Memo to Malcolm: Scrap Australia’s Renewable Energy Target & Collect a Free Political Gift

free-gift

Malcolm Turnbull is a Prime Minister who has attempted to please everyone and thereby proved the adage that by doing so you end up pleasing no one at all.

Conservatives within his own party fulminate every time Malcolm takes to the stump and delivers sops designed to appease inner-city hipsters: his past and plentiful platitudes about the ‘wonders’ of renewable energy fit squarely into that category.

Now that Malcolm has – in an obvious attempt to hold political ground in coal-rich Queensland – hitched himself to the ‘clean’ coal wagon, he’s managed to infuriate his hipster/left target audience, along with the wind industry, its parasites and spruikers.

He has also managed to draw the fury of those electricity generators who are quite happy with the very lucrative chaos caused by the intermittent delivery of wind power. There are plenty like AGL and Origin who have built very substantial peaking power capacity, the only purpose of which is to cash in when wind power output collapses on a routine, total and totally unpredictable basis.

Those power plants, principally Open Cycle Gas Turbines as well as diesel generators are highly inefficient and cost a fortune to run. However, by milking the grid manager during wind power output collapses, the owners of such plant are able to extract spot prices for power that run from between $2,000 all the way to $14,000 per MWh, the regulated market cap – instead of the $40-50 per MWh that baseload coal-fired power costs to deliver (see our post here).

It’s market rorting like that saw BHP Billiton pay $2.57 million in July last year for a single day’s power that would ordinarily cost them $250,000 (see our post here).

As former Labor Premier of NSW, Jack Lang pithily put it: ‘Always back the horse named self-interest, son. It’ll be the only one trying’.

Hence the screams coming from Australia’s retailer/generators about the Coalition’s plans to finance the construction of high efficiency, low emissions (HELE) coal-fired power plant.

If the correct policy settings were put in place (starting with the designation of intermittent wind power as “scheduled” rather than “semi-scheduled” generation – see our post here), HELE plant would then deliver reliable, secure and affordable electricity using much less coal (a fuel and cost saving) and emitting less CO2 (the latter satisfying hipsters by supposedly meeting constantly moving and arbitrary international emissions ‘targets’).

However, allowing HELE plant to dispatch power to the grid 24 x 365 would destroy the ability of peaking power generators to operate at all (or only at the margins) and, therefore, gut the value of their capital investment. Accordingly, expect those with peaking plant to howl long and loud as the Coalition sets out to get Australia’s energy debacle back under control.

By allowing baseload plant to dispatch around the clock – instead of being knocked out of the market whenever the wind blows – grids would once again become stable and power once again affordable for families and businesses alike.

The push by the Coalition to capture blue-collar votes in Queensland (and, indeed, wherever meaningful conventional power is generated and/or power is used in big volumes) through the actual delivery of reliable and affordable electricity may just offer Malcolm Turnbull a shot at a second term in office. But only if he takes the advice of the likes of Chris Kenny.

Turnbull should turn off renewables target to put heat on Shorten
The Australian
Chris Kenny
28 January 2017

The Coalition has been presented with a gift by Labor that could prolong its tenure into a seemingly improbable third term. After an unlikely decade as a frontline political issue, climate change policy could again be crucial in deciding the next federal poll.

Sure, Malcolm Turnbull did little with this munificence last year but developments have increased the imperative and the opportunity.

The Prime Minister and the Coalition would be almost criminally negligent if they blew the chance next time. They only have to highlight the folly of Labor’s masochistic policy — a price on carbon and 50 per cent renewable energy target — and craft a plausible alternative. This issue alone could win them the election, or at least allow Labor to lose it. More importantly, it can save the economy from a needless burden.

Bill Shorten is promising to visit upon the rest of the nation the energy chaos evident in South Australia, where consumers pay the highest power prices in the country (some of the highest in the world) yet face dangerously unreliable supply.

The campaign commercials write themselves — Labor increasing costs around the country, blacking out the eastern states just as it did in South Australia. The weakness for the Coalition on this issue is that it is a little bit pregnant.

