Businesses Belted by Australia’s Renewable Energy Target: Power Prices Spiral Out of Control

Australia’s Renewable Energy policy is an economic suicide pact, from which there is no escape.

The result of that winning combination of greed, ignorance and downright stupidity, the Renewable Energy Target has destroyed businesses and is set to destroy whole industries.

Manufacturers, miners and mineral processors are screaming blue murder as they watch once reliable and affordable power supplies destroyed by ideologically driven lunatics wedded to the delusion that sunshine and breezes actually provide meaningful power.

Australia’s telecommunications businesses are not immune from the insanity.

Telstra, in its former incarnations as Telecom and before that the Post Master General was a government owned monopoly, that set up and ran Australia’s telephone system. More recently, Telstra has moved into the provision of internet services and digital media streaming to households.

Having been privatised in several stages, Telstra – a commercialised government business enterprise – enjoys market dominance as a result of its naturally cozy relationship with government. With that advantage, Telstra is not a business that would be considered as any kind of financial risk for investors or creditors.

However, Australia’s rocketing power prices have just delivered a $100 million increase in its annual power costs and that whopping hike in input costs has it and others calling for urgent action to prevent a wave of de-industrialisation and job losses.

The Australian’s Sarah Martin is a political correspondent who – in the article below – effortlessly demonstrates her ignorance of Australia’s energy policy and reinforces it by relying on commentary from characters who are obviously part of the problem, rather than part of the solution.

Telstra power costs up $100m as energy crisis bites industry
The Australian
Sarah Martin
27 May 2017

Telstra has warned the federal government its power costs have surged by more than $100 million in the past year, with a senior executive calling on Industry Minister Arthur Sinodinos for urgent action to address the crisis.

Speaking at a meeting between the minister and Australian Industry Group’s national council this week, Telstra’s group executive of corporate affairs, Tony Warren, is understood to have outlined concerns about the harm inflicted on the telco’s operations by spiralling power costs.

Telstra’s plea for action underlines a warning from the peak industry group that without price relief, Australia faces a “national economic security emergency” that risks triggering a wave of de-industrialisation and job losses.

The warning came as the Federal Court handed down a contentious ruling on network charges that is expected to exacerbate the energy crisis, adding $3 billion to electricity prices over three years, on top of spiralling wholesale prices.

Telstra would not confirm the $100m figure, but said it was attempting to respond to rising energy prices. “We are one of Australia’s largest users of electricity,” a spokesman said.

“Like all companies, our power costs have gone up in recent times and we have a range of initiatives in place to reduce our carbon footprint and to use technology to become more efficient in managing our energy use.”

Ai Group chief executive Innes Willox said members from a range of key economic sectors in southeast Australia reported electricity bills as much as quadrupling from one contract to the next. “A tripling of prices is commonplace and a mere doubling of bills is regarded as a perverse triumph,” he said.

“The closure of Hazelwood (power station) and its ill-thought-through consequences, the dramatic rise in domestic gas prices and a rise in network costs are contributing to massive energy cost pressures on industry.

“Given the mess that has been created, there are no clear short term fixes but at the very least industry urgently needs backing from government around energy efficiency measures.”

Mr Willox said Ai Group understood the situation was a government priority and industry was “doing its best” to adapt.

“But if the situation continues for even a year or two, we genuinely face the risk of a significant Australian de-industrialisation.

“With the steep and unsustainable gas and electricity price increases taking hold, Australia faces nothing less than a national economic security emergency.”

Energy Minister Josh Frydenberg said there was “no single reason for the higher energy prices” and “no silver bullet” for the problem. “The government is responding on a number of fronts and in particular is taking action to ensure more gas is available for the domestic market as higher gas prices have been a key factor in rising bills,” he told The Weekend Australian.

He claimed state governments should take more responsibility by reining in network costs, abolishing “unrealistic” state-based renewable energy targets and “lifting their mindless moratoria” on gas extraction.

Last month, in an attempt to address the spike in gas prices, the government announced it would impose export controls on energy companies when there were domestic shortfalls.

However, Andrew Richards, chief executive of the Energy Users Association of Australia, which represents large energy users, said government action so far had not addressed the problem, and further intervention might be needed. He called on the government to release a national plan for energy and climate change, which is under review by Chief Scientist Alan Finkel.
The Australian

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The Ai Group’s Innes Willox has spent years promoting subsidised wind power, with the kind of zealotry one naturally expects from crony capitalists, in on the deal.

A former journalist and PR master, Willox has plenty of skin in the game – as a director of union super funds, including Australian Super which is headed up by former Labor/Union heavyweights.

Union super funds have poured hundreds of millions of dollars into wind power outfits, such as Pacific Hydro and Infigen. In recent times, Willox has dominated the commentary and opinion pages of Australia’s mainstream press, pushing the ‘wonders’ of renewables; and deflecting and preventing any criticism of Australia’s Federal Renewable Energy Target.

As Upton Sinclair put it: “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

Although, in fairness to Willox, we expect he fully understands the benefits of being on the right side of the largest single government mandated wealth transfer in the history of the Australian Commonwealth.

Then there is the man who would be King: Energy Minister, Josh Frydenberg.

Frydenberg never ceases to disappoint, leaving STT wondering which malevolent foreign agency he is working for? Because everything he does and says is thoroughly hostile to the interests of Australian businesses and households.

No man with the power and authority gifted to Frydenberg would claim that there is no solution to Australia’s energy crisis, unless he was suffering from some congenital mental defect, rendering him incapable of acting; or there existed some kind of financial incentive, causing him not to act, due to the risk of being unable to obtain whatever it is that he’s been promised.

For Sarah Martin’s benefit, we will deal with the elephant in the room.

Australia’s Large-Scale RET is a subsidy scheme designed to transfer more than $3 billion each year from Australian power consumers to wind and solar power generators; and to do so every year until 2031: It’s Time for Frydenberg & Turnbull to Come Clean on the Cost of Subsidised Wind Power

The market perversity caused by the LRET is what led to the closure of Hazelwood, a power plant representing 25% of Victoria’s power generation capacity, and which is what also drove the closure of South Australia’s only coal-fired power plant at Port Augusta, last May – resulting in a further power price surge in SA – and plenty of load-shedding and blackouts whenever wind power output collapses.

When the wind is blowing, wind power outfits literally pay the grid manager to take their skittish wares, relying upon the guaranteed prices they receive under Power Purchase Agreements with retailers (most of which are in the order of $110 per MWh – 3 times the cost of coal-fired power), underpinned by the value of the renewable energy certificate (aka RECs or LGCs), designed to trade at $93 each: Turnbull’s Reliable Power Play: Australian PM Pushes Coal-Fired Future

The alternative for retailers is coughing up the $65 per MWh shortfall charge for each and every MWh of mandated renewable energy that the retailer fails to purchase in order to satisfy the annual 33,000 GWh set by the LRET.

When subsidised wind power is being dumped, below cost, into the grid, conventional generators (who operate without subsidies) are forced out of the market, unable to literally give their power away (as wind power outfits can and do). Conventional generators get paid nothing, unless they are delivering power to the grid and yet they will continue to burn coal or gas waiting for their chance to deliver power – incurring fuel and other operating costs, but with no revenue to cover those costs, the path to insolvency is assured. Hence the demise of Victoria’s Hazelwood and South Australia’s Port Augusta plant.

For Frydenberg to argue that there is “no single reason for the higher energy prices” and “no silver bullet” for the problem beggars belief.

The cost of satisfying the LRET, in terms of the purchase of renewable energy certificates or the shortfall penalty alone, tallies up to a cool $42 billion from now until 2031, a cost entirely born by all Australian power consumers, including Telstra.

The howling about increasing network costs also overlooks the fact that when seas of solar panels are scattered across the outback and wind turbines are speared all over the back of beyond, the electricity they occasionally produce has to be directed from the wrong end of the network (ie where the power consumers are not); or from places where the network is practically non-existent.

Moreover, as South Australians have learnt to their staggering cost, conventional grid systems are not designed to tolerate massive surges and collapses in electrical output. Meeting the strict tolerances as to voltage and frequency required by functioning grids is a doddle for coal and gas fired plant, nuclear plant and hydro. However, where, as in SA, output depends entirely upon the time of day, whether it’s cloudy or windy enough (and not too windy) maintaining grid stability is a daily battle.

The cost of building grid infrastructure to bring occasional power from remote locations is as staggering as it is unnecessary. The cost of over-engineering networks in order to cope with weather driven surges and collapses in wind power output merely adds to that unnecessary cost.

Attacking grid managers for doing what being forced to rely upon sunshine and breezes inevitably demands is just a little rich, especially coming from those who’ve engineered and/or profited from Australia’s renewable energy debacle.

Andrew Richards is right when he says government action so far has not addressed the problem. However, when he says that “further intervention might be needed”, if he means further subsidies thrown at pie-in-the-sky fantasies like grid-scale battery storage, then every Australian power consumer, including Telstra can expect even more punishment. In truth, the only “intervention” needed is to scrap the Renewable Energy Target, right now.

Australian power consumers might be complaining about their power bills at present, but for Telstra – and every other Australian business and household – the worst is yet to come.

With rent-seekers like Innes Willox – and the Union Super Funds he and his ilk own and control – pushing to maintain the status quo; and with gormless or disingenuous political facilitators, like Frydenberg, in charge of the policy that feeds Willox & Co, Australia’s energy crisis is guaranteed to escalate to the point of an economic and social disaster. It’s well on the way, and yet none of those with the opportunity to address it have any inclination of doing so: Nero fiddling with his home town incinerating around him springs to mind.

It’s a little like watching the same train wreck, over and over again. Australia’s power pricing and supply calamity is something that STT has been predicting for years.

Now that the disaster has been realised, major consumers are beside themselves – among business owners, large and small, there is a pervasive sense of helplessness, blended with barely concealed rage at the morally bankrupt idiots that pretend to govern the Country.

That a full-scale revolution has yet to occur is probably down the observation made by the late, great STT Champion, Alby Schultz, that:

“The only reason people are not rioting in the streets about the unjustified increase in their power bills is that they simply have no idea what is going on.”

That prescient little vignette was delivered by Alby in the Federal Parliament in February 2013, when he was the Liberal member for Hume.

With power prices doubling and even tripling on an annual basis, it won’t be long before Australians take to the streets. When they find out that they have been lied to for years by a mercenary and cynical, political and media clique they won’t just be angry, they will be furious. And rightly so.