Power Price Punishment Spreads as More Retailers Add 20% to Australian Power Bills

Alan Finkel’s rubbery figures come unstuck.

***

STT called Alan Finkel’s report on Australia’s renewable energy debacle a mix of Lewis Carroll’s Through the Looking Glass and Goldilocks.

As commentators chew through Finkel’s rubbery figures, it is apparent that our description was not just fair but accurate.

New electricity reform details cut off promised $90 saving
The Australian
David Crowe
16 June 2017

Households will not receive a promised $90 annual saving from a clean energy target, as new ­details about the sweeping energy reforms put to Malcolm Turnbull undercut assumptions behind forecasts of electricity price falls.

In a double blow for consumers, soaring wholesale prices are forecast to push up household gas and electricity bills by double-digit amounts next month, with retailers warning of steep price rises amid the debate on energy reform.

EnergyAustralia will be the second of the three major energy companies to raise prices this year, telling households and businesses in Queensland, NSW and South Australia they face rises of up to 19.9 per cent for electricity and up to 13.3 per cent for gas.

A confidential briefing on the energy scheme proposed by chief scientist Alan Finkel has revealed that the claim of a $90 saving on annual bills does not include the cost of a key new policy to make renewable energy more reliable.

Coalition MPs emerged from a briefing with Dr Finkel with new doubts over the effect of a clean energy target on retail prices and the wider case to overhaul the $11.7 billion electricity grid.

The reform plan faces stronger resistance from government MPs who believe the heavier investment in renewable energy will push up prices and that the best solution will be to encourage more coal power.

Cabinet ministers are also anxious about the household impact, given growing scepticism about the modelling, which was done by the same firm that made optimistic forecasts about wholesale prices in a renewable energy analysis three years ago.

One of the MPs in yesterday’s briefing, NSW Liberal Craig Kelly, said he was concerned about the clean energy target’s ­effect on prices when there was a need for a separate target to ensure reliable supply. “My scepticism has been justified now further details are available,” Mr Kelly told The Australian.

The clean energy target remains a live option for the government in a form that includes the most efficient, new forms of coal-fired power, in line with Mr Turnbull’s message to parliament that the reforms would not penalise coal. It appears this will be a deal-breaker with Labor, as Bill Shorten warns against any “clean” scheme that includes coal, putting the Finkel blueprint on track for a stalemate in the Senate. Key crossbenchers are yet to reveal their hands.

The clean energy target was put forward by Dr Finkel but has not been endorsed by Mr Turnbull or Energy Minister Josh Frydenberg, leaving it up to the Coalition partyroom and federal cabinet to decide whether to adopt the idea of rewarding electricity generators that produce the lowest greenhouse gas emissions.

A new issue concerning ministers and backbenchers is uncertainty about the cost of financial rewards for energy generators using certificates that are funded by retailers, who would pass the cost on to consumers. The Finkel report puts no figure on the annual cost of the certificates but the briefings on the modelling suggest it would be $78 million in the first year, rising to $1bn a year in the decades ahead.

Dr Finkel made no forecast for household electricity costs under the clean energy target, given the benchmarks would have to be set by the government, but the modelling assumed a threshold of 0.6 tonnes of carbon emissions for every megawatt hour of electricity — a level that would exclude all coal-fired power.

The modelling by economics firm Jacobs found the clean energy target would result in residential retail prices on average 7 to 10 per cent lower if there were no change to current policies. An informal government analysis suggested electricity prices would be $90 lower per year under the clean energy target than they would be without reform.

Dr Finkel’s briefing yesterday confirmed these calculations did not include the cost of his recommendation for a “reliability obligation” on new wind and solar projects to have to invest in batteries, hydro or other generators to ensure back-up power.

The Minerals Council of Australia estimates the added cost of battery storage could push the cost of wind power from $92 per megawatt hour to anywhere between $304 and $727 per megawatt hour.

“The inclusion of the costs of back-up battery storage would make a substantial difference in the overall cost impact of the CET scheme,” it said in its summary.

Wind, solar and other renewable power is expected to account for 76 per cent of the $88bn to be invested in power generation to 2040, according to a research paper from Bloomberg New Energy Finance issued yesterday.

“This year’s report shows that renewables and storage are set to transform Australia’s energy supply faster and at a lower cost than the Finkel review anticipates,” said analyst Kobad Bhavnagri.

The firm’s key finding is that coal is “yesterday’s technology” because the cost of wind and solar is falling so quickly, making it harder for investors to justify a new coal-power station.

