and is included in the retail price of electricity”.

It’s power consumers that get lumped with the “retail price of electricity” and, therefore, the cost of the REC Subsidy paid to wind power outfits. The REC Tax/Subsidy has already added $9 billion to Australian power bills, so far.

Between 2014 and 2031, the mandatory LRET requires power consumers to pay the cost of issuing 603.1 million RECs to wind power generators. With the REC price likely to be at least $65 (by 2017) – and tipped to exceed $90 – the wealth transfer from power consumers to the wind industry will be somewhere between $40 billion and $60 billion, over the next 17 years (see our posts here and here).

The wind industry and its parasites routinely trot out make believe figures on the “average” cost of the RET to households – their rubbery figures rely on the historical impact of the RET – but it’s what to come – as the LRET target rockets to 41,000 GWh over the next 5 years – that really matters (see our post here).

The second is the cost of backing up wind power when it fails to deliver every day and hundreds of times each year (see our posts here and here).

Fast start-up peaking power plants – predominantly Open Cycle Gas Turbines – cost a fortune to run ($200-$300 per MWh, depending on the spot price for gas on the day).

When wind power output collapses the shortfall is made up with “spinning reserve” held by coal and gas-steam plants (including CCGTs); and OCGTs. Bidding between generators with high operating costs sees the dispatch price quickly rocket from the usual $30-40 mark, to in excess of $300 (otherwise OCGT operators will simply not supply to the grid); and, if a wind power output collapse coincides with a spike in demand, the dispatch price rockets all the way to the regulated cap of $12,500 per MWh (see our posts here and here).

With the likelihood of any new wind farms being built in Australia slimmer than a German super-model, power consumers are in for a very big “sting”.

The “sting” is the mandated shortfall charge of $65 per MWh which – under the current 41,000 GWh target – starts to impact from 2017. There is no way that the annual target set from 2017 (that escalates to 41,000 GWh in 2020, where it stays until 2031) will be met. Wind farm construction is almost at a standstill: “investment” in the construction of wind farms went from $2.69 billion in 2013 to a piddling $40 million this year (see this article).

And, from here on, no retailer is going to sign a PPA with a wind power outfit; which means hopeful wind farm developers will never get the finance needed to build any new wind farms (see our post here).

In our earlier posts (here and here) we outlined the fact that – under the LRET – retailers are fined $65 per MWh for every MW they fall below the mandated annual targets – follow the links here and here.

With less than 23,000 GWh coming from renewable sources annually at present – and no likelihood of any significant wind power capacity being added between now and 2020 – Australia will fall short of the fixed target by a figure in the order of 18,000 GWh. When the target hits 41,000 GWh in 2020 – the fine will apply to that figure until 2031.

The fines paid by retailers will be collected by the Commonwealth and be directed into general revenue.

The cost of the fine compares with the average wholesale price of between $35-40 per MWh. Therefore, at a minimum, retailers will be paying $100-105 per MWh (the average wholesale price plus the fine). Retailers have already announced that they will simply recover the cost of the fine from their retail customers (see our posts here and here).

Retailers will add a margin to that in the order of 10% (or more) which means Australian power consumers will be paying upwards of $115 per MWh: 3 times the average wholesale price.

The Australian Energy Market Commission, EnergyAustralia and AGL have all united to declare that meeting the 41,000 GWh annual target will be impossible; and that, as a consequence, power punters will simply be lumbered with an enormous new electricity tax.

Given current renewable capacity of 23,000 GWh – under the legislation – the shortfall charge (fine) starts to bite from 2017.

Year Target GWh Shortfall GWh Penalty Cost
2017 27,200 4,200 $273 million
2018 31,800 8,800 $572 million
2019 36,400 13,400 $871 million
2020 41,000 18,000 $1.17 billion
Total $2.886 billion

The mandatory RET continues until 2031; and the $65 per MWh fine with it. That means power consumers will be paying around $1.17 billion every year from 2020 until the RET expires in 2031.

In addition to the $2.886 billion in fines added to power bills (up to and including 2020) – between 2021 and 2031 – fines of almost $12 billion will be issued to retailers, recovered from power consumers and the proceeds pocketed by the Commonwealth.

UPDATE

Since this post went to press in November last year it’s become evident that the total contribution of eligible renewable generation sources available to meet the LRET target is (and will remain) stuck at 16,000 GWh annually. That means that the cost of the shortfall penalty over the life of the LRET will top $30 billion. For the breakdown and details, see our posts:

LRET “Stealth Tax” to Cost Australian Power Punters $30 BILLION

Ian Macfarlane, Greg Hunt & Australia’s Wind Power Debacle: is it Dumb and Dumber 2, or Liar Liar?

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Remember that the policy justification for the insane cost of the mandatory RET is that it would: “encourage the additional generation of electricity from renewable sources”; and “reduce emissions of greenhouse gases in the electricity sector”; and “ensure that renewable energy sources are ecologically sustainable”.

On the scenario outlined above, the Federal government will collect close to $15 billion from power consumers by way of the shortfall charge levied on retailers. However, there will be: NO additional renewable energy; NO “break-through” on-demand renewable energy technologies; and NO reduction in CO2 emissions. An outrageous outcome, confirmed by Australian Energy Market Commission, EnergyAustralia and AGL (see our posts here and here).

Labor’s refusal to cut any deal on the 41,000 GWh LRET, sees them join the Coalition in a political death spiral. The power consuming voter will soon twig to the fact that they’ve been taken for suckers: being hit with a great big toxic tax that will drive power prices through the roof for no measurable benefit, whatsoever (see our post here).

With a political disaster brewing – as STT has predicted (see our post here) – one easy way home is to include the “old” hydro and new solar generation output that has been perversely excluded from the annual LRET : the 41,000 GWh target would be satisfied in a heartbeat – without adding a single wind turbine to the grid – by using existing (but presently excluded hydro) and solar generation that exceeds the 4,000 GWh “expectation” set for rooftop solar under the Small-Scale Renewable Energy Scheme.

The plan to bring in and use “old” hydro to satisfy the LRET is being championed by Tasmania’s PUP Senator, Jacqui Lambie – with the PUP leader, big Clive Palmer right behind her (see our post here).

Jacqui Lambie, is railing at the fact that – despite almost 100% of Tasmania’s power coming from hydro – because 95% of it is “old” hydro – only 5% is eligible to receive RECs. As a result, Tasmanian retailers will have to purchase millions of RECs from wind power outfits on the mainland or, otherwise, be whacked with the $65 per MWh shortfall charge – both of which will be added to Tasmanian retail power bills. Seems unfair, but that’s the LRET.

STT hears Jacqui is pulling out all stops to see that Tasmania’s “old” hydro gets included in the LRET, with RECs going to Tasmanian hydro generators (for a taste of Jacqui’s fury, see her press release here). In that event, Tasmania would satisfy the target in an eye-blink.

STT predicts that – if Jacqui’s plan to use “old” hydro and rooftop solar to satisfy the LRET gets traction amongst her fellow cross-bench Senators – Tony Abbott will jump at the chance to bring an end to the great wind power fraud; and, thereby, to avoid a political disaster in the making.

eagle death spiral

Macca’s failed RET pitch, puts Labor and
the Coalition in a political death spiral.

About stopthesethings

We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. We need carbon on this planet, we don’t need the greens or labor. Get rid of them, we have had enough. Carbon makes all life grow, not d1ck heads.

