South Australia’s Lessons for the World: Subsidised Wind Power The Fastest Route to Social & Economic Disaster

judith sloan2

Judith Sloan: lays out a lesson on avoiding economic & social disaster.


In a week when the mainstream media have been (finally) laying out the catastrophic results of South Australia’s ludicrous attempt to power itself on sunshine and breezes, it would be rude not to include this cracking article penned by The Australian’s top-flight economics editor, Judith Sloan.

Judith’s work has graced the pages of STT once or twice before, as here: LRET “Stealth Tax” to Cost Australian Power Punters $30 BILLION

And, no doubt, with renewed interest in South Australia’s unfolding energy debacle, Judith will have plenty more to say on the issue.  Here’s Judith.

Energy price reveals folly of renewables
The Australian
Judith Sloan
19 July 2016

It is unusual for any story related to South Australia to appear on the front page of this newspaper. But when wholesale electricity prices in that state reached more than 30 times the prices recorded in the eastern states last week, the broader interest in the issue is obvious.

To give you a feel for the figures, last Thursday at 1.45pm, the wholesale power price in South Australia was recorded at $1001 per megawatt hour, compared with prices of between $30/MWh and $32/MWh for the eastern states. At one point, the maximum price in the state hit $14,000/MWh.

Unsurprisingly, several companies operating in South Australia, including BHP Billiton and beleaguered steelmaker Arrium, warned state Treasurer and Energy Minister Tom Koutsantonis that they might temporarily close their plants because of the high and erratic electricity prices.

But more worrying still are the medium-term prospects for the state: the chairman of the Energy Users Association warns that “large end-user customers are feeling the pain. As large customers roll off their energy contracts and need to renew those contracts, they are faced with significantly higher prices in South Australia”.

Electricity contracts for delivery next year and in 2018 are priced at between $90/MWh and $100/MWh in South Australia, compared with between $50/MWh and $63/MWh in Victoria, NSW and Queensland.

How could this happen? How could it go so wrong for South Australia? The short answer is, contrary to Roy and HG’s famous prognostication that too much is never enough, too much is too much when it comes to intermittent and unreliable renewable energy. South Australia is paying a heavy price for its misguided energy policy, potentially leading to the further deindustrialisation of the state while also reducing its citizens’ living standards. But the real tragedy is that this outcome was entirely foreseeable.

Let us not forget that South Australia continues to boast about its status as the wind power capital of the country and having the highest proportion of its electricity generated by renewable sources. Since 2003, the contribution of wind to South Australian electricity generation has grown to more than one-quarter of the total.

Late last year, the state government issued the Climate Change Strategy for South Australia, ignoring completely the problems that were already apparent in the system. The wholesale electricity price in the state has been consistently above the national average since early 2015.

The statement reads that “to realise the benefits, we need to be bold. That is why we have said that by 2050 our state will have net zero emissions. We want to send a clear signal to businesses around the world: if you want to innovate, if you want to perfect low carbon technologies necessary to halt global warming — come to South Australia.”

But last week the confidence of that statement had been forgotten. Koutsantonis hysterically blamed what he saw as failures in the national electricity market and inadequate electricity interconnection for his state’s high and volatile wholesale electricity prices.

He even pledged to “to smash the national electricity market into a thousand pieces and start again”. How he thought this suggestion would be helpful is anyone’s guess.

The main problem with electricity generated by renewable energy — in South Australia’s case, overwhelmingly by wind — is what is technically called the non-synchronous nature of this power source, because of its inability to match generation with demand.

When the power is needed, the wind isn’t necessarily blowing. Or if the wind is blowing too hard, the turbines must be switched off and again the demand has to be met from other sources — in South Australia’s case, mainly from electricity generated in Victoria from brown coal.

What is clear is that overdevelopment of variable generation using renewable resources is a recipe for higher prices and lower than expected reductions in emissions because of the increasing costs of ensuring system stability and reliability.

Feasible storage options are down the track and, in any case, likely to be expensive.

The system can cope with some renewable energy and, in the short term, wholesale prices may even fall. But across time expansion of renewable energy undermines the profitability of traditional base-load generators while increasing the need for more back-up supply (up to 90 per cent of the maximum generating capacity of the renewable energy sources).

The decision by the South Australian government to sit on its hands when the coal-fired Northern Power station in Port Augusta closed in May was an act of wilful madness. The alternative would have been for the government to pay the owner, Alinta Energy, to keep the loss-making plant operating, certainly before an expansion of the interconnector capacity.

But Koutsantonis thought he knew better. “The truth is the reason it is closing is it couldn’t make money in this market,” he said. “The reason it can’t make money in this market is even though it does pour in relatively cheap power into the grid, renewable energy is cheaper.”

That would be cheaper only after taking into account the huge subsidies that are thrown at renewable energy courtesy of the renewable energy target and ignoring the need for back-up capacity.