Conservative Coalition MPs do not accept this and reject key parts of the Finkel report that suggest the cost of capital for a coal power station is as high as 14.9 per cent under current policies, making it half as attractive as an investment in a renewable power project.

The objections from Coalition MPs put them at odds with industry associations, the National Farmers Federation and energy groups calling for a consensus in parliament on the Finkel recommendations. Australian Chamber of Commerce and Industry chief James Pearson said: “We need politicians of all sides to set aside ideological baggage and reach an agreement that provides certainty for the future. It is essential that investors have confidence in policy settings to encourage investment in energy projects.”

Coalition MPs did not put forward any alternative to the clean energy target in their partyroom meeting on Tuesday but they urged Mr Turnbull and Mr Frydenberg to prioritise lower prices rather than meeting emission reduction targets.
The Australian

While Finkel’s figures may have been more than just a tad elastic, some others have become frighteningly concrete.

Year-on-year retail power price increases of 20%, outstrip the current rate inflation of 1.5% and constitute pure political poison (as laid out in the article below).

Another set of figures that will instill fear in the wind industry are those quoted above from the Minerals Council of Australia which: “estimates the added cost of battery storage could push the cost of wind power from $92 per megawatt hour to anywhere between $304 and $727 per megawatt hour.”

Among his recommendations, Finkel is pushing a Generator Reliability Obligation, which would force wind and solar power outfits to source backup power at their cost to cover the inevitable daily collapses in output when the sun goes down, clouds roll in or the wind stops blowing.

Whether the Reliability Obligation is met by, as yet, mythical mega-batteries or fast-start open cycle gas turbines or diesel generators, the total cost of the power ‘delivered’ by wind and solar power outfits will be north of $300 per MWh, six times the cost of coal-fired power.

Instead of forcing low-cost base-load generators out of the market with heavily subsidised wind and solar, the full cost associated with their inherent intermittency and unreliability will be borne by wind and solar power outfits, instead of conventional generators and, ultimately, retail power customers.

At $300 per MWh or more, wind and solar power will never sell a watt in a market where delivery must be guaranteed 24 hours in advance, with financial penalties for any failure to deliver.

Finkel’s recommendation to implement what are called ‘day-ahead’ markets (see p101-103 of the report) will knock wind and solar power outfits out of the market, because they will have to suffer the cost of supplying backup power in case of any weather or sunset related inability to deliver the volumes promised.

The very concrete cost penalties attached to a failure to deliver has got the wind industry and its parasites already pleading for mercy. The Clean Energy Council has been putting up nonsensical and desperate arguments aimed at heading off Finkel’s recommendation of ‘day-ahead’ markets, for very obvious reasons.

Then there is the small matter of year-on-year retail power price increases of 20%, 13 times the rate of inflation.

Energy giant flags 20pc rise in power bills
The Australian
Andrew White
15 June 2017

Soaring wholesale prices will push up household and business gas and electricity bills by double-digit amounts next month, with retailers warning of steep price rises as Canberra ­debates energy reforms.

EnergyAustralia will become the second of the three major energy companies to raise prices this year, telling households and businesses in Queensland, NSW and South Australia they face rises of up to 19.9 per cent for electricity and up to 13.3 per cent for gas.

The increases are among the highest in the past five years and will add an average of $915 to the electricity bills and $1042.60 to gas costs for small and medium businesses in NSW.

Household electricity bills will jump $319.80 after doubling in the past five years thanks to soaring network and wholesale prices.

David Leitch of consultancy ITK said the rises were the direct result of years of uncertainty over energy and carbon policy that had stalled investment in new capacity and handed an opportunity to the retailers and generators.

But the problem was worsened by the closure of the Hazelwood and Northern coal-fired power stations and the Victorian government deal to keep the Portland aluminium smelter going. The smelter consumes 10 per cent of Victoria’s energy output.

“There is genuine tightness in demand and supply, but they have also milked it,” Mr Leitch said.

EnergyAustralia, business groups and the NSW government yesterday said the rises highlighted the need for a clearer national policy and urged the federal government to embrace the recommendations of the report by Chief Scientist Alan Finkel to introduce a carbon emissions target to guide investment in new energy systems.

Professor Finkel’s report has divided the ­Coalition, with a quarter of MPs concerned its recommendations do not do enough to secure reliability and lower ­prices, and others wanting a higher target that would allow new coal-fired generation to qualify as low- ­carbon.

“Without a sensible national plan, we won’t have enough new investment in new power plants to bring prices down,” NSW Energy Minister Don Harwin said.

“With the kind of flat market conditions many businesses face, especially those exposed to international competition, such cost increases can’t be passed on.”

