Freedom of Choice: Massively Subsidised Wind Power or Jobs, Growth & Prosperity

BHP’s Olympic Dam mine in SA: lucky to get power at all.

 

Not so long ago, barely 25 years, in fact, Australia was rightly regarded as an energy superpower: abundant coal and gas reserves ensured reliable, secure and affordable electricity. It was hard to explain ‘energy poverty’ to anyone and power was altogether cheap.

Back then, the ‘business’ was about taking that electricity and using it within businesses to create goods and services: an environment in which Australia’s miners, mineral processors, manufacturers and industry generally flourished.

Nowadays, the ‘business’ is all about generating erratic, unreliable and ludicrously expensive wind and solar power: neither of which have any natural market; neither ‘industry’ would exist without massive and endless subsidies, mandated targets and punitive fines levied on retailers who fail to purchase in accordance with legislated threats.

The consequence of turning Australia from a country in which business was about ‘using’ electricity, into one in which the main game is about ‘generating’ electricity (albeit, only occasionally for wind and solar), is the destruction of the manufacturing industry, the imminent destruction of the mineral processing industry and a permanent and mortal threat to every other business that hitherto has generated profits for its shareholders and provided meaningful employment to Australians.

The catch-all euphemistic term is “de-industrialisation”.

Up to now, Australians have, quite apparently, ‘chosen’ an inevitable path to de-industrialisation. However, as power costs rocket and firms shut their doors, Australians might pause to reconsider whether it was such a clever ‘choice’, after all.

Here’s The Australian’s Judith Sloan raising a few rhetoricals along the same lines.

Four questions for politicians considering Australia’s energy future
The Australian
Judith Sloan
20 June 2017

Allow me to let you in on a secret: the notion that governments can create certainty for investors, particularly when it relates to electricity and climate change policy, is a myth. It ain’t going to happen, even if the Coalition government is able achieve a compromise position on the Finkel report.

Go back just two years when the Coalition government, with Tony Abbott at the helm, adjusted the renewable energy target — from 41,000 gigawatt hours to 33,000GWh by 2020. Greg Hunt, then environment minister, told us “what I think we have achieved today is certainty for the renewable energy sector”.

That lasted all of two years and we are back in a similar bind where we are being told the status quo is not an option. But hang on, two years ago we were led to believe that everything had been sorted.

In 2015 the climate modellers had told the minister that wholesale electricity prices were bound to fall because there would be additional supply of electricity generation coming on to the market — new wind farms and some large-scale solar — and the other generators simply would chug along. They might not make any money, they could even lose it, but they would remain in the market.

It took only the withdrawal of the Northern power station in South Australia and Hazelwood in Victoria to jack up wholesale ­prices by more than double in two years. The modellers thought $40 a megawatt hour would be the likely figure; it is now about $120.

In combination with the statewide blackout in South Australia last year and the power shedding that occurred earlier this year — with NSW lucky to miss out — the issue of reliability of supply has also become a hot political issue. So much for investor certainty.

The Finkel review panel understands the issue of investor certainty as it affects the prospects for investment in electricity generation. When it comes to new coal generation, the estimate is made that the weighted average cost of capital is close to 15 per cent, which is almost on a par with the cost of capital for investments in many developing economies.

What the panel is saying is that a 5 per cent risk premium would need to be attached to the assessment of any potential investment in new coal-fired electricity plants, meaning there will be no new coal-fired electricity generation in the country in the next 40 years at least. There may be variations in how long existing plants are kept going, but there will be no new investment in coal-fired electricity.

This is notwithstanding the surge in investment happening worldwide in next-generation high-efficiency, low-emissions coal-fired electricity plants. Forty-five are being built in Japan, more than 100 in Africa, hundreds in China and other parts of Southeast Asia and some in Europe, including in Germany. Germany also has extended the date when the use of brown coal will the phased out.

This all surely raises the question: how is it possible that governments overseas see the sense in building or facilitating the construction of these new HELE coal plants but it is not possible in Australia? Given that Australia is the source of vast quantities of high-quality thermal coal, it is more than passing strange that there is no prospect of any new coal-fired plants being built here.

The answer must revolve around the failure of the market to establish the conditions for investment that would be beneficial for the community — in this case, reliable, relatively low-cost power. Now in such instances, the conclusion drawn from the existence of market failure is that the government should become involved in the provision or financing of the worthwhile activity that is prevented by the market failure. Think: federal government financing of the National Broadband Network, or state government commissioning of desalination plants.

Of course, there are some serious questions about the NBN and the desalination plants in relation to their cost, in particular. But there is nary a remark made about the need for government to be involved in the projects.

In the case of the NBN, there almost certainly would be serious under-provision in rural and regional areas.

And in the case of desalination plants, private investors are prepared to take the risk of constructing these expensive capital-intensive plants in the context of uncertain future demand only if governments effectively underwrite the risk — through take-or-pay contracts, for instance.

So let’s think about the electricity market and the predictions of Finkel. It doesn’t take too many brains to realise that a renewable mix of 42 per cent by 2030 is unworkable, even if we deduct the 9 per cent from small-scale rooftop photovoltaics.

In the context of ageing coal-fired electricity plants that will be prone to break down and with what we know about the scope and cost of storage, particularly batteries, there is no way the government can agree to implement the clean energy target that is predicted to lead to this mix.