Last week, the situation became so dire that Koutsantonis pleaded with the privately owned, mothballed gas-fired electricity generator located on the Port River in Adelaide to fire up to make up the electricity shortfall in the state.

In fact, gas should be the next cab off the rank when it comes to electricity generation. It is much less emissions-intensive than coal, particularly brown coal, but there is much less gas-generated electricity in South Australia because of the distortions in the market caused by the subsidies to renewable energy.

There are some important lessons in this disaster for the country as a whole; after all, there is no inter­connector to another country as there is an interconnector between South Australia and the eastern states. And note that Victoria has a target of 50 per cent renewable energy by 2030.

Notwithstanding his exasperation, Koutsantonis did make one valid point last week: “This is coming to Victoria, this is coming to NSW … every jurisdiction is facing what we’re facing now.”

Bill Shorten should take note and immediately ditch his fanciful target of 50 per cent renewable energy lest the South Australian experience befall the rest of the country.
The Australian

In and otherwise faultless analysis of South Australia’s energy calamity, Judith gives far too much credit to wind power when she says: “expansion of renewable energy undermines the profitability of traditional base-load generators while increasing the need for more back-up supply (up to 90 per cent of the maximum generating capacity of the renewable energy sources)”.

Given that the Sun still rises and sets every day, grid-scale solar power requires 100% of its capacity to be “backed up” by conventional generation sources; and, apart from off grid applications, residential solar is effectively backed up 100% of the time by conventional sources, in any event.

Wind power can only ever be delivered at crazy, random intervals and, likewise, 100% of all wind power capacity has to be backed up by conventional generation sources 100% of the time.

June 2015 SA

These posts tell the story:

The Wind Power Fraud (in pictures): Part 1 – the South Australian Wind Farm Fiasco

The Wind Power Fraud (in pictures): Part 2 – The Whole Eastern Grid Debacle

The other, not so minor, quibble is with Judith’s statement that: “Bill Shorten should take note and immediately ditch his fanciful target of 50 per cent renewable energy lest the South Australian experience befall the rest of the country.”

Judith overlooks the fact that the current 33,000 GWh Large-Scale Renewable Energy Target will be more than sufficient to allow the “South Australian experience [to] befall the rest of the country”.

The “choice” between the current LRET target and Electricity Bill Shorten’s 50% LRET is like one of British sit-com, Extras side-kick, Maggie Jacob’s puzzling rhetoricals such as “would you rather be trampled by elephants or eaten by lions?”

A while back in a post dealing with the “choice” – Labor to Throw $200bn to the Wind: Electricity Bill Shorten’s Economic Suicide Pact Unpacked – we put the Maggie Jacob’s Poser as follows:

“would you rather have your economic future destroyed by a $45 billion electricity tax, designed to subsidise the construction of another 6,000 of these things; or a $90 billion electricity tax, designed to subsidise the construction of another 12,000 of them?”

As Judith well-knows, because she has written detailed analysis on the topic, the current LRET involves a $3 billion a year wealth transfer from power consumers to wind power outfits in the form of Renewable Energy Certificates: What Kills the Australian Wind Industry: A $45 Billion Federal Power Tax

So what Judith, and any other economist with half a brain, ought to be calling for is an immediate suspension of the operation of the legislation that gives rise to the LRET – the greatest single industry subsidy scheme in the history of the Commonwealth – and which is the Federal policy foundation for South Australia’s self-inflicted power supply and pricing disaster.

Tom Koutsantonis can’t ignore his power debacle for much longer.

18 thoughts on “South Australia’s Lessons for the World: Subsidised Wind Power The Fastest Route to Social & Economic Disaster

  1. One only has to look at the EU where russian gas and france’s nuclear power prevents economic disaster by supplying power when needed most. Australian industry simply can’t rely on renewables alone and consumers need affordable power for their homes. Those who think otherwise are labouring under an illusion. Funny how the people pushing these ideas are almost the financially well off or have an interest in the renewables business. Good luck Australia!

  2. I have read the article and most of the comments. I have lived totally off grid for over 20 years now. originally both solar and wind , and later just solar. I chose this lifestyle as I believed the myth of the co2 danger. most of what is written has aspects of truth in it, but no one seems to understand the issue. may I suggest you live off grid for a while before making comments or writing reports. it is a bit like spending millions pulling your car apart to try to find out why it wont start. try checking the fuel gauge first.

    1. No, the industry and mines and manufacturers who supply your needs are on the grid, which allows you to make the choice you did. Cities run on the grid, the grid powers street lights, traffic control, airports, water and sewer systems, hospitals, which you will need at some stage, the internet which carried our post and your comment. We could go on. Affordable and reliable power is essential to civil society. Period.

