Vain and dishonest, former Labor PM (and Muppet-in-Chief), Kevin Rudd has a lot to answer for.
When his predecessor, Liberal PM, John Howard brought in a renewable energy target in 2001, it was set at a tokenistic 2%: clearly a sop to the wind cult, but for Australian businesses and families, a ‘nothing to see here moment’.
When Rudd took office in December 2007, he set Australia on a path to penury: ably assisted by former Union heavyweight, Greg Combet, his Parliamentary Secretary for Climate Change.
By 2010, the Labor/Green Alliance had enshrined a 45,000GWh renewable target set for 2020 – 41,000 of which sat under the Large-Scale RET and the balance under the Small-Scale Renewable Energy Scheme (SRES). Had the 41,000 GWh LRET remained in place, it would have amounted to around 30% of Australia’s electricity market in 2020.
The rest, as they say, is history. Although, from a South Australian perspective it’s become a ‘Horrible History’.
Now Kevin, with his usual sense of hyperbole and obsequiousness, has weighed into Australia’s unfolding energy debacle, a disaster of Kevin’s own making. The Australian’s Nick Cater covers Kevin’s latest fantastic ‘I’m here to help’ adventure.
Coal proves its worth while Rudd tilts at turbines
21 February 2017
Kevin Rudd breezed into the Sky News studio in Canberra last week to decry the lack of “deep, strong, committed national leadership” since the electorate’s foolish decision to turf him out of office.
It was “nuts” to remove the carbon tax, he said.
“Where we are now can be summed up in three words: dumb, dumb, dumb.”
Australia’s energy market could be dumber still if Labor wins office and pursues its vanity target of 50 per cent renewable energy by 2030. The plight of South Australia, the canary in the turbine blades, demonstrates what happens when an economy becomes hostage to unreliable sources of power.
Yet Rudd was unapologetic. Coal? Don’t get him started. “The message for coal, long-term globally, is down and out,” he informed us. We need “a heavy mix of renewables”, which was why he was proud that the government had introduced the renewable energy target.
In the real world, the one outside Rudd’s brain, the RET is nothing to be proud of. It is one of the most expensive public policy disasters of the century, market intervention on a massive scale with unfair and unintended consequences that will haunt Australians for decades.
Rudd, determined to tackle the era’s “greatest moral challenge”, upped the target by more than 450 per cent in an uncosted promise before the 2007 election.
It was crazy, as the Productivity Commission politely tried to tell him in a 2008 submission.
The target would not increase abatement but would impose extra costs and lead to higher electricity prices, the commission warned.
It would favour existing technologies — namely wind and solar — while holding back new ideas that might ultimately be more successful.
Rudd, of course, knew better. Not for the last time, he ignored the Productivity Commission and pushed ahead with his renewable target of 45,000GWh by 2020, of which 41,000GWh would come from large-scale wind and solar.
If the policy was designed to punish Australian consumers, it was a roaring success. Household electricity bills increased by 92 per cent under the Rudd-Gillard governments, six times the level of inflation.
Rudd went further, spending $4.15 billion on dubious clean energy boondoggles. He put $1.6bn into solar technologies, delivered $465 million to establish the research institute Renewables Australia, gave $480m to the National Solar Schools Program to give schools “a head start in tackling climate change and conserving our precious water supplies”. Easy come, easy go; the money tree seemed ripe for picking.
The cost of meeting Rudd’s windmill and solar fetish has been extraordinary.
Wind-generated power is roughly three-times more expensive than traditional energy, and large-scale solar even pricier.
It has taken cross-subsidies of $22bn to keep renewables viable, according to a 2014 review for the federal government. The economy-wide cost was put at $29bn.
It amounts to industry welfare on steroids. Corporations that jumped on the clean energy gravy train have benefited from assistance on a far greater scale than that we once lavished on the car industry.
Wind farm operators work in splendid isolation from the risk and uncertainty that trouble ordinary businesses. Their share price is not driven by supply and demand for electricity, but by the funny-money world of large-scale generation certificates.
