Competition Watchdog Slams Subsidised Wind & Solar: Demands Government Investment in Reliable & Affordable Coal-Fired Power

It was only a matter of time before Australia’s ruinous renewable energy policies imploded and implode they just did.

Australia’s power pricing and supply calamity is the inevitable consequence of the so-called ‘transition’ to nature’s wonder fuels. And yet the wind and sun cult and renewable energy rent seekers continue to behave as if the results can be hidden from plain view: avoiding grid collapses is now a daily occurrence, based on what the weather might be doing at the time and where that fiery ball sits in the sky. More on that in an upcoming post.

With retail power prices jumping another 20% or more this year (on top of a 20% hike last year), those with an interest in maintaining Australia’s wealth and prosperity have hit the panic button.

The beginning of the end for heavily subsidised and chaotically intermittent wind and solar came in the form of a report drawn up by the Australian Competition & Consumer Commission, headed up by Rod Sims.

The ACCC report is the circuit breaker that Australia’s energy crisis needed (albeit a decade too late). But as the old Chinese proverb has it: ‘The best time to plant a tree was 20 years ago, the second best time is today.’

It’s not clear precisely where the fallout will land, but one thing is certain: the dream run enjoyed by wind and solar outfits is well and truly over.

Here’s a trifecta from The Australian, on the beginning of the end for that over-pampered and truly pathetic pair.

Turnbull weighs coal fix for energy wars
The Australian
Simon Benson and Ben Packham
12 July 2018

A proposal for the federal government to financially guarantee the construction and operation of new dispatchable power generation, which could include clean coal-fired plants, is expected to be taken to cabinet with the backing of the Prime Minister.

Malcolm Turnbull yesterday confirmed he would seriously consider the key recommendation of a report by the competition watchdog to underwrite and potentially subsidise new “firm” and cheap power generation for industrial and commercial users.

Signalling a possible end to the energy wars within the Coalition partyroom, the recommendation was immediately endorsed by ­Nationals MPs, who have interpreted it as a green light for government to intervene in supporting the future of coal generation.

Tony Abbott, one of the most vocal opponents of the government’s national energy guarantee, also backed the recom­mendation, saying it was a “vindication” of calls for more baseload power in the national electricity market.

Senior government sources said Mr Turnbull was personally “very supportive” of the idea and it could be considered by cabinet before the end of the year. A formal position from the government is not expected until after a meeting of the Council of Australian Governments next month, which will seek to ratify agreement for the national energy guarantee.

The recommendation was among 59 handed down in a 400-page report yesterday by the Australian Competition & Consumer Commission, which said nothing less than a radical shake-up of the national energy market would bring down prices for households and businesses.

Local energy stocks were hit by the call for pricing reform, falling 1.04 per cent as a sector. It slashed almost $1.6 billion from the market valuations of the two biggest listed power players, AGL Energy and Origin Energy.

Among key recommendations, the ACCC said elevated prices had been driven by “high and entrenched levels of concentration in the market’’ and singled out Queensland for a major overhaul. The watchdog said the state’s power generators should be split into three entities, leaving open the possibility of a sale.

State and territory governments did not escape the blowtorch, with inflated networks costs caused by unrealistic, government-imposed reliability standards identified as still being the chief culprit in rising power prices.

The report recommended writing down the asset value of the network companies to limit the rate of return on investment which dictated the annual cost recovery the companies sought, or offer rebates on network charges of up to $100 a year to customers.

The report, led by ACCC chairman Rod Sims, is being examined closely by Energy Minister Josh Frydenberg, who yesterday said he would not rule out any of the recommendations, having privately signalled to colleagues last month that there would be a deal for new coal or gas in addition to the NEG.

A source within government told The Australian the recommendation to underwrite new generation was almost certain to be adopted.

Mr Turnbull yesterday signalled the government’s intent in a speech in Brisbane.

“We’ll look further at this proposal over the coming months … but this recommendation has the distinct advantage of being thoroughly technology-agnostic and, well-designed, should serve our goal of cheaper and reliable energy.”

Resources Minister Matthew Canavan said the report had vindicated the Nationals’ position on pushing back on the NEG and arguing for high-efficiency, low-emissions coal-fired power.

“Many of my colleagues had raised genuine and heartfelt concerns over the current adequacy of investment in power generation. Those concerns have been vindicated,” Senator Canavan said.

“The ACCC has now recommended the government underwrite baseload power investments. If people didn’t want to listen to the Nationals, then they should definitely listen to Rod Sims.”

Nationals leader Michael McCormack also welcomed the ACCC report, signalling it could end the internal dispute over the NEG and allow the Coalition parties to reach a consensus.

The ACCC said there was a case for government support in the financing of new large-scale generation projects that required considerable up-front investment and carried significant risk. “Where private-sector banks are unwilling to finance projects due to uncertainty about the future of an industrial or manufacturing business, the ACCC considers there is a role for the Australian government in providing support for such projects in appropriate circumstances,” the report said.

