Running on Wind Power & Wishes: South Australia Becomes a ‘Fools Paradise’

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Last week had State Energy Ministers in a desperate rush to Canberra to plead for help from Federal Energy Minister, Josh Frydenberg at an urgently convened COAG Energy Summit.

In the lead up, every one of them was being fed lines from those eager to profit from South Australia’s energy calamity: grid operators, keen to roll out $4-5 billion worth of interconnectors to keep the lights on in SA when the wind stops blowing; gas pedlars, keen to supply fuel for fast-start Open Cycle Gas Turbines that chew up oodles of the stuff, and which their owners use to chew $2,000-14,000 per MWh out of the grid operator – whenever wind power output collapses on a total and totally unpredictable basis – for power that a baseload operator will happily sell all day, every day for $40; and, in the ‘can you seriously believe their audacity’ class, wind industry parasites claiming that all Australia needs is a few thousand more of these things to make its energy ‘transition’ complete – for a trip to the outer reaches of the cosmos, see this piece from the Clean Energy Council.

Among their number it was SA’s witless Energy Minister, Tom Koutsantonis who was actually silly enough to regurgitate the guff he was being fed: claiming that his State’s problems would be solved with an interconnector or two (he seems to confuse them with those extra-long extension cords used by tradies on building sites – cheap and available for instant use). The ones proposed, however, will cost more than $4 billion and, with planning consents, engineering etc, take 5-10 years to build.

Tom’s other saviour is, apparently, more gas. Just what Tom proposes to burn it in is anyone’s guess – he spent weeks on his knees begging the French owner of a mothballed Combined Cycle Gas plant at Pelican Point to fire up its idle unit, in a panicked and desperate effort to keep the lights on in SA (see our post here).

Meanwhile, back on terra firma, Brett Hogan from the Institute of Public Affairs and the Editor of the Australian Financial Review were laying out the reality of just what a debacle Australia has made of its energy markets, thanks to a foolhardy attempt to run whole States on sunshine and breezes.

Energy ministers need to facilitate, not limit, consumer choices
Australian Financial Review
Brett Hogan
19 August 2016

As the nation’s Energy Ministers prepare for Friday’s meeting in Canberra to discuss how to “ensure energy markets remain stable and secure” it would be a major step forward if the gathering acknowledged that previous policies had mistaken capacity for the ability to deliver.

Imagine if the winner of a tender to build a 20-kilometre road took the cash, laid only 5 kilometres, and said it was all they could manage, with the rest someone else’s problem.

Then the unsuccessful tenderers are expected to finish the job, while protesters attack them for still being in business and complain about them charging to fix the mess they never created in the first place.

Swap “roads” for “electricity capacity” and that’s how federal and state policymakers have been running Australia’s national electricity market.

‘Feel-good’ targets

For two decades now, governments in Australia and indeed throughout the western world have prioritised feel-good renewable targets ahead of the ability of the system to generate reliable and affordable electricity.

A standard 1500-megawatt coal-fired power station can churn out 1500 megawatts of electricity 24 hours a day, seven days a week for maybe 50 years. Because it never stops earning a return on investment, the cost of the energy it produces is low, and it doesn’t need subsidies.

No worrying about the weather, paying for standby generators, building interconnectors to bring in electricity from hundreds of kilometres away, reinforcing the grid to deal with sudden surges or drops in output, or praying for advances in technology or battery development.

Yet it is the standard 300-megawatt wind farm, which may only generate 33 per cent of its electricity potential over the course of a year, which benefits from state and local government purchasing contracts, renewables targets and capacity auctions, and an act of the federal Parliament compelling retailers to buy its product, despite delivering 8 per cent of equivalent output.

Modern, efficient fossil-fuel electricity generating assets are either sitting idle or being pushed out of the market by policies that don’t take account of the costs of generating that other 92 per cent or the effect on transmission and distribution networks, private companies and supply security.

International renewables fails

In April, Manhattan Institute Senior Fellow Robert Bryce found that residential electricity prices in renewables-preferred Germany, Spain, and Britain, had increased between 2005 and 2014 by 78 per cent, 111 per cent and 133 per cent respectively.

Yet in Germany, government taxes and charges now make up around half of household electricity bills, many major energy companies are haemorrhaging cash, and CO2 emissions actually rose in 2015 due to increased demand for heating oil, diesel and brown coal.

After Spain started reducing energy subsidies said to be worth over €200 billion, new wind-farm development has stalled, and leading solar company Abengoa, which invested heavily in government lobbying, has been battling bankruptcy.

Britain, where the government has also started reducing subsidies prompting claims that the industry will “fall off a cliff“, has witnessed the birth of diesel farms, including on wind and solar sites, to meet peak demand and the conversion of coal plants to burn wood.

Yet here, the federal government clings to its Renewable Energy Target while the states compete to set ever-higher targets in shorter time  frames claiming there will be little effect on prices.

The June decisions by Origin and AGL to increase South Australian electricity prices by 6.5 and 10 per cent respectively from 1 July, or up to seven times the rate of inflation, are a leading indicator that platitudes from politicians are no substitute for the forces of demand and supply.