When the LGC spot price shot up from $52 in July 2015 to $86, the value of Infigen’s stock quadrupled.
Coal energy producers, on the other hand, saw their fortunes decline. The Alinta power station closed at Port Augusta in May last year, ground down by operating losses of about $100m.
The result of Labor’s ill-considered RET policy should shame the social justice party into silence. Shareholders in the likes of Infigen have grown rich by squeezing coal operators out of business with all that entails: the loss of 440 jobs at Port Augusta, for example, and the threat the closure presents to jobs in other South Australian industries.
They have grown rich through a scheme that has made the electricity grid more unstable and reduced the reliability of supply.
They have grown rich through a scheme that has more than doubled the cost of running an air-conditioner, a detail that probably won’t trouble Infigen’s executives on the 22nd floor of their five-star energy-rated Pitt Street, Sydney, headquarters but would make life uncomfortable for a pensioner surviving on $437 a week in Adelaide’s northern suburbs.
On paper, the case for abolishing the RET is strong. Deloitte’s estimates the reduction in electricity prices would add $28.8bn to GDP by 2030 and create 50,000 jobs.
The politics of liberalising the energy market would be punishing, however, and all but impossible to negotiate through the Senate.
The status quo — a 23.5 per cent renewable target by 2020 — will require doubling the capacity of wind and solar and will further erode the viability of coal plants. The doubling of energy future prices that followed the announcement of the closure of Victoria’s Hazelwood power station is a sign of things to come.
Rudd’s claim that coal is “down and out” will come as news to the Japanese government, which is planning up to 47 coal-fired, high-energy, low-emissions plants burning high-quality Australian black coal.
It would be viable in Australia, too, if energy providers enjoyed a free market. With gas prices high, ultra-supercritical coal generation would fill the demand for base-load power.
Yet the uncertainty of Labor’s greener-than-thou policies — not just a 50 per cent RET but a price on carbon, too — could yet make the end of coal a self-fulfilling prophecy.
Nick Cater is executive director of Menzies Research Centre.
Kevin Rudd might believe that coal is history and Nick Cater is right to point to the destructive force that the LRET has had on the electricity market (destroying the viability of meaningful base-load power generators), but this kind of intellectual doodling is about to be smacked with a solid dose of reality.
In a few weeks time, Australia’s Eastern Grid is about to lose the benefit of the 1,600MW of cheap, reliable power that has been delivered by Victoria’s Hazelwood power plant for nearly 50 years. Hazelwood provides 25% of Victoria’s baseload power and 5% of Australia’s total energy demand.
Australia’s ‘wind power capital’, South Australia critically depends upon coal-fired power delivered from Victoria via the Murray-Link and Heywood interconnectors. When Hazelwood closes, South Australians can look forward to even more frequent blackouts, load shedding and a further escalation in their already rocketing power prices:
The catastrophic impact that the closure of Hazelwood will have on reliability and power prices has sharpened the focus in Canberra where, STT’s operatives tell us, the Coalition is looking to purchase Hazelwood and run it under Commonwealth government control.
After more than 20 years of governments privatising state-owned electricity assets, it appears that the process is about to be reversed with a ‘nationalisation’ of one of Victoria’s key power generation assets.
While chopping South Australia (population 1.6 million) from the grid from time to time, whenever wind power output collapses on a total and totally unpredictable basis (euphemistically known as ‘islanding’) has a political cost, it will pale into insignificance when 5.8 million Victorians and particularly Melbournians start suffering from mass blackouts and load shedding, like their South Australian counterparts. Victoria, unlike South Australia, still has a very solid industrial and manufacturing base; at least for the time being.
If the Federal government doesn’t rescue Hazelwood, there is nothing to replace it. Although, the wind industry, its parasites and spruikers have been talking up the prospects of a redundant technology abandoned centuries ago, for pretty obvious reasons. Among their marketing propaganda is the claim that wind power is ‘free’; and getting cheaper all the time.