NSW Business Chamber chief executive Stephen Cartwright said state and federal governments should set out a short-term plan “above and beyond Finkel” to ease the price increases that have already come through and continue again on July 1.

EnergyAustralia chief custom­er officer Kim Clarke said the cause of higher prices was higher wholesale costs, which have almost doubled in some states, increased demand for gas by liquefied natural gas projects in Queensland and reliability issues with some big generators.

“This is bad news for families and businesses and absolutely not what they wanted to hear,” Ms Clarke said. “Today, getting electricity to our customers costs more right across the energy chain.”

Queensland customers received the smallest increase, with electricity prices up 7.3 per cent for households and 11.3 per cent for businesses. This month the Queensland government moved to ease pressure on price rises by restarting the Swanbank gas-fired turbines and ordering the state’s generators to take less profit.

South Australia, which already has the highest prices and suffered blackouts last year, faces a 19.9 per cent rise for households. Business bills rise 19.9 per cent, or about $967.20, a year for electricity and 13.3 per cent, or $936, a year for gas.
The Australian

Austral Bricks: soon to disappear from view forever,
thanks to continually rocketing power prices.

***

Back in March last year we covered the power price punishment delivered to businesses in South Australia.

Steven Mouzakis, Austral Brick’s Sydney-based national energy and sustainability manager, got the shock of his life when its brick factory at Golden Grove, South Australia went to renegotiate its power contract for 2016.

“The energy price increased by 90 per cent,” Mr Mouzakis said. “How can we operate a business with energy costs increasing at 90 per cent?”

Good question. Perhaps Mr Mouzakis can direct it to Josh Frydenberg and CC Jay Weatherill?

He could also ask for an update on why power prices have jumped between 16 and 20% in South Australia since Austral Bricks suffered its 90% jump in 2016?

Or, perhaps, Mr Mouzakis and the, soon to be unemployed, workers at Austral Brick’s Golden Grove factory can deliver these readily answered, rhetorical questions the next time they visit their nearest Polling Stations?

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:

    After checking the MW production for June 2016 this year is definitely looking very ‘sick’. There have been one or two short periods when the wind blew, but not enough to make up for the periods when it was all but absent.
    If battery’s could be and were installed to collect excess energy they would be sitting completely discharged this month.
    What has kept the grid going is not always but almost always the energy being produced in Queensland. The juggling going on to move energy around the grid is mind boggling. Without the security of base load being produced in Qld, NSW and Victoria this part of the Nation would be suffering permanent energy blackouts.
    If our Politicians cannot accept this they are not only fools but dangerous fools.
    But what is more concerning is that there are so called highly educated people still pushing for removal of all base load production leaving renewables, with wind at the fore, to keep us supplied.
    It makes you wonder what would happen to these poor soles if this happened, how would they survive?
    They have been educated and rely on modern technology which functions using electricity to ‘learn’ and to become ‘educated’, they have already lost the ability to think for themselves, to question, challenge and use rational debate to help achieve valid answers.
    Too many of them have relied on being told what to think instead of thinking for themselves after collecting and assessing ALL information, they rely on what their ‘friendly colleagues’ provide them with and do not dare to question when, where and how they arrived at their conclusions – their knowledge all rests on being told what ‘all’ believe without even questioning who ‘all’ is.
    To many are resting their ‘knowledge’ on ideology instead of true independent research.
    Power (electrical energy) is powerful but dangerous when misused, so to is the power to make decisions that affect us all.

  2. Jim Hutson says:

    Insiders are predicting that the electricity bill will double in the next 2 years. You know the wheels are starting to fall off when the Federal and State Governments are starting the blame game. With approx. 4200 megawatts slated for closure in NSW, where is the power coming from?

  3. Herbert Adams says:

    Life is full of irony.

    Over the month of July South Eastern Australia has been becalmed. In what is shaping up as one of the great droughts, giant high pressure cells are blocking rain bearing low pressure cells, the rain is not falling and there hasn’t been a zephyr of a breeze for weeks on end.

    In SA the beloved wind turbines for the month of June have literally stalled, I await the months wind output figures. Surely this data should be emailed every to each politician.

    Of course with the dryness there will come the inevitable call of climate change and the associated hysteria from deluded greenies and the Clean Energy Council.

    The irony is in dry years there’s very little wind just the foggy/frosty mornings and beautiful sunny days.
    The idea of combating climate change and increasing droughts by producing our power from wind turbines is lunacy.

    How our chief scientist could recommend wind energy destroys any confidence I have in rational debate.

    He should be made to face the senate and explain how the power generation system would work using June’s wind energy generation charts for SE Australia.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: