Australia’s Renewable Target in Tatters: Major Retailers Shun Wind & Solar, Electing to Pay $Millions in Retail Power Fines Instead

turnbull-frydenberg

They’re not buying ‘the RET’s set in stone’ line Josh.

***

In the week just gone, yet another of STT’s predictions unfolded, with devastating consequences for Australia’s Large-Scale RET and the remnants of a battered and beleaguered wind industry.

The LRET was slashed in 2015 simply to avoid the political embarrassment of having too little eligible renewable power dispatched to satisfy the 41,000 GWh target set for 2020. Choosing immediate tactical retreat over inevitable strategic failure, the wind industry and its stooges in the office of then Minister for the Environment, the clueless Greg Hunt, gutted the ultimate target to 33,000 GWh. Outsiders were pushing for 26,000 GWh, which might have been achievable. But Hunt’s hubris prevailed and the LRET’s die was cast.

At the time, those in the know predicted (as STT did – see our post here) that there was no way the new target would be met: akin to the demise of another government underwritten subsidy rort – the Reserve Price Scheme for Australian wool – the decision to cut the LRET target signalled a clear and present danger.

Once cut for political purposes it was inevitable that it would be cut again: bankers who might have financed new wind farm projects and investors that might have once bet their shirts on wind power outfits could smell mortal financial risk and, accordingly, turned off the tap.

Power retailers, too, could see that the LRET’s demise was a matter of when not if: they refused to sign long-term Power Purchase Agreements, due to the very sensible fear that the LRET would turn into a policy ‘zombie’ – leaving them locked into pointless renewable contracts, that would do nothing more than deliver them millions of worthless RECs and skittish unreliable wind power. The same forces saw the wool industry’s Reserve Price Scheme implode back in 1991, costing growers and the government $billions (see our post here).

The reason for all that financier and power retailer recalcitrance was that once the lack of renewable investment led to the imposition of the ‘shortfall charge’, the politics of the LRET would quickly turn rancid and the whole scheme would soon implode.

As we detailed in this recent post – It’s Time for Frydenberg & Turnbull to Come Clean on the Cost of Subsidised Wind Power – the shortfall charge is going to cost all Australian power consumers around $20 billion and there will be no increase in renewable power generation and no reduction in CO2 emissions in the electricity sector, the stated aim of the LRET (not that chaotic wind power is capable of reducing CO2 emissions at all – see our post here). And it’s that politically poisonous cocktail that spells inevitable doom for the LRET in its current form; or, indeed, in any form at all.

Now, the naysayers – like STT, cautious bankers and power retailers – are having their ‘Nostradamus’ moment: one of Australia’s big power retailers, ERM Power has rejected the RECs offered by wind power outfits and has, instead, taken the easier option of paying $123 million as ‘shortfall charge’. For the wind industry, its parasites and spruikers the wailing, moaning and gnashing of teeth starts now.

Here’s the AFR heralding the beginning of the end for the LRET, and the wind industry with it.

‘No chance’ of meeting 2020 energy target
Australian Financial Review
Mark Ludlow and Angela Macdonald-Smith
27 January 2017

The founder of ERM Power, one of the country’s largest electricity retailers, says Australia has no chance of achieving its Renewable Energy Target of 23 per cent by 2020, meaning customers will be forced to pay higher prices for no environmental gain.

Amid growing unrest from the business community about the relentless push towards clean energy, Trevor St Baker said the federal government might have to consider amending the legislated RET of 33,000 gigawatt hours again before the decade ends.

“There is no way we are going to make the 33,000 target. It’s impossible to get there. That’s what the argument should have been about all the time, it should have been 20,000 [gigawatt hours]. That’s all you can reasonably expect to be built,” Mr St Baker, who is non-executive deputy chairman of ERM Power, said in an interview with The Australian Financial Review.

“Our target should be greenhouse gas reduction. There is a renewables obsession that is like this schoolyard debate.”

Minerals Council of Australia chief executive Brendan Pearson said there needed to be a “clear-eyed assessment” of whether the RET was feasible, saying it added $3 billion a year to the energy costs of households and businesses each year.

“Perhaps the most sensible and rational option is to grandfather the scheme for existing projects as well as those projects not yet completed but under way,” he said.

“But there is no point persisting with a scheme which just continues to raise the cost for energy users without delivering any environmental benefit. More broadly, we need to return energy policy to a technology neutral model.”