If renewables are so cheap the market will sort it out
21 February 2017
Trying to make head or tail of Labor’s energy policy is really enough to do your head in.
Apparently, it comes in two parts. First, there is the target or goal or aspiration of 50 per cent of electricity generated by renewable sources by 2030 (up from the legislated RET of 23.5 per cent in 2020). This could be in legislation but then again, it could not be in legislation.
Then there is the emissions intensity scheme that will be in legislation and this will be consistent with the 50 per cent renewable energy target, goal or aspiration. But don’t worry, the emissions intensity scheme will be technology-neutral.
Are you still following? My guess is that most members of the public have about as much understanding of emissions intensity trading schemes, let’s call them EITs, as they do about the anatomy of the brain. If I tell you that an EIT works by making high emission generators pay a penalty and giving low emissions ones a credit, you are probably not much the wiser.
You see, the government sets an emissions benchmark and if the generator is above that benchmark, it is bad and punished; if the generator is below it, it is good and is rewarded. Over time, the government raises the bar by setting lower emissions intensities and more bad generators are forced out of the market.
It’s really just another version of the renewable energy target but gas could get a look in. But because the gas market in this country is so distorted and there is essentially a permanent moratorium on gas exploration and extraction in Victoria, NSW and the Northern Territory (there is a vast amount of locked up gas in the territory), in practice it is hard to see how there could be much additional investment in gas generation under the current conditions.
And once you start talking about trading schemes, most people will think of spivvy traders making money at the expense of ordinary people. And they wouldn’t be wrong if we look at the European experience with its emissions trading scheme, which is a bit different from the emissions intensity scheme, you understand.
The trading scheme in Europe has been a monumental flop. Ongoing over-allocation of allowances, low carbon prices and outright fraud are just some of its problems. But some spivs and the firms that clip the tickets (a feature of all trading schemes) have done well. Ditto the Californian scheme, which is currently mired in legal uncertainty.
Once, once upon a time, former Labor climate change minister Penny Wong described an EIT as a mongrel and smokescreen. But that was then and now it’s Labor’s preferred policy.
In fact, opposition environment spokesman Tony Burke says Labor’s EIT “will save businesses and households $15 billion across the next decade”. I’m not sure where he got that figure because the only reliable estimate of the cost of an EIT comes from the Australian Energy Market Commission using work undertaken by Frontier Economics.
This analysis points to the EIT pushing up wholesale electricity prices by 12 per cent across the decade relative to business as normal. And note that this figure is predicated on the rapid expansion of closed-circuit gas turbine generation, which may well not be feasible and is almost certain to be very expensive.
I guess Burke is just following one of the lessons he learnt in Propaganda 101 – keep repeating an incorrect figure and hope no one notices. Eventually, some people might just accept the invention. Mind you, Opposition Leader Bill Shorten has also been doubling down on Labor’s baffling policy. “We are absolutely committed to seeing 50 per cent of our energy mix coming from renewables by 2030. More renewables means more jobs, lower power prices and less pollution. It will create nearly 30,000 new jobs.”
By the way, comrade, 30,000 new jobs is trivial; there are currently 12 million employed persons. And no sensible economist believes that switching to intermittent, renewable energy will lead to a net addition to employment (or lower prices for that matter). The only question is: how big will be the associated employment losses?
But what I really want to know is how an EIT can possibly work in the context of an impossibly high (or any) renewable energy target. These two policies work at cross purposes. One says we don’t care how the lower emissions are achieved, the other says it is all about promoting more renewable generation. Either policy is technology-agnostic or it’s not.
But perhaps Labor is actually inching towards rational policy because opposition infrastructure spokesman Anthony Albanese has made the important claim that “renewable energy is now becoming the cheapest form of energy so it doesn’t require the sort of subsidies that were there in terms of the electricity market”. Hallelujah, I say, although I should perhaps tell him he’s dreaming.
But taking Albo’s word, there is obviously no need for the EIT or a renewable energy target, goal, aspiration. The market will sort it out because, if it is the case that renewable energy is the cheapest form of electricity, there is no need for any government mandates, interventions or subsidies.