The core policy dilemma is the renewable energy target. Labor does not know what its 50 per cent target would cost, how much it would increase prices or what it would do to energy security. But South Australia provides the case study. Its renewable share of just over 40 per cent has prompted the closure of two large coal-fired generators and the mothballing of significant gas generation. This, along with other factors, has pushed up prices and, critically, made the state increasingly reliant on interconnectors feeding mainly coal-fired power from Victoria.

This vulnerability saw the state plunged into an unprecedented statewide blackout when a storm hit last September.

With Victoria’s Hazelwood coal-fired generator set to close this year, prices will rise again and both South Australia and Victoria will become more vulnerable. Yet Labor persists with its national 50 per cent target.

A study by Bloomberg New Energy Finance says this would require $48.2 billion in large-scale renewable projects. Given renewables are intermittent this cost would either be additional to the investment required to upgrade baseload power, or the cost will be borne without delivering energy security.

Turnbull and his Environment and Energy Minister, Josh Frydenberg, have attacked Labor’s pledge. Turnbull says Shorten and Labor have an “obsession” with “heroic” renewable targets. “He has no idea of how to get there,” Turnbull says. “He has no idea of how that will maintain security, no idea of what it will cost, no idea of what it involves; these are big ideological statements and what happens is when they get converted into government policy, you start to get the problems that you’re facing now.”

And that is the problem for Turnbull — we are facing these problems now, under Coalition policy. So the Coalition says a 50 per cent RET would be a disaster, yet it is dealing with the price and security issues create by the current 23 per cent RET — which it still supports.

What the Coalition is really saying is Labor’s policy will be more of a disaster; it is a matter of degree. This is why former prime minister Tony Abbott has called for the RET to be cancelled, so only those projects now approved would be funded. This would sharpen the policy difference.

However, it is simplistic. Sure, it would stop investment in wind and solar but there is no guarantee it would encourage investment in the baseload power we will need.

Remember Abbott backed the RET when he was prime minister but, in response to lower-than­ expected electricity demand, negotiated its reduction from 45,000 GWh to 33,000 GWh. Labor supported this move.

So Abbott endorsed and reduced the RET just two years ago but now wants it scrapped. While Labor endorsed that same reduction two years ago but now wants the RET more than doubled. Nobody is pure in this debate.

Yet it is clear that Labor’s renewables goals are reckless; the best proof is the current supply and pricing problems on the way to a target less than half as high.

The status quo is unacceptable. So rather than just say it will be much worse under Labor, the Coalition needs to decide what to do.

Before we consider what that might be, let’s step back and look at the broader picture. How did we get into this situation?

Much of politics is a contest between the emotional and the rational. Perhaps no policy area is as adversely affected by this conflict as climate change.

Politicians trumpet emotionalism when it comes to “belief” in global warming and fears about the future of the planet. They are less inclined to rational discussion about the possible inevitability of warming, futility of national emissions reductions or the possibility that it might be more prudent to focus on adaptation.

Instead, we get gesture politics. Politicians propose policies that give the appearance of solving problems — policies that salve our consciences but have little practical benefit.

This is why we see the pretence that making electricity more expensive in Australia (which produces only 1.3 per cent of global carbon emissions) can save the planet. It is the same delusion you see in people buying $125,000 Tesla vehicles and thinking that will abate their first world carbon footprints.

It is this sort of climate virtue-signalling that makes renewable energy politically attractive. Carbon prices are harsh, direct action is difficult and adaptation sounds defeatist. But renewables sound nice. Politicians know this. Despite their cost and inefficiency, renewable energy projects tend to have strong public support.

And if wind and solar energy weren’t intermittent or if battery storage technology were adequate, everyone would prefer renewables. It is a no-brainer.

When that time comes they will take over — without any subsidies or government intervention. But so far, in this country, the push for renewables has been political.

Subsidising wind has been a politically expedient way for both major parties to demonstrate a commitment to saving the planet. And the RET scheme — where other suppliers and consumers underwrite the cost of renewables — has made it a risk-free winner for investors.

The trouble is it has made electricity more expensive and less reliable — and it has done nothing for the planet (global emissions continue to rise despite Australia’s meagre offerings).