Federal Energy Minister Josh Frydenberg said this week there would be no changes to the 2020 RET target while admitting it would be “a real challenge” to meet it. He said the Turnbull government is unlikely to commit to a new target for 2030, given investments contracted in the next few years are likely to run for the next decade.

The RET was already scaled back in 2015 from the Rudd government’s target of 41,000 GWh but investment is still lagging behind what is required to meet the revised goal. Bloomberg New Energy Finance calculates that investment in large-scale renewables needs to more than double, to $US2.9 billion ($3.8 billion) a year, compared with last year’s $US1.1 billion.

News this week that ERM will pay a $123 million penalty as part of its 2016 liability under the RET instead of surrendering its full quota of Large-scale Generation Certificates (LGCs) has revived worries about whether the target is viable. The scheme allows a retailer three years to make up for the shortfall by surrendering LGCs at a later date.

The ERM move has also underscored the fact that if the target is missed, consumers will be paying higher prices that cover the cost of additional renewable energy generation, without that energy being produced, with the money used instead to pay the “shortfall charge”.

Western Australian Liberal Senator Chris Back said this week the system could result in more than $1 billion a year of fines paid between 2020 and 2031 because there would not be enough renewable energy to meet the target.

Alinta Energy will also pay a shortfall charge for its 2016 liability under the RET, but chief executive Jeff Dimery rejected criticism that such a move undermined the scheme, which the company “absolutely, categorically” supports.

Mr Dimery said the ability to pay a penalty and then make good on that over the next three years by surrendering LGCs helped meet the 2020 target by creating a situation where a smaller retailer could then go forward and build renewables projects or commit to renewable power purchase contracts in confidence of the value it has locked in for the certificate.
Australian Financial Review

Here’s the Press Release from Chris Back, quoted by the AFR:

Dr Christopher Back
Liberal Senator for Western Australia
Media Release
24 January 2017

ERM pays Shortfall Charge – debacle was inevitable.

Senator Chris Back has repeated his call for a moratorium on new wind farms being constructed until the Productivity Commission completes a cost-benefit analysis of the effect the industry is having on the National Electricity Market (NEM) and retail electricity prices.

ERM Power Ltd [ASX: EPW] today announced it would meet its obligations under the Large-scale Generation Certificate (LGC) Scheme through a combination of surrendering certificates and paying the Clean Energy Regulator (CER) $123 million for calendar year 2016.

That sum is to discharge a liability on all retailers created by the Renewable Energy (Electricity) (Large-Scale Generation Shortfall Charge) Act 2000 which sets the shortfall charge at $65 per megawatt hour for each and every megawatt hour that a retailer falls short of the Renewable Energy Target (RET). On present estimates, the shortfall charge will be applied at a rate of over $1 billion per year from 2020 to 2031 because there is insufficient renewable energy available to satisfy the current 33,000 Gigawatt hour target.

Senator Back has continuously told the public and fellow parliamentarians that the action that ERM has announced today is the easiest way for businesses to comply with the legislation as we approach the 2020 Renewable Energy Target.

This ‘federal tax’ on electricity will flow into consolidated revenue. “I am assuming that this extra revenue will go towards reducing Labor’s debt.”

Senator Back said, “The RET may not be reducing emissions, but in this case it is reducing Labor’s debt by $123 million. All consumers are in effect paying a federal tax on electricity either as the subsidy issued in the form of RECs or the shortfall charge recovered as a penalty – so where is the benefit to the environment from such a scheme?”

The RET scheme was never intended to act as an unchecked, single industry subsidy. “With the disastrous example set by South Australia, comes a growing public awareness of the massive cost of subsidy entitlements under the large scale RET scheme, the permanent disruption to once functional power markets and the associated grid instability.”

“What we have witnessed is load shedding and blackouts that stem from reliance on wind power. It will become harder over time to find supporters for subsidised wind power as the fallout is the MEDIA RELEASE

forced closure of energy dependant businesses, thousands of households unable to afford power and routine supply interruptions when the wind stops blowing.”

“This announcement by ERM provides a wake-up call. There should be no further subsidies for intermittent and unreliable power sources that are proven failures. There are solutions to our climate challenges but wind power is not one of them,” Senator Back said.

Chris Back

Senator Chris Back enjoys his ‘Nostradamus moment’.

***

Western Australian Liberal Senator, Chris Back is on track when he puts the figure of what the shortfall penalty will cost all Australian power consumers at more than $1 billion a year until 2031 – the retail cost will total more than $1.5 billion annually and total over $20 billion over the life of the LRET (see our post here).

