Senator Matt Canavan: Australia’s RET Policy: “Robin Hood visits Bizarro World”

matt canavan

Matt Canavan: he gets it.

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Labor’s energy policy nothing but wind
The Australian
Matt Canavan
4 December 2014

GEORGE Orwell once said that political language was designed to “give an appearance of solidity to pure wind”.

Step forward exhibit A and the Labor Party’s explanation for refusing to fix the mess that is Australian renewable energy policy. Mark Butler says that Labor will not “stand by and watch” billions of dollars in investment in renewables head overseas.

Back on planet reality there is no investment in renewable energy now because we already have too much of it.

This year the legislated Large-Scale Renewable Energy Target required Australia to produce 16,100 gigawatt hours of renewable energy.

What this effectively means is that businesses have to surrender an equivalent amount of renewable energy certificates or pay a penalty. But Australia has an enormous oversupply of renewable energy certificates. This has nothing to do with the change of government a year ago and everything to do with the overly generous solar subsidies provided by various state and federal governments until recently. These subsidies have correctly been removed but the overhang remains.

Where there is a surplus of a product its price falls and this is what has happened to the price of renewable energy. Renewable energy certificates have been stuck at about $30 a megawatt hour, too low to bridge the gap between cheap fossil fuels and renewables.

Labor’s refusal to even consider reform is condemning the renewable energy industry to greater uncertainty and simply defers a reckoning. The reckoning will come when it becomes apparent that we cannot, by 2020, increase our renewable energy production to 41,000GWh as set by law. To meet that target we need an additional 26,000GWh of renewables.

The most efficient renewable energy wind turbines are capable of producing about 3MW while running. Because there are 8670 hours in a year, each wind turbine has the potential to produce about 26GWh a year.

But turbines don’t run at full capacity because the wind doesn’t always blow. Across Australia the average real output of wind turbines is about one-third of their rated capacity.

That means each wind turbine could produce about 8GW of energy every year. To produce another 26,000GWh we would need an extra 3000-plus wind turbines — more than doubling the population of wind turbines in Australia today. Each of these wind turbines would take up about 1sq km of land — considering the space needed between turbines. That means we would need an area larger than the size of the ACT to produce all this additional wind energy.

Now we technically could blanket the ACT with wind turbines — and some may suggest that would be a more productive use of that land — but that is not going to happen in five years. There is too short a time to build so many wind turbines so fast.

What will actually happen is that we won’t reach the target, but the dirty secret is that those that have already invested in renewables don’t really mind.

In about three years the target will grow to be above the renewable energy we are producing. Under the law that will mean the price of renewable energy certificates will increase to a shortfall charge of about $93 a megawatt hour in post-tax dollars increasing the burden of the RET threefold.

The producers of renewable energy will once again have their pockets lined thanks to the largesse of the families and businesses that consume energy. Irrigators will pay more to water their crops and we will become even less competitive in steel production. Jobs will be lost.

The RET costs the average family about $50 a year now; in a few years that will probably rise to $150 a year, or half a carbon tax but without the compensation. Every time you open the fridge, the little white light will come on to remind that you are paying for rich investors to make money in renewable energy stocks.

Australia’s renewable energy policies could simply be titled “Robin Hood visits Bizarro World” — they steal from the poor and give to the rich.

For all the Labor Party’s fine words in the cause of social justice and redistribution, when the lights go on those words are shown to be about as robust as a bunch of dead leaves blown along by the wind.

Matt Canavan is a Nationals senator for Queensland.
The Australian

robin hood 3

So, let’s take a little jaunt to Bizarro World.

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Matt flatters the wind industry when he says “the average real output of wind turbines is about one-third of their rated capacity”.

The AVERAGE of all wind farms connected to the Eastern Grid is closer to 27% – near-bankrupt Infigen’s Lake Bonney 3 operation – near Millicent in SA’s windy Sth-East – struggles to hit a capacity factor of 23%; and its neighbours produce meaningful power a risible 25% of the time – on AVERAGE.

But power punters are not – funnily enough – that interested in having power delivered on AVERAGE (see our post here).

And talk about annual averages overlooks entirely the hundreds of occasions each year when – on the Eastern Grid – the entire fleet of wind farms – spread across 4 States – produce less than 5% of their capacity and – on plenty of occasions – less than 1% for hours, and even days, on end (see our post here).

Any “system” of power generation that can’t deliver power as and when it’s needed, is no “system” at all – it’s pure, infantile nonsense.