There is also no reason why Labor wouldn’t support the immediate cessation of the current RET (rather than wait until 2020) since renewable energy will win out. The Turnbull government needs to take Labor up on this and legislate to close the scheme as soon as possible.
If we look at the renewable energy projects under construction or being planned, it is clear that all of them are being subsidised through the renewable energy certificate process as well as cash handouts from the Australian Renewable Energy Agency, the Clean Energy Finance Corporation, the ACT government or other government support.
So following Albanese’s advice, all these subsidies can now be cancelled and the long-suffering taxpayer (and electricity consumer) can be spared several hundred million dollars. We can also be spared the pain of coming to grips with the details of Labor’s EIT — no longer needed — or the renewable energy target, goal or aspiration — also no longer needed.
That’s something we can all drink to. I’m thinking an aged cab sav from the Coonawarra — to salute South Australia, the home of the wind turbine.
If Judith is thinking cabernet sauvignon, STT is happy to suggest that Judith crack into the Wynns Coonawarra Estate, Glengyle 2007 which, although still young, is drinking very nicely right now.
On a more serious note, however, the well-chewed ‘chestnut, about wind power being cheaper than coal or gas-fired power is a nonsense. For a start, the Operations and Maintenance costs of running wind turbines is in the order of $24 for every MWh dispatched – see our post here and this from our favourite whipping boys, Infigen:
So, the wind might be ‘free’, but wind power is anything but.
Then there is the fiction that wind power is actually ‘competing’ with conventional generation sources.
In every ‘competition’ in life, the ‘competitors’ are required to line up together, at the same time, traverse the same course, run the same distance and cross the same finish line.
Wind power is rarely in the stalls at the same time conventional generators are ordered to line up and – even when wind power eventually manages to hit the track – it rarely covers the distance – as in this ‘fail to finish’ on 8 February 2017, which left 90,000 South Australian families boiling in the dark:
There really is no “competition”. The 90,000 South Australian families that lost power were victims of wind power’s inherent inability to compete.
Power delivery is not a series of sprints which commence at whatever time the runners might feel ready, but is, rather, a marathon being run 24 hours a day, every day of the year and irrespective of the weather.
With its obsessional reliance on wind power, in South Australia it is often the case that the only power capable of being delivered to them comes from coal-fired plant situated in Victoria, delivered via interconnectors; or local gas-fired plant or diesel generators (hence STT’s predictions concerning the closure of Hazelwood expressed above).
For Judith’s future reference, here’s what ‘competition’ actually means:
competition noun: the activity or condition of striving to gain or win something by defeating or establishing superiority over others; an event or contest in which people take part in order to establish superiority or supremacy in a particular area; the person or people over whom one is attempting to establish one’s supremacy or superiority; the opposition.
STT is not sure what SA’s 18 wind farms were doing on 8 February, but we’re fairly confident that, whatever it was, it wasn’t in any kind of ‘contest’ with conventional power generation and it most certainly failed to establish any kind of ‘superiority’ or ‘supremacy’ over its so-called ‘competitors’.
For every one of South Australia’s 1,576MW of wind power capacity, there has to be a MW of synchronous, dispatchable power generation capacity, which means coal-fired power from Victoria and locally generated power, using gas and large-scale diesel generators (although plenty of South Australian businesses and householders have purchased their own generators, as a matter of critical necessity).
However, we do admire Judith’s ‘put up or shut up moment’, where she unravels the wind is ‘free’ paradox.
If wind power is not only ‘competitive’, but is truly cheaper than coal or gas-fired power then the wind industry has no need for the $42 billion worth of subsidies set up under the LRET, to be drawn from retail power bills?
Anthony Albanese, the CEC’s Kane Thornton and all those pushing the fantasy that wind power is cheap need to be careful about what they wish for.
Taken at their word, there is simply no justification for the LRET, the largest single industry subsidy scheme in the history of the Commonwealth.
So which is it?