In the AFR piece, Alinta’s Jeff Dimery reckons his decision to stump up the shortfall penalty charge, instead of paying to purchase RECs hasn’t ‘undermined the scheme’. No, Jeff – the decisions by ERM Power and Alinta to pay penalties instead of buying RECs has signed the LRET’s death warrant.

No politician is going to be able to finesse a Federal penalty tax on power – that equates to an utterly ineffective, $93 per tonne CO2 tax.

Among the filth and fury that poured out of wind cult central over ERM Power’s refusal to play ball under the LRET was this rant by the Clean Energy Regulator, Chloe Munro – ERM falls short of their renewable energy obligations

Chloe’s rage is, no doubt, fueled by the fact that she had sworn a solemn oath to Energy & Environment Minitster, Josh Frydenberg and the PM, Malcolm Turnbull that the LRET would never, ever go to penalty.

Well, Chloe, sorry to rain on your parade: it just did.

chloe munro

Surrender, Chloe. The greatest subsidy rort of all time is over.

About stopthesethings

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

Comments

  1. Brian Johnston says:

    Jackie

    You provide a table showing electricity generated – I presume wind – and add to the grid

    Does your table show real usable electricity or useless and dangerous harmonics

    We urgently need to know. If it is the later and I am sure it is then I think you will find the whole windmill saga is fraud

  2. The energy retailer deciding to pay the shortfall fine to the government is vastly preferable to payments being made to the wind farm operators. Let’s hope for more of this financial prudence.

  3. Hi,

    I started a PETITION “SA PREMIER JAY WEATHERILL : Demand the RESIGNATION of the Energy Minister for HIGH POWER PRICES CAUSING SA’s JOBS CRISIS and 15,000 household POWER DISCONNECTIONS, frequent POWER BLACKOUTS and the JULY 2016 POWER CRISIS” and wanted to see if you could help by adding your name.

    Our goal is to reach 200 signatures and we need more support.

    You can read more and sign the petition here:

    https://www.change.org/p/sa-premier-jay-weatherill-demand-the-resignation-of-the-energy-minister-for-high-power-prices-causing-sa-s-jobs-crisis-and-also-15-000-household-power-disconnections-frequent-power-blackouts-and-the-july-2016-power-crisis?recruiter=135406845&utm_source=share_petition&utm_medium=email&utm_campaign=share_email_responsive

    Please share this petition with anyone you think may be interested in signing it.

    Thankyou for your time.

  4. Jackie Rovensky says:

    The sooner the idiots in the Governments in Australia start to look closely at what is happening the better.
    The sooner they accept Wind Turbines are of no use to provide reliable energy for all is a fallacy.

    For example:
    27.1.2017 Eastern Grid Production 11.45am SA time:
    SA 15MW
    VIC -5MW
    NSW 20MW
    TAS 117MW – only the Mussleroe project is currently connected to the Eastern Grid.
    Total production 127MW GRID CAPACITY 3820MW
    Toda7 29.1.2017 Eastern Grid Production 9.33am SA time:
    SA 69MW
    VIC 45MW
    NSW 1MW
    TAS 30MW
    Total 145MW GRID CAPACITY 3820MW.

    These are only samples of moments in time take a look at: http://anero.id/energy/wind-energy
    Where you can move easily through the website examining a great deal of information that anyone can understand – even those dolts who continue to support this ridiculously useless, expensive and dangerous industry.
    Of course we can never meet the requirements of a set target to do that, especially relying on the weather which we all know and accept is unpredictable.
    You have to have something that is reliable and does what it’s claimed to do. You also have to set realistic targets, ones that can be met and then you set another one.
    You have to do this without destroying peoples lives, without physical pain to members of society, without turning hard working people into dependents of the State, because they can no longer afford to look after their own families because of rising costs.
    The price of electricity will always be passed on, and it is like an uncontrolled virus, it keeps multiplying and spreading through every level of society.
    We need Politicians who see and accept this as something to be avoided, Politicians who work for all the people not for pressure groups and lobbyists.

    • Jackie Rovensky says:

      11.52am SA time
      Total 76MW across the Grid.
      SA 13MW
      VIC 20MW
      NSW 8MW
      TAS 35MW
      Apparently as supporters of this industry say ‘The wind is always blowing somewhere’ but obviously not along Australia’s Eastern Grid.

  5. The easiest way to achieve meaningless CO2 reductions would be to upgrade our current coal fleet to the latest HELE systems

    This would reduce CO2 output by far more than renewables ever could, and would save the environmental devastation of unreliable bird-slicers.

