No Way Back From RE Disaster: Energy Minister Abandons Australia’s Power Consumers

What passes for political leadership in this country is engaged in a wind and solar-fuelled economic suicide mission. Subsidies to grid wrecking wind and solar (when soft loans, green schemes and taxpayer handouts are added) are pushing $5 billion a year, punishing households and businesses alike.

As wind and solar power capacity increases, power prices are rocketing out of control and major energy users are being chopped from the grid whenever the sun sets – killing solar – and sudden bursts of calm weather cause precipitous wind power output collapses.

And yet, Australia’s Energy Minister, Josh Frydenberg continues to act as if nothing’s wrong. Gormless doesn’t cover it.

Exasperation and desperation are giving way to anger and fury. As Alan Moran details below.

Energy policy, price escalation and the destruction of industry competitiveness
Catallaxy Files
Alan Moran
8 June 2018

For some in Australia, the renewable rich UK electricity market is a beacon.

Wind produced 15 per cent of the UK’s electricity in 2017 and was running at 29 per cent earlier this year bringing Emma Pinchbeck, executive director of RenewableUK to opine, “The move to a smart, renewables-led energy system is well underway.” Greenpeace UK’s energy campaigner, Nina Schrank, added, “The plunging price of renewables is allowing low carbon energy to replace coal and gas”.

The green soothsayers spake too fast! Calm weather in the nine days to June 7 brought wind’s share down to around 4 per cent and forecasts are for such conditions to persist for another fortnight.

In a prequel to developments planned in Australia, subsidies to wind in the UK have led coal to virtually disappear. Years of destructive regulatory measures in the UK have transformed what was, in 1990, the world’s first genuine competitive national electricity market into a high cost system. Ministers, as is their wont, are panicking, and planning to subsidise a new nuclear power station to paper over the giant fissure their policies have created.

As in Australia, there was in the UK a near unanimity among the political classes inhabiting the swamp that wind and solar are the waves of the future. Renewable subsidy was piled on renewable subsidy and coal, the lowest source of supply and originally the backbone of UK generation, is virtually defunct.

In Australia the interventions in the market in favour of wind and solar created a doubling of the wholesale price once the measures started to bite in 2015. A tiny reduction in retail prices announced by Origin this week led Minister Frydenberg to declare that, “We are through the worst of it, we have turned the corner when it comes to energy prices. I’m very confident that my colleagues and indeed the states and the territories see the National Energy Guarantee (NEG) as being in the national interest”.

Aside from some voices in the political wilderness of the Liberal Party “Opposition”, the LDP, the Conservatives and ON, all politicians, regulators and industry lobby groups are acquiescing in continued growth of subsidised renewable energy. Without a subsidy there would be no renewable supplies aside from the eight per cent that is hydro. Right now:

• The Commonwealth’s goal is 23 per cent by 2020 and at least 28 per cent by 2030.
• Chief Scientist Alan Finkel has endorsed a 50 per cent share by 2030, the level that is ALP
• The noxious Australia Institute wants to see 75 per cent by 2030.

Constant meddling in the market, the plethora of regulatory bodies and politicians’ gullibility in swallowing the renewable nirvana line have created a permanent regulatory frenzy. At present there are some 30 different reviews underway and suppliers are unable to provide the advisory resources to head off all the bad ideas that these float.

The most important of the current reviews are those of the ACCC into retail prices and the aforementioned NEG, which will determine the future penalty on coal to enable wind, and maybe gas, to displace it with higher cost supplies.

The ACCC report, due at the end of this month, will almost certainly recommend additional regulatory measures in terms of retail supply and line charges, measures that were foreshadowed in the preliminary report of last September. These measures may force short term cost reductions but in the long term will place us further along the road to higher cost supplies.

As for the NEG, what is being produced is yet another complex system whereby retailer will need to ensure a specific emission level is reached for each unit of electricity sold. It will, in effect, replace new Renewable Energy Target subsidies with a form of carbon tax.

On current policy settings, the only thing that will prevent wholesale electricity prices from remaining at their present levels is de-industrialisation. The smelters, once the jewels of Australia’s industrial crown, take 16 per cent of electricity and if they close prices will fall – but Australia will be much poorer.

The state and national renewable policies entail a subsidy to wind and solar of close to $5 billion a year. This is in a market which currently is about $18 billion a year and was, of course, much less before the recent price doubling.

It is hard to see how we are to extricate the economy from the disaster that these policies have created.
Catallaxy Files