SA should be thankful for gas

What has escaped most commentators is that South Australia and Tasmania were actually lucky that legacy gas plants at Pelican Point and Tamar Valley were still available for emergency power. A bigger shock will come when these generators permanently leave the market.

Electricity systems exist to provide, safe, reliable and affordable power to consumers and to business. They don’t exist to deliver carbon dioxide reductions, or tax credits for crony capitalism.

Governments’ dominant presence in energy markets distorts investment behaviour and encourages businesses to line up for taxpayer funds rather than compete to develop a commercial product.

The role of government should be to ensure a level playing field for various energy companies and technologies to compete, with consumers deciding both the winners and the prices they are prepared to pay.

If policymakers want to look overseas for relevant examples they could look no further than India, Japan, Thailand, and the Philippines who are commissioning new generation power plants that burn coal at a higher temperature and under higher pressure, improving the productivity and capacity of their electricity networks, guaranteeing supply security and even emitting less carbon dioxide.

While it is less than two years since the chief executive of Hydro Tasmania claimed that it could help to power Victoria, and reportedly mocked the long-term viability of coal, Hydro Tasmania’s peculiar strategic approach shows how politics clearly perverts sensible outcomes.

Electricity must first be created, before it can be transported, stored or consumed. Batteries and interconnectors can only do so much.

Prussian statesman Otto von Bismarck was reported to have once said “only a fool learns from his own mistakes – the wise man learns from the mistakes of others”.

In the end, demand will drive the supply of reliable and affordable electricity. Unless wealth destruction is now the deliberate intent of government policy rather than a terrible side effect, our energy ministers would be wise to heed the chancellor’s advice and facilitate rather than limit consumer choices.
The Australian Financial Review

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COAG energy Council must fix this energy mess
Australian Financial Review
Editorial
19 August 2016

When the Council of Australian Governments’ energy council meets on Friday, ministers will be playing catch-up from a long way behind the curve after a decade of ineffectual stewardship of the nation’s energy markets. Since the National Energy Market was created by the Howard government in 1998, it has degenerated into an incoherent mess driven by the political agendas of individual states’ renewable energy schemes and politically driven gas policies. Consumer preferences for ever cheaper, subsidised wind and solar power have caught policymakers flat-footed, states such as South Australia have imprudently plunged into dependence on unreliable wind, and domestic gas has become scarce. Households are now paying more for energy than in many comparable countries – the reverse of the historical experience – and carbon dioxide emissions are rising instead of falling.

COAG has been woefully ineffective in bringing any co-ordination to these policies. Conditions have outgrown a market designed in a simpler era of centralised electricity generation and abundant gas supply to facilitate the transport of energy across borders and smooth out weather and consumption patterns. Consumers now want to generate their own power and sell their surplus to their neighbours – posing huge regulatory and grid technology challenges. More high-voltage interconnectors are needed between states that rely more heavily on intermittent renewable energy. Above all, households and businesses want a transition to a lower carbon economy – to which the Australian government committed at the Paris climate talks – that delivers reliable and affordable energy.

Led by the Minister for Environment and Energy, Josh Frydenberg, the council will have to try to wrangle the states to start making energy policy – and renewables policy in particular – that reconciles each of these goals in a national framework.

The NEM was designed to ensure a basic requirement of an energy system – to keep the lights and airconditioners on. This means having a consistent ability to generate, and having enough generation capacity to deal with widespread airconditioner use in summer or people putting on the kettle after watching the evening news. But renewable energy needs to be backed up by reliable baseload – provided by gas, coal or batteries. A state may have this capacity, or might have to import it.

This is the sorry case of South Australia, which used to boast cheap fossil fuel power among its competitive advantages. Over the past decade it has aggressively built its renewable energy industry, to the point it sources around 41 per cent of its generation from wind and solar. Coal has been rendered uncommercial in the state, and as well as paying big subsidies to renewables producers, South Australians now face higher gas and power prices. The SA electricity supply is less stable, and the remaining gas producers can charge what the market will bear when the wind isn’t blowing or the interconnector to Victoria is down, as has happened several times in the past two months.

If the Victorian government achieves its own aggressive renewable energy targets – and insufficient back-up is put in place – the lights might literally go out in SA, as the Australian Energy Market Operator warned last week. Getting the NEM to work properly in the new environment is imperative. As the Australian Energy Council’s Matthew Warren pointed out, a 40 per cent renewables target in Victoria would mean 50 new wind farms in eight years. There is no plan for where SA would get its power if it was a still day in Victoria.

Gas, of course, is also a clean option, but we now have a shortage of supply, such that, as The Australian Financial Review reported yesterday, industrial gas buyers are now considering importing gas from the United States. Partly, this is a problem caused by a regulatory failure to respond to the great achievement of becoming an LNG exporting superpower. There is a not enough access to onshore gas, a political ban on getting it in Victoria and NSW, and not enough infrastructure to pipe it around the east coast.
Australian Financial Review

tom koutsantonis2

Tom Koutsantonis: left praying to the Wind Gods.