“This can be achieved at little cost to government. Specifically, the ACCC proposes the government introduce a program under which it will guarantee offtake from a new generation asset (or group of assets) in the later years of the project (say years six-10 or six-15) at a low fixed price sufficient to enable the project to meet financing requirements.”

As the fallback customer, it has not been determined whether the government would actually buy the power to on-sell to another customer or simply bankroll the operation until it found new commercial customers.

But if the spot price were to fall as low as $45 per megawatt hour, as a senior government source said, the “government would have done its job”.

The ACCC report said the recommendation, which would apply only to new market entrants and require they have at least three commercial customers, would involve “little cost”, as energy prices would have to fall significantly for the government to be disadvantaged.

In recommendations on the behaviour of the energy giants and the lack of competition, the report called for a prohibition on acquisitions to limit the market share of any one generator to 20 per cent in any NEM region.

EnergyAustralia, a major wholesale and retail power company, said “artificial limits on ownership of generation capacity seem unnecessary when the ACCC already has the authority to review proposed mergers and acquisitions for impacts on competition”.
The Australian

The ACCC report can be found here: Final report: Restoring electricity affordability & Australia’s competitive advantage

Hint to those who think the ACCC isn’t serious: its objective is right there in the title.

The subject matter and conclusions naturally sent renewables zealots into apoplexy.

Labor leader, Bill Shorten slammed the report as pandering to “knuckle-draggers of the cave-dwelling right of the Liberal Party”, even though he hadn’t bothered to read it (reminiscent of the time when Shorten agreed with then Labor PM, Julia Gillard, even though he had absolutely no idea what she’d said). Loud and loose, is how Bill loves to play it. And this time it’s been no different.

Debate raged around whether or not the report actually advocated for Federal government support for coal-fired power plants. Panicked Labor apparatchiks, like Mark Butler ranted that there was no mention of the word ‘baseload’ in the report and that wind and solar were cheaper than coal, anyway, blah, blah, blah.

By setting a price target of $45-$50 per MWh for new generation capacity, the ACCC was, by pretty obvious implication, recommending coal-fired power, simply because nothing else in the system can deliver power profitably at those rates, 24 x 365.

Another topic tackled by the ACCC, one which has been completely taboo in political circles, is the obscenely generous handouts given to householders indulging in their own brand of pointless and expensive virtue signalling, at the expense of everyone else struggling to pay their spiralling bills.

The subsidies squandered on rooftop domestic solar are colossal; the guaranteed feed in tariffs (particularly for early adopters) were – at over $0.50 per KWh (equal to $500 per MWh) – outrageous; and the FITs and subsidies to those with solar panels are worth many multiples the true market value of the power that will ever be returned to the grid.

Here’s The Australian’s Editor detailing that aspect of the ACCC’s attack on the privileged and the pompous.

Cost of green schemes exposed
The Australian
Editorial
12 July 2018

Six years ago today The Australian warned that consumers on middle and lower incomes would pay a high price for renewable energy targets: “Poorer families would bear the brunt of the investment in transmission networks as wealthier households reaped generous subsidies for investing in solar panels,” we said. “As well as driving up power prices, the flaw of the mandatory RET is that in ‘picking winners’ among high-cost technologies it distorts the market and diverts investment from other lower-emission energy sources.” Those misgivings were prescient, unfortunately, for household budgets.

In the final report of its inquiry into retail electricity pricing released yesterday, the Australian Competition & Consumer Commission has quantified how much such technologies now add to consumers’ annual power bills. The effects range from $170 in South Australia, $155 in Tasmania and $109 in NSW to $93 in Victoria and $76 in Queensland, with the differences mainly related to the take-up rates of rooftop solar photovoltaic panels. As the ACCC identified, the subsidies received for installing wind and solar made the business case for doing so compelling in recent years. But they did so “in a way that was indifferent to the ability to provide energy to the market when demand requires it”.

In seeking a pragmatic set of policies to reduce the power bills crippling tens of thousands of households and small businesses in one of the world’s most resource-rich nations, the ACCC has proposed winding down and abolishing the federal Small-scale Renewable Energy Scheme by 2021 instead of 2030, when it was scheduled to end. The strategy makes sense in light of the dramatic reduction in solar PV installation costs. In 2007, the pre-subsidy cost of installing a 1.5-kilowatt system, typical for the time, was about $18,000. A similar system today costs about $5000 before any subsidy. During that period, the proportion of households with solar power has risen from 0.2 per cent in 2007-08 to more than 12 per cent.

The SRES has been one of the main subsidisers of solar rooftop panels, which have allowed householders who can afford the technology to benefit from generous solar feed-in tariffs. By reducing their consumption of grid electricity, the inquiry calculated, solar power users are paying, on average, $538 a year less in power costs than non-solar customers — underwritten by many other consumers who cannot afford to take advantage of the scheme. Scrapping the SRES, the ACCC found, would save domestic consumers between $15 and $30 a year, depending on which state they lived in. It would be a modest step in the right direction.

