Hoping to avoid the predictable consequences of one’s own actions is simple ignorance; and forgivable. However, deliberately ignoring measured warnings from others, when the consequences of those wilful actions will destroy hundreds of businesses; kill off thousands of jobs; result in thousands being deprived of power and tens of thousands more struggling to pay their rocketing power bills is downright criminal. And so it is in South Australia, where all of those results have played out, precisely as predicted.
Warning of jolt to power prices raised a year ago was ignored
Michael Owen & Verity Edwards
22 July 2016
South Australia ignored economists’ warnings a year ago that it faced higher wholesale energy prices and a statewide blackout if it allowed the exit of its only major baseload power station.
Rather than provide subsidies or other assistance to keep Alinta’s Northern power station in Port Augusta open, the state Labor government continued its pursuit of renewable energy and relied on an upgrade of the Heywood interconnector with Victoria to import brown-coal-generated power to meet demand.
A Frontier Economic report published last July foreshadowed the problems. It said price spikes in the state were linked to days of low wind production, noting it had been predicted for years increasing penetration of intermittent renewable generation would lead to more volatile wholesale prices.
The report warned that, with the withdrawal of the 576MW Northern power station, “South Australia may face load shedding events and potentially even a statewide blackout”. “The people of South Australia are increasingly likely to bear increased electricity costs as wind makes up a greater proportion of South Australian generation,” the report said.
State Treasurer and Energy Minister Tom Koutsantonis said the upgrade, which should be completed next month, would make the interconnector one of the largest in Australia at more than 600MW, “to make sure that whatever capacity we lost from Port Augusta we could dramatically increase and import from interstate if we needed”.
When the state’s power station closed permanently in May, there were immediate price surges of almost 75 per cent and volatility has since worsened, almost spiking to the maximum $14,000 per megawatt hour this month.
The government was provided with “many scenarios about what could or might happen” to power prices when the state’s coal-fired power station closed, Mr Koutsantonis said. Asked whether it received an offer to keep Alinta’s power station operating in Port Augusta, he said: “I don’t talk about commercial offerings from companies.”
“But I’m not going to support baseload or any other form of any generation with subsidy, because if we did that and went down that path that would be folly,” he told FIVEaa radio.
An Alinta spokeswoman said the company had “no further comment in relation to the closure”.
Alinta chief executive Jeff Dimery said in June last year that there had been talks with the South Australian government to “investigate a range of options” to stay open but that “policy settings designed to support significant growth in renewable energy generation have … had the effect of causing a significant oversupply of power available to South Australia”.
Tony Wood, from public policy think tank the Grattan Institute, has said governments may have to consider paying subsidies to keep back-up baseload power sources available, amid warnings other states faced a similar energy crisis to South Australia, which has a renewable energy mix of more than 40 per cent, if they embraced wind and solar at the same rate.
South Australian components manufacturer Alfon Engineering’s power prices had increased by almost 50 per cent in its latest contract, owner Fred Moore said.
Alfon’s monthly electricity bill until the end of May was about $3000, and it has increased to just less than $4500 per month from last month. “I don’t know how long the company is going to be able to afford it,” Mr Moore said.
The 12-month contract will see the company’s bill skyrocket from about $36,000 last financial year to about $54,000.
Port Augusta resident Suzy Graham has lived in a household of uncertainty since the power station closure, with her husband, power plant worker Adam O’Hanlon, facing unemployment.
“It’s been an uncertain 12 months and it’s been a bit stressful on the household, our kids have been a bit confused,” she said.
Mr O’Hanlon has been able to pick up casual work on wharves at neighbouring towns but he sometimes has to stay overnight. The family has also faced rising electricity costs at home, with a bill this week showing a spike in prices.
Yesterday, we dealt with the (Labor-left think tank) Grattan Institute’s Tony Wood and his plan to ‘solve’ SA’s pricing and power supply calamity – the result of massive subsidies to wind power – by hitting up the taxpayer and/or power consumers for hundreds of $millions in annual capacity payments to base-load generators (see our post here).
Not that SA now has much choice in the matter, but there is 576MW of reliable and cheap base-load capacity lying idle at Port Augusta, that it may well have to pay Alinta to bring out of mothballs (see below).
Whatever its witless Labor government determines to do, it needs to do it fast: small businesses like Alfon Engineering – whacked with a 50% increase in its power bill; and big ones, like BHP – due to a wind power output collapse, paying $2.57 million in a single day to power its Olympic Dam operation, instead of the usual $250,000 – won’t last much longer without some kind of respite from South Australia’s wind power debacle.