  2. Thank you STT for the precise, clinical break-down of the money trail that feeds the parasitic, rent seekers of the great RET wind scam.
    Your readers may also be interested in a study that examines the Causes of residential electricity bill changes in Victoria, 1995 to 2013. This research, commissioned by the Victorian distribution businesses, essentially confirms that the RET and related market distortions (ignoring the ALP/Green initiated smart-meter fiasco) are far and away the greatest factor in the explosion in residential electricity costs. Of particular interest also is the demolition of the Green/Left hyped Furphy that “Gold plating” of transmission and distribution assets is the major reason for increases in electricity costs. If there could be minor criticism of this research perhaps it would be that it does not identify the significant increase in power balancing costs which is essentially unidentified but nonetheless feeds directly into increasing the wholesale price of electricity. This issue is ably addressed in the following paragraphs of your article:

    The second is the cost of backing up wind power when it fails to deliver every day and hundreds of times each year (see our posts here and here).
    Fast start-up peaking power plants – predominantly Open Cycle Gas Turbines – cost a fortune to run ($200-$300 per MWh, depending on the spot price for gas on the day).
    When wind power output collapses the shortfall is made up with “spinning reserve” held by coal/gas-thermal plants; and OCGTs. Bidding between generators with high operating costs sees the dispatch price quickly rocket from the usual $30-40 mark, to in excess of $300 (otherwise OCGT operators will simply not supply to the grid); and, if a wind power output collapse coincides with a spike in demand, the dispatch price rockets all the way to the regulated cap of $12,500 per MWh (see our posts here and here).

  3. sue holtham says:

    Let’s all get together and rid the landscape of the killing blades – before all the birds of prey are only seen in a zoo or museum. 😦

  4. Jackie Rovenksy says:

    The problem for Labor and the industry is the industry is founded on ‘handouts’ not on being able to support itself – so be it – like all industry today they have to stop expecting handouts from the public purse and manage their business more effectively.
    Just because their investors will not get the huge profit payments they have become used to, doesn’t mean we the everyday people of Australia have to keep supporting them.
    We are not their serfs – legally bound to them as our ‘owners’.
    Of course the older renewable sources should be included. It’s ridiculous that they are not already.
    With SA Government now going for 50%, we see a very hungry Government desperate to appear relevant as it pulls the State into an ever deeper decline. Instead of utilising the States wealth of available renewable sources, it would rather ensure the State becomes beholden to a single industry which cannot ever meet its claims, can never provide true investment in the State, can never prove or meet its claims, can only cause human and environmental distress and devastation. The only way to stop this is for the Federal Government to take control, to maintain its stance and to prove to its people it has their best interests at heart.
    Ripping the environment apart is no way to save it and its no way to ensure a world fit for human habitation in the future.

  5. Uncle Fester says:

    Unfortunately both Labor and the Greens still somehow attribute the erection of a wind turbine to a reduction in carbon pollution output. They show their ineptitude by ignoring the fact that every turbine MUST be backed up by another means – such is the unreliability of the wind. Net result: A fan, lots of RET liability and zero carbon emission reduction. Not to mention the years of spinning that is required for each fan to cover its own carbon footprint.

    Crazy mathematics, but then, given the current deficit left by Labor, they probably think they are working with their strengths.

  6. Terry Conn says:

    STT has once again summed up the reality of wind farms as a ‘failed’ method of renewable energy that doesn’t have a single positive reason for existing. Mark Butler’s published logic for supporting wind farms is incredulous. It is impossible to believe that he doesn’t know the truth. As is so often the case, the Labor party lacks any moral focus when it comes to ripping off the nation’s citizens for their own personal gain or their mates personal gain.

    Similarly, Julia Gillard’s belief it’s okay to put a reason on a form to register an association even though she knows it’s false — it’s just a ‘slush fund’ (whatever could be immoral or illegal about that?).

    The big difference between the RET, as it applies to wind farms, and Julia’s ‘slush fund’ is the magnitude of the amounts of money involved, Julia’s cost a few hundred thousand but the RET costs multiple billions for consumers that should not be forced to pay. There can only be one reason the Labor party backs the RET and that’s because they and their mates get a sizeable chunk of the biggest scam ever. One day there will be a ‘day of reckoning’ for this scam, those who support it need to start working on ‘plan B’!!

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