And let’s be clear about something: the CET is not technology-agnostic. It penalises coal-fired generation by denying it a certificate or allowing only a small proportion of a certificate. (Inter­mittent renewable energy would be eligible for a full certificate.)

The combination of the emissions reduction targets used by Finkel and the exclusion or near-exclusion of coal from the CET means new coal is knocked out. Tweaking the emissions intensity benchmark won’t alter this fact.

So for all those parliamentarians thinking about this issue, there are several questions to be answered:

• Is affordability and reliability of electricity more important than emissions targets?

• Do you want to see the exit of every smelter, cement plant, fertiliser plant and most other parts of manufacturing from Australia?

• Can you see a role for government in fostering the development of new best-practice coal-fired power plants?

• What are the options of meeting our Paris commitments through the purchase of (cheap) international carbon credits, linking the RET with the direct action scheme and other means?

By answering these questions, the parts of the ultimate solution become clearer.
The Australian

Nyrstar’s Smelter, Pt Pirie, SA: another business on the endangered list.

About stopthesethings

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

Comments

  1. estherfonc says:

    Hi,

    Here’s the link to the Petition on the Federal Government website for Australia to Withdraw from The Paris Climate Agreement.

    Please Sign it by clicking on the link below and please also share it with everyone you know. There are only 1418 signatures to date, so it needs to move FAST !

    Closing date for petition is 19/7/17.

    http://www.aph.gov.au/Parliamentary_Business/Petitions/House_of_Representatives_Petitions/Petitions_General/Sign_an_e-petition?id=EN0264

    Thankyou.

    Esther

  2. Jackie Rovensky says:

    Unfortunately across the world as well as here in Australia people have been duped into being complicit by supporting what was and is still a big LIE.
    At every stage of the wind industries progress they have lied about the worth of their towers of doom.
    That some leaders of countries overseas have recognised this and are working to try and turn their countries back into properly functioning entities, we here in Australia are still stuck in a time warp, we are at the bottom of the world in more ways than one.
    We do have some Politicians and others who see the danger, but for too long far too many of them were under the spell of the big lie the industry was selling, with some still under the delusion that we can run a modern economy on an reliably unreliable energy source.
    That Labor is still demanding that NO COAL be the catch cry of future energy regulations in accordance with the Finatikle report, it causing this Nation to stall from doing the right thing for the people and their future.
    That the Government has not found a way around this impasse is a failing on their part after all they are there to work for us not the Labor Party.
    Our Federal Government should stop stalling and start ensuring the future of this Nations energy’s security and it’s cost effectiveness.
    They need to stop failing us and start putting their pet ideologies to one side for the sake of the Nation.
    They can do it, all it takes is a smidgin of guts and acceptance they got it wrong.
    The people of this Nation do not disserve what is happening to their lives and country. Those suffering from living near Wind Turbines do not disserve it and nor do those who are loosing their livelihoods, homes and future as jobs disappear and prices rise.
    The Government has to remember it is not just the price of electricity that is rising its the price of everything we need and use.
    The introduction of a GST is nothing compared to the impact this nightmare is having on the people of this Nation.
    International agreements that were not fully and properly assessed as to the effect they would have and/or what the best way to achieve what any agreement wishes to achieve need to be set aside.
    Failings of previous Governments should be dealt with quickly for the sake of this country.
    Australia can be no use to anyone now or in the future if they cannot be a strong, independent, fully functioning Nation with a population that is satisfied, happy, healthy and working.

  3. It leaves me pondering how Australia is going to turn this around. All I’m seeing lately is loads of letters to the various media blaming privatisation of the electricity providers for the high prices. Is this coming from the ABC? Are Australians willingly this dense? Or has the climate change/renewable energy brainwashing been so effective that the average Joe cannot recognise, or perhaps doesn’t want to admit that s/he has been conned?
    My personal opinion…both of the above. Groupthink at its finest.
    I just don’t see attitudes changing. There’s every likelihood Labor will defeat Labor Lite at the next election and raise the renewable spending yet again. The economy may be about to tank, but until the ABC (I hate to say it), businesses, politicians and a large percentage of the population admit to the problem rather than blame it on spurious political claptrap, then there’ll be no change.
    When recognition of the real issue becomes mainstream, watch out! Someone is likely going to wear the climate change concrete boots so that the population has an excuse for being conned and can vent their anger.

  4. Terry Conn says:

    Unfortunately the questions Professor Judith Sloan asks of Australia’s politicians will not be answered by them because they are a major part of the problem and have no capacity to be part of the solution. No other country in the world is at the mercy of renewable energy fanatics, particularly wind turbines, then Australia – Denmark and Germany have been as ‘mad’ in their rhetoric but have, in practice, been able to hook into to their neighbours reliable power sources when needed regardless of price – even in their stupidity they have been much more pragmatic and sensible then Australia who are now the laughing stock of the world and the plaything of every playboy entrepreneur in the world offering solutions that will drain every last dollar from our citizens before our final expiration (Musk and Tesla being just one example, today I see ‘Sonnen’ from Germany lining up pretending to turn home solar units into a ‘giant’ battery in just another hoax solution).

  5. ‘how is it possible that governments overseas see the sense in building or facilitating the construction of these new HELE coal plants but it is not possible in Australia?’
    It is because of warmist empty headed MSM having way too much influence on politicians. Bring on regular referendums/plebiscites with every federal election – that would reduce the influence of idiot media and vocal minorities on politics in Australia.

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