  6. Polly Staffer says:

    Great post, STT and props to Senator Back.

    Greg Hunt’s quiet exit out of the Environment Ministry signalled the beginning of the end for the RET.

    Clean Energy Regulator, Ms Munro, assured Josh Frydenberg, the newly installed Environment Minister, that we were ‘on track’ to meet the legislated 33,000 GWh RET obligation that had been ‘negotiated’ by his predecessor. The former minister would have known that Chloe’s ambitious statement was irresponsibly disingenuous, if not an outright lie.

    Shortly after making those utterly fantastical assurances, Ms Munro quietly announced her impending resignation.

    Oliver Yates abandoned his CEO post at the Clean Energy Finance Corporation too.

    Those who have long been the custodians of the great Australian RET Rort are quietly slipping away into the sunset before the entire RET scheme implodes.

    Rats and sinking ships?

  7. Gordon Weir says:

    It’s not just the cost of all this nonsense. South Australia has spent a lot of time in the dark lately because their wind power just isn’t reliable.

  8. Just get on with building high tech modern nuclear power reactors.

    Forget the Wind Turbine folly

    Solve everything

    • Australia has amongst the best coal in the world.

      We do not need to go the nuclear option yet … (wait for thorium to be proven)

      and the atmosphere and plant life needs CO2.

  9. Michael Crawford says:

    The US now has a president committed to a policy of America First, by which he means governing to serve the interests of the majority of Americans, not special interests.

    We have a government committed to Australia Last, working to serve the interests of international cabals like the UN, multinationals via TPP, minority special interest groups and the ABC.

    Roll on One Nation. The Libs, Nats, Labor and Greens are all devoted to serving the interests of anyone but the majority of Australians.

    • That’s all across the western world. Somehow those people got in power and are dedicated to the destruction of western life. As an American, I could move to Australia or New Zealand (and a few other nations) and except for local politics be at home with the quality of life. The UN thinks that the greatest quality of life should be that we live in mud huts with dirt floors and a little solar light.
      The rejection of climate control started in Britain with Brexit. Yeah!

    • Natalie Green says:

      Same with Canada, our selfie king PM is more interested in being part of the UN, and bringing Canada to its knees than actually governing the people.

  10. Son of a Goat says:

    I asked a farmer once what would he do if he won $10 million in cross lotto. He replied “I would keep farming till it’s all gone.”

    It’s a bit like that with renewable energy policy in Australia.
    After the ERM announcement as STT eluded the wind cult went into a frenzy. Tweets such as $48 billion in fines = $48 billion in lost investment.

    Heaven forbid there was even calls for the fines to be paid into the coffers of the Clean Energy Council for them to invest into renewable energy projects.

    In the words of the late and great Marty “I wouldn’t entrust those oxygen thieves to flip burgers at Maccas.”

    The wind cult lead by those likeable boys at the CEC are in desperation mode, let’s watch in the coming weeks as the rats desert the sinking ship.

  11. Terry Conn says:

    Chloe Munro took the approach in evidence to the senate wind farm enquiry that the Waubra wind farm’s non compliance with approval stipulations was a ‘philosophical’ question – now that the penalties being paid, as predicted, becomes a reality her petulance epitomises the disconnection between those who rule us on the basis of ideology and philosophy and the ‘real’ world the rest of us have to live in – she should pack her bags and go home after being sacked for incompetence, but all these public service queens and kings are statutorily protected from any accountability and their salaries and perks carry on unabated. Well, the crash begins, hand out the hard hats Chloe.

    • Yes Terry one hopes it’s the beginning of the end of the gravy train on which Munro and many other luminaries of the wind cult have ridden high for too long. Perhaps it’s time at last for sanity to prevail and for long suffering ordinary Mums and Dads and Australia’s dying industry to be relieved of the pointless subsidies they are forced to pay to the rent seekers of the pernicious wind cult.

    • Polly Staffer says:

      Very well said, Terry.
      Wonder how Chloe and Co will respond to news of the Bald Hills Wind Farm’s recently confirmed non-compliance with noise ordinances? Absent compliance with state planning laws, Bald Hills Wind Farm does not meet the requirements of the federal Renewable Energy (Electricity) Act 2000 and Renewable Energy (Electricity) Regulations 2001. Its accreditation as an eligible power station cannot be justified.
      Under Chloe’s ‘philosophical’ watch, its owners have collected RECs for almost 2 years without consequence.

      • Could you please provide more info re Bald Hills decision please it looks like noise issues are finally being HEARD can’t seem to find anything on the WWW.

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