Turnbull’s Trilemma: PM’s Power to Rise (or Fall) with National Energy Guarantee

The reason that Australian governments give for policies set to squander $60 billion in subsidies on wind and solar power is a three-way mission to deliver (1) reliable, (2) affordable and (3) low-CO2-emissions electricity.

After the debacle that’s played out in Australia’s wind power capital, South Australia, the odds of that trifecta ever becoming a reality are clearly nil.

Sure, generating power and reliably delivering it can be done without generating much CO2 gas. But unless nuclear power is used as the generation source, power consumers can expect to pay the highest power prices in the world, just like South Australians, Germans and Danes (all wedded to the delusion that a country can run on sunshine and breezes).

In short, combining wind and solar with pumped hydro and much hyped mega-batteries comes with an obscene price-tag. South Australia has just thrown $150 million of taxpayer’s money at Californian Carpetbagger, Elon Musk for a battery pack that will ‘power’ the economic basket case for all of four minutes when the wind stops blowing.

Australia’s self-inflicted energy crisis is the product of deliberate and considered action. Now that the results are in (an unmitigated disaster for businesses and householders, alike), the officious bystander would be entitled to stand gobsmacked at the ponderous inertia demonstrated by the Federal Coalition government.

PM, Malcolm Turnbull is clearly incapable of unwinding any of the policies that caused the damage in the first place. Instead, the next best thing is yet another layer of government intervention in a market already so tangled and distorted that it resembles a crippled octopus.

Because Turnbull’s proposal for a National Energy Guarantee is a policy directed at undoing the obvious and inevitable harm that the Federal government’s Large-Scale Renewable Energy Target has done (and continues to do) to Australia’s once reliable and affordable power supplies.

On the broader level, the NEG is like a rabid dog chasing its tail, or placing more and more Band-Aids on top of bloody Band-Aids.

The stated objective of the LRET is to subsidise purportedly low emissions wind and solar to reduce CO2 emissions in the electricity generation sector. The NEG is accompanied with an Emissions Obligation which has the same objective.

If ever there was an unnecessary policy duplication, having the LRET still in place with the introduction of the NEG and its Emissions Obligation sits as the prime example.

On one side of the fire stands the Energy Security Board trying to ameliorate the damage, on the other side stands the Clean Energy Regulator literally throwing petrol on the conflagration.

In this piece, Alan Moran unpacks the obscene cost of running two horses in the same perverted policy race.

Turnbull’s energy policy proposals: more steps forward than back?
The Spectator
Alan Moran
22 November 2017

The Government has now received but not yet released a report into the energy market plans it wants to put in place.  These plans entail retaining the increased availability of the Renewable Energy Target (RET) subsidies until 2020 and then maintaining payments of those to installed plant until 2030.

Currently the subsidies, which are direct transfers from consumers, pay wind/solar $85 per MWh in addition to them receiving the spot price now at $80 per MWh (double the price prior to the Hazelwood closure).

Prior to releasing the report on which the numbers are based, Energy Minister Josh Frydenberg in an op-ed for The Australian and in press releases to other media has paraded the forecast effects of the latest of dozens of energy policy shifts that have been announced over recent years.

The estimates are made by the government’s soothsayer of choice Frontier Economics, headed by Danny Price.  Frontier has made a handsome living from projecting energy prices and outcomes from different market interventions.  It was paid one million dollars by the besieged South Australian government to provide advice on how the state’s ideologically-driven renewable energy policy could work.  Mr Price was also the architect of the 2009 Turnbull-Xenophon emission intensity scheme where penalties on plant would increase in relation to their emissions per unit of output.

While always keen to help politicians push energy provision in their favoured directions, Mr Price did however skewer the absurd claims of ANU energy gurus Frank Jotzo and Salim Mazouz that closing down brown coal fired stations would have a negligible price effect. He estimated closing Hazelwood would bring the 25 per cent retail price increase that is now being seen (an increase driven by a more than doubling of wholesale prices that the Hazelwood closure caused)

Although Frontier’s modelling is not to be released until Friday, the information now on the public record shows that it forecasts:

  • Cost savings to households of $120 a yearby 2030 with a 23 per cent drop in wholesale electricity price in the decade between 2020 and 2030 compared to business as usual. Pro rata reductions will be greater for the big energy users which have a greater proportion of their costs in the energy component itself.
  • The requirement of renewable energy retailers to “firm up” the supply under the National Energy Guarantee will result in an extra 3,600 megawatts of dispatchablepower during the decade, equivalent to the generation capacity of two and a half Hazelwood’s capacity.
  • “The2030 share of renewables is likely to be about 32-36 per cent, of which about 8 per cent comes from hydro that has the characteristics of baseload power”. That is 26-28 per cent will be exotic currently subsidised renewables up from 16 per cent (plus 8 per cent hydro) in 2020

Minister Frydenberg has received accolades for his policy proposals from his ostensible political opponents: the Grattan Institute and Bloomberg New Energy Finance as well as doubtful allies like the BCA and BHP.