Frydenberg and Turnbull have correctly identified some crucial policy pressure points that could be fixed to remediate the energy market — too many restrictions on gas exploration/development and overly ambitious state renewable targets.

But the best idea for immediate action has come from my colleague Judith Sloan.

She says that rather than fund only renewable energy the RET certificates could also fund non-renewable projects that are more efficient. They could support clean coal or gas generation, so long as they are lowering emissions, comparatively.

There is interest in this within government. It would meld with Turnbull’s long-professed technological agnosticism over emissions reductions.

Then again, given continuing emissions growth in China and likely developments in Donald Trump’s America, perhaps we should abandon the cost and pretence of meeting arbitrary emissions targets. We could once more take advantage of our natural advantage in cheap energy.
The Australian

ballot-box

Malcolm, your free political gift is ready for collection right here.

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:

    Renewables do bring lower energy costs to the people of SA – but it’s not in the way they would like us to believe it is being achieved – no it’s because when the power goes of there’s none to be used – hence lower power bills!!!!
    Makes you wonder if the industry its acolytes and AEMO are happy with the way things are going in SA as it’ proves’ their claims of energy prices coming down as more renewables and in particular wind is installed.

  2. Crispin Trist says:

    A further UK news link of interest on SKY News.

    http://news.sky.com/story/energy-bills-to-rise-after-cost-of-green-schemes-underestimated-10759771

    I will include a quote of the article below.

    Quote from SKY News website.

    “Energy bills to rise after cost of green schemes ‘underestimated’
    The typical household annual energy bill is likely to be around £110 higher in 2020 – £17 more than expected due to the schemes.

    Households will face higher energy bills because officials have “significantly underestimated” the cost of green energy schemes.

    As a result, the typical household energy bill is likely to be around £110 higher in 2020 – £17 more than expected, according to the Commons Public Accounts Committee.

    They said officials had “failed to prepare properly” for the possibility that forecasts might be wrong and that the Treasury had not provided sufficient oversight.

    In October, a National Audit Office report found that the £7.6bn cap on subsidies for low carbon electricity set by the Government for 2020/21 will be breached by more than £1bn by the end of the decade.

    The costs of green energy schemes are capped as part of a framework, are funded through levies on energy companies and inevitably paid for by consumers in their energy bills.

    But the Public Accounts Committee said the Government’s management of the framework lacks “transparency, rigour and accountability”.

    The committee’s chairwoman Meg Hillier said the Government had “failed to meet its commitment” to report annually on the impact the policies were having on bills.

    “Current arrangements just aren’t good enough,” she added.

    “At the same time, the Government expects the cost of levies to continue to bust the budget, meaning customers will pay more than expected.”

    For this, she blamed “poor forecasting” and “further evidence of excessive optimism in the implementation of energy policy”.

    A spokeswoman for the Department for Business, Energy and Industrial Strategy (BEIS) said: “The Government is committed to helping ordinary working people keep more of what they earn and supporting households with the cost of living.

    “The strong, decisive action we took reduced projected costs by over half a billion pounds to protect people’s household budgets and ensure value for money while delivering more environmentally friendly energy.”

    The news comes just days after energy regulator Ofgem demanded an explanation from Npower after the energy provider announced 1.4 million customers would be hit with a 9.8% rise in their energy bills.

    In December, rival supplier EDF announced a rise in its electricity charges to take effect from 1 March, while some other smaller suppliers have also raised tariffs.

    The increases come as consumers already face soaring prices following June’s EU referendum, which led to a collapse in the value of the pound.

    Inflation hit a two-and-a-half year high of 1.6% in December, and is expected to rise further as the cost of imports increases due to the weaker pound.”

    …end quote.

  3. Crispin Trist says:

    A recent BBC article sent to me from a contact in the UK.

    Accountability. MPs urge action on green energy schemes

    The Public Accounts Committee says it was promised a report on the impact of green policies on bills.

    http://www.bbc.co.uk/news/business-38894030

  4. Son of a Goat says:

    Lordy Lordy the power is out again in SA with rotational load shedding. It’s in the high 30’s and the wind ain’t blowin.
    But, as we all know renewables are the cheapest form of new generation.
    Smart boy that Kane!

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