  3. Everyone who ever voted for wind power already has a working refrigerator. The same folks who sold the “CO2 menace” sold the turbines, what makes you think they only lied about turbines? “It is easier to fool someone than it is to convince them they have been fooled” They lied about solar, wind, reef death, end of rainfall, end of snow, end of mankind, and countless other items but suddenly they find honesty regarding climate? These people want to depopulate the planet, get rid of 85-95% of humans, you don’t accomplish this by saving lives, somebody has to die. They say they are concerned about “future generations ” that they don’t want to be born. The easiest route is starvation, easier than gas chambers because the dying tend to the dead, less messy. This is easily accomplished by driving up food and energy prices and wasting money and human capital on non problems, ignoring the obvious cooling just ahead. The Sun is the only source of energy we have, suggesting it doesn’t control our climate is silly. CO2 is the gas of life. Atmospheric temperature is a residue of climate, not a driver. Water carries the heat, in the oceans and atmosphere. Climates are defined by how and when they receive water.

  4. The other thing is that, for Australia especially, that the Renewables Delusion is almost as bad as the God Delusion (unless you live in a tyrannically Islamic country, or tyrannically Christian Taliban region of the USA)
    Theism claims to release you from evil, which it doesn’t. But Evil is real,even if the supernatural is not.
    Similarly, the danger of Disastrous Climate Change is real, but “Solar Renewables” cannot save the world from it.
    Carbon Dioxide is invisible to us, but if we could see the infrared radiation from ordinary cold dirt, it would be like fog.

    The planet has to Get Rid Of more heat, from the sun, in an hour, than what the various Energy Information agencies of the world reckon industry and domestic comfort use in a year.
    Interfering with the ability of land and sea to radiate that energy outwards, is what is melting the Greenland snow and ice.

    Industrial energy counts don’t include the fresh water we drink, nor the food we eat.
    15,000 gallons of water distilled from the seas by the sun, a not unusual annual demand, represents recent solar energy well in excess of the fossil solar energy of the gasoline (or petrol) needed to drive 15,000 miles at 30 mpg. !

    China has reckoned that the real answer to this problem is not all the horrible “renewable” stuff the rest of the world is so keen to buy from them. They have a project that is intended to produce safe, civilian, renewable nuclear energy from small shippable reactors, in a decade or two.
    The design, a Molten Salt Reactor, is one that the USA pioneered 50 years ago.
    But visit, for the recent work of two MIT graduates.

  5. I had thought that Germany’s Energiewende had already proven it, but I’m glad to see this article.
    Disastrous Climate Change is a real and horrible threat, and if the Great Barrier Reef is to survive, it is high time for Australia to replace coal burning with nuclear fission.

  6. Interesting that I read that Union super fund invests a lot of money in Renewable energy. Could that be CBUS? Seems they have a lot of CFMEU involvement in their fund with all of their workers contributing to this Super Fund. Shorten will of course support Renewable energy if it involves unions? Food for thought.

  7. Unfortunately, Scotland is still pursuing the fraudulent wind power mirage. Not only does the trashing of our beautiful land, lochs and mountains continue, now the money-grabbers are intent on spoiling our coastlines. Plans are to build hundreds of wind turbines in our coastal waters, from Aberdeen down to the Firth of Forth. Shame on them, the profiteers and the politicians who accept the brown envelopes. Hopefully there will come a day when they are brought to court for their crimes.

      1. Thanks for the links. Well, here’s hoping that the decision is final, and no turbines will be built.

        Its funny how much was reported about them getting the go-ahead, and how little has been reported about them currently being stopped in their tracks!

        The areas mentioned were also supposed to be protected because of the marine wild-life, such as seals, dolphins, etc.

        Scottish Government are playing a weird game, because we can’t actually afford all the turbines we have, the subsidies are paid for by the whole of the UK.

    1. I was working for the Federal Energy Regulatory Commission at that time, and by far the most evident problem was that “spinning reserve”, the ability of the distributor network to call upon sharp increases in power supply to respond to increases in power demand, was crucial. It is worth ransom level fees.

      The physical problem with an AC grid that has the huge advantage of providing the ability to transform 1000 kW of power ( a megawatt) from 20 amps at 50 kilovolts, to 2000 distributed amps at 500 volts, with remarkably little loss, is that every supplier has to be in phase with all the others, at a frequency of 60 Hz in the USA (or 50 Hz in Britain).
      In other words, if a couple of 200 MW generators are out of phase by 1/120th of a second, they cancel each other out, and probably burn something up. With luck, it’ll be a fuse or better still a relay that drops them both out.
      There is a little “grace time”. What happens is, that if your various generators are overloaded, they slow down. The problem is that they do not slow down in perfect synchronisation.
      The solution is to have something that is not fully loaded, running at rpm that synchronise its output with the grid. Hydro, and gas turbines, do this beautifully.
      Of course, if your usual base load nuclear power is off the grid for “routine maintenance”, the problem is worsened. The peaks appear sooner.

      The moral of this tedious account is of course that, whereas the dispatchability of idling reserve is worth a Grid’s Ransom, the capricious availability of wind and solar is worthless, and in the case of the California problem, it was again the weather, because the loss of the reliability of hydro came from the lack of snow that “should have fallen” the previous winter.

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