Of course, any forecast 13 years ahead in the changing energy theatre are to be taken with a grain of salt, all the more so when the forecast is by a consultancy which has been hired in the knowledge that its answers will be helpful to the government which commissioned them.

Some implications of the report that have been overlooked by the media reporting are:

First the 23 per cent wholesale price reduction being forecast comes after an increase of 100 per cent or more following the politically-induced measures of renewable energy subsidies that have driven out low cost coal based energy facilities.  So even if the forecasts prove accurate they still leave the nation at a massively increased electricity cost base than it had in 2015.

Secondly, the “extra 3600 megawatts of dispatchable power” comprises high cost facilities like the mythical Snowy pumped storage facility designed to even out the daily price and all those batteries designed to provide very short term reliability.  These facilities represent very poor value for money in providing ancillary services to electricity generation necessary with wind and solar but intrinsically present with coal generators.

Thirdly the 2030 level of exotic renewables must displace some further coal power stations, at least three others of Hazelwood’s size (only the 2000 MW Liddell is presently scheduled for closure by 2030 and the government is seeking to have AGL keep it open).

Driving the forecasts is a projection of renewable energy costs.  Like so many that have preceded them, these latest forecasts predict the renewable low price nirvana is upon us. They use a projected 2020 cost of wind and solar at $73 a megawatt hour and $75 a megawatt hour respectively; these drop to $64 a megawatt hour and $57 a megawatt hour by 2030.

These prices remain well in excess of those that are available from new coal facilities (less than $50 per MWh according to estimates in a report commissioned by the Minerals Council), and also require firming capacity payments.  Moreover, although some contracts have apparently already been signed at around $60 per MWh, prices of these contracts do not seem credible.  The renewable subsidies have caused the market price to increase from its previous $40 per MWh to $80+.  But, in addition, wind still receives a subsidy of $85 per MWh.  This, on market information, is estimated to fall to around $45 by 2022, (the latest date at which any information is publicly available).

If wind/solar is genuinely available at $73 falling to $57 per MWh – with some claiming that such forecasts are actually conservative – and this is close to the spot price, competition would drive the subsidy to zero.  The telling fact is that this is not happening.  Moreover, among the serried ranks of renewable rent-seekers and their army of supporting shills not one has suggested the subsidies are unnecessary!

Doubtless the government will consider the vast sums spent on the Frontier report to be good value if it enables a partial extraction of consumers from a RET subsidy that will likely cost at least $3 billion per year up until 2030.  But this is very much a second best option and, in view of the increased share of renewables post the 2020 cut-off of new build subsidy eligibility, one that might not warrant even that tepid praise.

And the lobbying pressure from greens and rent-seekers is hardly likely to acquiesce to a standstill of subsidy payments to wind, solar, pumped storage, batteries and other products doing so much to undermine the once world-beating Australian electricity industry.

Alan Moran is with Regulation Economics and is the author of Climate Change: Treaties and Policies in the Trump Era.
The Spectator

All of the above arises because, some 20 odd years ago, carbon dioxide gas was deemed to be ‘toxic pollution’.

Yes, carbon dioxide gas is plant food and, even if it is about to cause the incineration of the Planet, the minuscule amount produced by Australia is like a zephyr in a thimble compared to the CO2 being pumped out of hundreds of coal-fired power plants in places like India and China. However, for as long as Malcolm Turnbull leads the Liberal/National Coalition, CO2 gas will be treated as ‘pollution’.

Australia is the only G20 country with a legislated prohibition on nuclear power generation.

However, the combination of the NEG and the Emissions Obligation puts nuclear power firmly on the table. As we have said repeatedly, nuclear power is the only stand-alone power generation source which is capable of delivering power on demand, without CO2 emissions being generated in the process.

From a retailer’s perspective, nuclear power is a source which is obviously capable of satisfying both its NEG obligation and its Emissions Obligations, were such a choice available.

When Alan Finkel put together his unicorns and pixie dust review of Australia’s renewable energy debacle, he managed to dismiss nuclear power in two short paragraphs.

With reliability the primary focus of energy policy under the NEG, sources with a 100% capability of delivering power, irrespective of the time of day or the weather, will necessarily attract attention. Add in an obligation (along with sufficient penalties) to deliver that power without CO2 emissions being generated, and the case for nuclear power in Australia becomes obvious and compelling.

The French use nuclear power to generate around 75% of their power and they pay fully half of what it costs retail customers in South Australia (see above). So, those who claim nuclear power is expensive, clearly haven’t been paying attention.

STT will continue to advocate for nuclear power. Now it’s high time Malcolm Turnbull did the same. Then, and only then, will Australia have a chance of settling its self-imposed energy trilemma: (1) reliable, (2) affordable and (3) low-CO2-emissions power.

Until this Country grows up and goes nuclear, Australia will keep merrily chugging along using a mountain of coal, an ocean of gas and a side-order of hydro. While the renewables rent-seeking crowd will keep on delivering an awful lot of hot air, bluff and bluster.

Canberra’s Dynamic Duo tackle impossible trilemma:
reliable, affordable, CO2-free power.

About stopthesethings

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

Comments

  1. IMO the NEG’s ALL about giving a leg-up to the RE cult in hastening the exit of coal.

    The NEG document specifically included in its assumptions the exit of coal and gas…the ESB members are RE zealots publically and unmistakably committed to a 100% RE Australia…and most RE-obsessed pundits are happy with the NEG, as are Bloomberg et al and apparently business organisations.

    Chair of both ESB and AEMC…John Pierce…. has said AEMC’s foreshadowed change from a 30 minute settlement to a 5 minute settlement for pricing…will be great for the intermittents but not good at all for coal and gas…they can’t handle it.

    Garnaut and Australia Institute want the change to 5 minute settlement ASAP so we KNOW they believe it will hasten the exit of coal.

    And Josh Frydenberg is adamant that coal and gas WILL be exiting the NEM.

    I think the plan was to have us all guessing about what they have already set in concrete.

    They’re ending the subsidies to RE generators, but I think they’ll just transfer that taxpayers’ assistance to the expensive firming operations that intermittent weather dependent windmill and solar power inevitably require to become dispatchable.

    So I think the ‘dispatchable power’ that’s so important for the reliability guarantee and has so many people querying the exact meaning of …. is to be…not coal and gas as it appeared to most of us…but sooner rather than later…wind and solar power firmed by use of batteries, pumped hydro etc …and I think the plan is for that firming …at huge cost…to be funded by Australian taxpayers.

    AFR says that Frydenberg assumes no further GHG abatement via the NEM after 2030.

    Is that because he expects coal and gas to have exited to such an extent by then that all the abatement can be taken care of in other areas?

    So IMO …just my theory…the unprecedented shift of TPM from the poor and middle-income earners…to the uber-rich of the WORLD…and in the case of at least two of the big gentailers to their Chinese Communist government and Singapore government owners…will continue…. and Australia ALONE in the world will be the lab rats for the world’s experiment to see if a modern economy can survive [ or will collapse]with an atomised intermittent power supply.

    Australia is ALONE in the world as a country without ANY of the backup other countries have…like nuclear…. huge run-of-river hydro…or connectors to other countries….and we are being asked to commit economic and social suicide.

    There was a report somewhere that to take out of the South Korean grid the more than 200TWh of coal-fired power they now have and replace it…. would require the building of more than 20 NEW nuclear power plants…additional to the ones they already have…so presumably replacement of Australia’s ~195 TWh of electricity usage would require a similar NUCLEAR build here.

    Are we to believe intermittent weather-dependent wind and solar power propped up by short-lived batteries and drought affected pumped hydro will power our modern economy…or is it intended that we have a subsistence economy… aka poverty?

  2. Crispin Trist says:

    Tourism in Victoria has for many years been promoted by the use of a well known ad campaign featuring a jigsaw graphic and the slogan, “You’ll love every piece of Victoria”.

    However, if the Daniel Andrew’s State Labour Government continues with the VRET, I fear that a more appropriate slogan will read, “You’ll hate every piece of a wind farm!”

  3. Terry Conn says:

    I agree with STT, once again, in respect to its summary of the situation we are now in – especially the band aid upon a bloodied band aid which will leave us all in dire economic straits, dire electricity provision straits and subject to an even greater bollocking by academics, public servants and politicians than we are already receiving. The back up requirement of the NEG is just giving succour to the greatest scam of all time.

    Nuclear is clearly the only solution but the chances of it even being ‘legalised’ within 20 years are remote – it’s either blackouts on mass this summer season or the next to jolt our citizens into action or a very painful and slow death for the entire nation such that even the rent seekers will have to flee or wither on the vine as well – when, for example, will the six million dollar a year man running AGL wake up to the fact that most of the people being extorted by this scam will be fortunate to earn one million dollars in fifteen years and will not be paying for electricity because they cannot.

    • I think we need to be careful with indicating nuclear is the only solution because it’s not. If we want dispatchable AND affordable AND CO2-free electricity capable of meeting demand, then nuclear is one of the clear solutions, along with hydro and geothermal, where available…and perhaps some others depending upon demand. However, the perceived need for CO2-free electricity is based upon the wonky science of catastrophic anthropogenic global warming, which becomes more ridiculous by the day, but somehow manages to remain politically influential.
      Once the CO2-free argument is eliminated, then there’s nothing wrong with coal, gas, methane clathrates or any of the fossil fuels for which we are blessed with thousands of years of supply.

  4. I agree STT Australia should embrace nuclear technology not because it’s cheaper than coal (it isn’t without “carbon” pricing) but because it could provide a viable new industry to basket-case South Australia.
    With the massive Olympic Dam mine on Adelaide’s doorstep providing the impetus for a comprehensive nuclear industry the mendicant state is well placed to become a world leader.
    Sadly though whilst either Weatherill or Turnbull call the shots this just won’t happen.

  5. Interesting tweet from Corey Bernadi.

    The @australian reports that small modular reactors could be coming to meet Australia’s energy needs – a pity then @corybernardi bill (to open up federal laws to the option) was wiped off the @AuSenate agenda this Thursday for #ssm debate #auspol #abetterway

  6. Gary Spencer Salt says:

    Bill Shorten and the camp that will follow him into power is regrettably the government we need at both Federal and State level. Total collapse is the only tool that will show the “King has no cloths” but it will come at a real cost – especially for low income earners.

    Go to any of the pixie dust warriors site and you clearly see the that facts have no place, in fact 1 + 1 = any number you want it to be!

    A typical comment on “How do you make steel” in a ABC thread

    “Sanjeev Gupta has decided to build a base load Solarstor in South Australia to support his acquisition of Whyalla steel. It can power the steel works all from the sun! Another one is being built in Pt Augusta! It’s happening now! Stay with coal and you’ll be left behind on so many new industrial fronts”

    Sorry to say Australian is moving back to a pre WW2 agrarian society under both major parties with their fantasies supported by a series of red / black holes at both ends.

    • I’m thinking the same thing Gary. An issue with voting Labor and plunging the country over the economic cliff with unworkable green policies is that we have no idea what’s next. However, exactly the same argument applies to Turnbull and the Liberal policies. It’ll just take a little longer to get there and maybe the thump at the base of the cliff won’t be so hard, but we still end up at the same place and we still don’t know what’s next. So, just vote Labor and let’s get this tooth pulled ASAP. The rest of the world needs a role model. Germany is currently dancing on the edge. We can all watch The Man From Snowy River plunge recklessly over the edge?

  7. Jim Wiegand - Wildlife Biologist says:

    It is all true, but how utterly dumb and corrupt is this scenario?
    Australia like here in the US is rich in energy producing forms of liquified natural gas and coal. Yet just like here the US, Australia is exporting enough cheap gas and coal that it could provide many times over all the net energy being produced from wind. But because selling the illusion of wind is such an industrial cash cow, the public is being fed lies. This illusion becomes even more clear when people understand the actual net energy benefit to consumers is a fraction of what this fraud of an industry claims.
    Every form of energy has its environmental costs, but none are so high as with sprawling wind energy developments. The absolute biggest threat to rare birds across the world is the
    mass killing propeller style wind turbine spinning in remote habitats. This industrial monster has put dozens of species on a fast track to extinction. But as with all this industry’s impacts, non-disclosure agreements, a persistent pattern of fraudulent research and government corruption are all keeping this hidden.
    Something else for the people of Australian to remember. The turbine impact related research I have read from the UK, is the most disgusting and fraudulent I have come across. Australia’s wind energy story has to be similar as here in America. In America, most of all of wind energy development (1980- to today), is here only because of fraud and corporate/government collusion.
    Yesterday’s lie to American people was that wind was going to save us from a reliance middle eastern oil. Today’s lie is that it will save us from climate change and power an electrical future. Tomorrow’s lie will be anything to keep this trillion-dollar cash cow going.

    The other day, retired USFWS Special agent Sam Jojola sent me this fitting quote. Having worked for the US Fish and Wildlife Service, Sam is well aware of the fraud and collusion that rules this land………

    “We cannot solve our problems with the same thinking we used when we created them”- Albert Einstein (1879-1955). In other words, corrupt politicians and predatory corporations will never be solving our problems.

  8. It’s a battle with no end in sight. Turnbull must be motivated by loyalty to family and “friends” to keep Australia on this course to poverty.

    It’s bad enough that the subsidies continue to 2030 under the LNP. To make it worse Labor will probably win the next election anyway. They’ll ramp up the funding to all things Green and Renewable and we’ll have turbines and solar panels everywhere. But no electricity, no industry and no jobs. It’ll happen faster than a South Australian blackout.

  9. Steve Bernard says:

    Imagine how many reliable, affordable and low-CO2-emission nuclear power plants you could have built for $60 billion!

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