When Matt talks about the LRET’s “dirty secret”, he’s pointing to the inevitable imposition of the $65 per MWh “shortfall charge”. Under the LRET – retailers are fined $65 per MWh for every MWh they fall below the mandated annual targets – follow the links here and here.

The cost of the fine will be recovered through retail power bills plus a retail margin on top – which means power bills have only one way to go – and that’s North.

The shortfall charge – which will start to impact this year, and really begins to bite from 2017 – will see power consumers getting whacked with fines which will add around $30 billion to retail power bills over the life of the LRET (which ends in 2031). For a rundown on the pointlessness of what will be nothing more than a massive, toxic electricity tax – see our post here.

But limiting focus to the impact of the shortfall charge on power prices completely overlooks the meat and potatoes. It’s the $40-50 billion wealth transfer from retail power consumers to wind power outfits that’s the main game.

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 LRET to households – their rubbery figures rely on the historical impact of the LRET – but it’s what’s to come – as the LRET target rockets to 41,000 GWh over the next 5 years – that really matters (see our post here).

The impact of spiralling power prices on households and business is something that the Coalition – currently struggling in the polls – will need to address pretty quickly if it wants any hope of a second term.

Matt singles out the impact of rocketing power prices on the viability of Australian irrigators. We’ve had a look at the impact of RET driven power prices on Australian farming operations in our post here.

In South Australia – Australia’s wind power capital – irrigators already face the highest power prices in the world – and things will only get worse as the annual LRET target ratchets up to its 41,000 GWh target in 2020 – that runs through to 2031.

Power prices skyrocket by 62 per cent in South Australia’s Riverland, irrigator says
Tom Fedorowytsch
ABC News
30 November 2014

Electricity bills have jumped by 62 per cent in South Australia’s Riverland, according to an irrigator who says he is facing increased costs.

Sam Albanese, a grower at Pike River near Renmark, said high electricity bills were the latest challenge for a region that was already suffering from the impacts of low commodity prices and drought in recent years.

“Since 2012 and 2013, our power bills have increased by 62 per cent,” he said.

“It’s a fairly big jump and it’s a bit hard to justify.

“There’s not much we can do about it. We’ve just got to grin and bear it, but I don’t understand it.”

The Australian Energy Market Operator confirmed that the Riverland faced higher network charges, arguing that it needed to recover the cost of electricity lost on a power line running through the Riverland from South Australia to Victoria.

Water pumping costly for irrigators

Mr Albanese has a wine grape and citrus block spanning 47 hectares.

He said a significant proportion of his power bill was attributed to pumping water up a 30-metre cliff from the Pike River to his property.

Despite his efforts to save electricity, Mr Albanese said network charges had forced his bills to rise exponentially.

Since 2012 and 2013, our power bills have increased by 62 per cent.

“I can only have a small influence on the top half of the bill and not the bottom half,” he said.

The Central Irrigation Trust was among several Riverland organisations trying to curb charges for electricity supply wires and poles.

Chief executive Gavin McMahon said network charges should be lowered and an electricity rebate introduced for growers.

“For the National Irrigators Council, the biggest issue up until now has actually been the Murray-Darling Basin Plan,” he said.

“Energy prices are now as significant as that to our members.”

In March 2012, SA’s power prices were dubbed the most expensive in the world.

A further hike of 18 per cent from July 2012 was heavily criticised by the SA Council of Social Services, which said it meant prices had risen by 65 per cent since March 2010.
ABC News

As the ABC points out, 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). And the spike in power prices is not limited to the Riverland, it’s a whole of state disaster.

While the ABC tries hard to pin the blame on “poles and wires”, in SA, it’s all about the impact on retail power prices from having wind power outfits receive guaranteed rates from retailers which are 3-4 times the cost of conventional generation.

South Australia – with 1,477MW – has a little under half of the wind power capacity connected to the Eastern Grid: on those (rare) occasions when it’s producing anything like its capacity, retailers will be paying through the nose for it – and slugging their retail customers accordingly; as follows.

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

The first is the underlying cost of the RECs issued to wind power outfits – which we dealt with above.

The second 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. At that price, retailers are paying more than 4 times the cost that they can purchase coal-fired power from Victoria’s Latrobe Valley (around $25 per MWh).

SA imports a substantial part of its power needs from Victoria’s coal-fired plants – via the Murraylink and Heywood interconnectors – which have a combined capacity of 680MW. These power imports help cover the hundreds of occasions when SA’s wind power output collapses entirely for hours and days, on end.