About stopthesethings

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

Comments

  1. Jackie Rovensky says:

    Paul unfortunately in SA, the City of Adelaide rules, those living outside of its borders do not exist – we have for years been trying to get the message across about the so called ‘renewable’ industry but have been mostly ignored.
    Now the city dwellers are having to face the truth as they are being affected financially by the disaster that has been Labor and Green policy.
    Unfortunately we have a 4year fixed term of Government and cannot get rid of them for a while yet – which could mean we will be in an even worse situation than we are now.
    No matter who forms Government then they will have a monster of a situation to overcome and it will not take a 4 year term to resolve it.
    As the situation worsens here in SA, more and more people will become totally reliant on Government handouts to survive, that will leave them in the talons of the ‘loan sharks’ we call Governments and so they will vote for those who promise them the most without considering promises are there to be broken.
    Just a note:
    Yesterday SA time 12.33pm
    Wind Energy production:
    SA 8MW
    VIC 24MW
    NSW 5MW
    TAS 26MW
    Today SA time 1.24pm
    SA 4MW
    VIC 24MW
    NSW 5MW
    TAS 26MW
    and its not been much better since early this morning or indeed for the past 24 hours.

  2. Paul from Brisbane says:

    I’m afraid that I have little sympathy for the plight of South Australians and their growing predicament – namely, the dismantling of that most basic of necessities of a modern economy – a reliable energy supply. And that is not to mention the demolition of hundreds of thousands of jobs that will also disappear as a consequence. Why can’t the business and community leaders of South Australia see this? Are they all fools?
    For election-after-election South Australians have chosen to re-elect a Green-Left State government which had clearly enunciated that its policy was to shift energy supplies to “renewables” – a misnomer if there ever was one. The consequences of this policy were fully predictable and many people and organisations with the required analytical acumen did in fact warn of the consequences – but they were not only ignored – more often than not they were jeered at – just as Senator-elect Malcolm Roberts was mocked a week ago on that ideological travesty – the “Q&A” program on ABC TV.
    The most precious gift that we have in our country is our democratic process – notwithstanding the gradual erosion of our right to free speech. It appears that South Australians are too stupid to even do some basic homework and understand why the Catastrophic Anthropogenic Global Warming cause is the biggest pseudo-scientific hoax in history. It is promoted with religious fervour by highly-politicised alarmist advocacy ideologists and a parasitical rent-seeking class in business, academia, media, and the public service – and yet South Australians just can’t see that it will be they that will have to wear the consequences of these snake oil salesmen. They are facing a future with a collapsing economy and a standard of living in steep decline. Do South Australians actually understand that you can’t operate the internet or computer networks when you have blackouts? What will become of South Australia’s much trumpeted bull-dust aspirations for a “high-tech” economy then? What a con-job the Green-Left is pulling on their own constituents. Getting these people to build a new submarine fleet relying on “renewable” power would have to be a joke. The managers of the French submarine supplier must be laughing their heads off at these Hicksville Australians. France does not have blackouts – its power supplies are 80% nuclear !
    The solution to the problem is relatively simple. It is a political problem and all South Australians have to do is throw the Green-Left politicians out of office – starting with their failed Minister for Mineral Resources and Energy, Anastasios Koutsantonis. He is also the State Treasurer. South Australians need to have a closer look at this guy’s career background and form their own opinions as to whether he has the necessary life experience and educational attributes for these critically important jobs. Does he even begin to understand the damage the Labor Government is causing? He seems to think that an “Interconnector” is something you just buy off the shelf at Bunnings Hardware.
    The Liberal Party Opposition don’t get off the hook on this one either. If their constituents were really all that unhappy about the demolition of their State then by now they should have been organising massive protests outside the South Australian parliament targeting the incompetence of the Green-Left government. What is wrong with them? Don’t they understand that everybody joining hands and singing Kumbaya just doesn’t cut it in the dog-eat-dog world of politics?
    During the term of the Newman Government in Queensland the unions mounted demonstrations and protests against the LNP Government outside the Queensland Parliament building almost every week. It was a constant feature on the TV news every night and it had a telling effect on the politics in Queensland.
    If the 50% of South Australians who did not vote Labor-Green don’t hit the streets in mass protests soon, then the industrial collapse of South Australia will accelerate beyond the point of no return.
    South Australian small business people alone should be able to mount mass protests of at least 10,000 demonstrators at a time. What is stopping them? Are they just sheep? Where is the Liberal Party Opposition in all this? Missing in action. It is just pathetic !
    In the end the people who are most responsible for the disaster of the false promise of “renewable” power in Australia are the media. They have failed in their primary responsibilities to research, report the facts, and to expose. With some exceptions – most of the media too is part of the rent-seeking class.

  3. Terry Conn says:

    Well, you would think that the ‘troglodytes’ who have been pointing out the facts of life about weather dependent sources of renewable energy for the past 15 years had written the sentiments expressed in the AFR articles above! Well, better late than never that some journalists in newspapers other than the Murdoch press have worked out the reality and had the guts to print it — congratulations to them and hope they keep up their good work of revealing this RET scheme and its wind power beneficiaries for the massive scam that it is.

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