And it’s the fact that wind power can only be delivered at crazy, random intervals – if at all – that gives rise to the third reason why SA suffers the highest retail power prices in the world.

The huge capital costs (requiring returns to investors) of having sufficient reserve capacity is one thing, but finding hundreds of MWs in a heartbeat means relying on “spinning reserve” held by coal or gas-steam plants (including CCGTs) and “peaking power”: fast start-up OCGTs (the reason why GE is right behind wind power – see our post here) and diesel generators. OCGTs cost $200-300 per MWh to run – depending on the dispatch price for gas; diesel generators cost over $450 per MWh in fuel alone.

Relying on peaking power to cover regular wind power output collapses comes at an ENORMOUS cost: the dispatch price that usually averages $40 per MWh quickly rockets towards – and often reaches – the mandated cap of $12,500 per MWh.

Sure, this price gouging involves peaking power generators colluding, gaming and rorting the power market – but that’s just the inevitable result of SA trying to rely on a chaotic and wholly weather dependent power source. And – in the end – it’s SA’s power consumers that pay dearly.

For a detailed breakdown on SA’s wind powered economic disaster (and what the wind industry’s spruikers at your ABC will never tell you) see our posts here:

The Great Watt and Pole Swindle

Bobby thumbed a “Diesel” down

ENRON now spelled A-G-L

It’s only a RORT if you’re not in on it

Why South Australians Pay the World’s Highest Power Prices

Want skyrocketing power prices? Just add Wind Power

And South Australians wonder why SA’s economic future has been slammed into the basket case category by their political betters. Well, now you know.

tom playford-anzac-parade

Tom Playford would be turning in his grave. See our post here.

About stopthesethings

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

Comments

  1. Bubbles theist says:

    Matts figures are incorrect, put simply the ROI on a 2mw $4 million wind turbine is around about 5%. No country to date can penetrate that ceiling but the average is about 3%. On the 4 mil investment expect to export around 200k of energy to consumers… Yes the figures are that bad, in Spain they understand their predicament all too well

  2. A great article by Senator Matt Canavan. But Matt is a too kind when it comes to calling out the short-comings of these anachronistic, eco-crucifixes. As STT points out the average real output (the capacity factor) of Australia’s wind fleet is closer to 27% than the generous 30% Matt has adopted.
    Not only is Matt generous when it comes to capacity factor but he is extremely generous when it comes to the land area required to site his 3000 plus turbines. Recent research indicates that each 3 MW wind turbine will require not 1 square kilometre of land but 3 square kilometres, based on a maximum achievable output of 1 Watt per square metre. Hence we find that the land area required for the siting of the 3000 turbines is more like 9000 square kilometres or nearly four times the area of the ACT.
    But rest assured the ACT is one place where you’re unlikely to see an endless carpet of giant fans any time soon. This is because while the ACT espouses an insane economy and living standard destroying 90% renewables target, it refuses to offend the sensibilities of its citizens by locating the giant fans within its borders, hence most of the angst and suffering will be inflicted on the citizens of NSW.

  3. Jackie Rovenksy says:

    The problem for SA is the Premier and his party are so involved with the Wind Industry they cannot find a way out of the bag of tricks they have blindly entered.
    All they do and can do is to blame everyone else for their faults, their stupidity.
    Rising power bills are ignored or ‘explained’ away by slimy smiles and pointing the finger at everyone but themselves.
    It’s impossible for any industry to be competitive in pricing here because of the ever increasing cost of power.
    Rising costs of power affect the money available to provide hospital care, child care, social services and jobs because so much of the funds to operate these areas is spent on energy bills. How can anything flourish here when no one can budget effectively with the cost of power constantly rising?
    Let’s hope other states don’t make the same mistake – but alas I can see both Victoria and NSW going down the same path.
    It’s going to be up to a strong Federal Government to reign in this nightmare, and if they are currently suffering at the polls – let’s hope they don’t falter in this determination but continue to support the people of this nation to rise up again to a place of opportunity for all the people, not just a few.

  4. These windweasel greentards, who are the owners and supporters of these corrupt fans, are nothing more than scumbags, who are the lowest form of people of the human race. These people are taking the hard earned cash in the form of the REC from the tax payer for no gain to and also destroying the health of people that live next to the fans from the noise, low frequency and infrasound emissions.

    All these scumbags should be tied to the stake near their beloved fans until they go mad from the low frequency noise and infrasound.

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