Should Malcolm Turnbull grasp it, the competition watchdog’s call for government to underwrite the construction of “firm” low-cost power generation has provided the Coalition with a useful means to calm divisions within its ranks over energy policy. Nationals MPs and others keen to see new baseload generation taking advantage of Australia’s vast resources of quality coal and high-efficiency technology will welcome the recommendation. As the Prime Minister said, the proposal “has the distinct advantage of being thoroughly technology agnostic and well-designed” and “should serve our goal of cheaper and reliable energy”. After almost 20 years in which planning for the nation’s energy needs has been overshadowed by hot air and more heat than light from the green lobby, the ACCC report has injected an important dose of realism into the equation.
The Australian

The ACCC has forced politicians and commentators to choose their sides and the choice is pretty simple: either Australia has reliable and affordable electricity and the industry, meaningful jobs, wealth and prosperity that follows; or we’re relegated to a nation of hipster baristas selling skinny-soy lattes to public servants and Chinese tourists.

Judith Sloan has been fighting for the former proposition, from the get go. Here she is again.

Backing low-cost power generation can cut electricity prices
The Australian
Judith Sloan
12 July 2018

Unlike Tony Wood of the Grattan Institute, I am not prepared to raise the white flag when it comes to electricity prices. There is no reason why we can’t have cheap electricity as we once did. After all, we have wads of the underlying resources that are needed to generate electricity — coal, gas and uranium. We can even throw in a bit of wind, sun and dams into the mix.

We should aim to have electricity prices no higher than the US and Canada — their prices are around a third of ours. Bear in mind that retail electricity prices have increased here by 56 per cent, in real terms, in the decade beginning 2007-08. You can understand why some people are calling for a royal commission.

Unless we get the underlying policy parameters right — and don’t believe the current version of the national energy guarantee is the solution — there is a very good chance that eastern Australia will just end up a larger version of South Australia, with mainly high-priced, intermittent electricity generated when the wind blows and the sun shines.

The trouble for Australia, however, is that there are no interconnectors to make up for shortfalls after the short-lived batteries have been exhausted and the water has been pumped up hill and released. Gas peakers can help but are expensive.

It is clear from the South Australian experience that the national electricity market is failing. The number of days on which interventions were declared last year was 25, up from four in 2016. This year, the figure will be higher again. The number of occasions on which the wholesale price in SA has been close to or reached the peak of a tad over $14,000 per megawatt hour is also rising.

Sadly, the report of the Australian Competition & Consumer Commission on retail electricity pricing tiptoes around some of the major issues. The language is typical bureaucratic-opaque. Some of the recommendations are sound; others not so much.

But on one point, the report is clear: “Policies associated with … reducing carbon emissions have been problematic. Australia has committed … to reduce its carbon emissions. The electricity sector has been a key focus for these efforts. However, various policy failures have hurt consumers.”

We can divide the factors that drive retail electricity prices into transmission and distribution (poles and wires); generation; and retail. All three have contributed to soaring prices. Government intervention has contributed to the problems.

Mandating new reliability standards for the networks — courtesy of the Gillard government — while guaranteeing a high rate of return was always a highway to overinvestment. This occurred particularly in NSW and Queensland. The ongoing need to provide grid connections to far-flung renewable energy projects means the network costs have remained very high.

Wholesale electricity prices have soared in the past five years, with the closure of a number of coal-fired electricity plants, most particularly Hazelwood in Victoria. We can expect the same ratchet effect on prices when Liddell in NSW closes.

Make no mistake: these plants, whose lives could have been extended, have been driven out of business by highly subsidised renewable energy which has dispatch preference within the system.

This process will continue for years to come. Renewable energy, even with expensive firming capacity in the form of batteries, diesel generation, pumped hydro and gas peaking, may become a bigger proportion of the mix but will ensure that prices stay high.

The one interesting recommendation of the ACCC’s report is that the government should operate a program to contract for low fixed-price generation capacity — around $45 to $50 per MWh — for the later years of new projects. These projects would in effect be sponsored by large industrial and commercial users but would be underwritten by the government.

This intervention would be significant because it would create new sources of dispatchable supply that could easily reverse the switch to unreliable renewable energy, evening out the playing field for competing suppliers.

The government should enthusiastically grab the opportunity to support new low-cost, dispatchable generation projects which could lead to lower prices as well as prevent the further deindustrialisation of the country.
The Australian

Once again, Judith Sloan cuts to the chase. However, we can’t let this line go: “We can even throw in a bit of wind, sun and dams into the mix.”

Err, Judith that’s precisely how this lunacy began.

The idea that we’re kindy-kids baking our very first cake and can pick and choose our ingredients with liberal abandon, oblivious to the results, leads to the nonsense being spouted by plenty of those across the conservative end of the political spectrum about not favouring one energy source over another, and that every form of generation has ‘its place in the mix’.

At every opportunity, PM, Malcolm Turnbull and Nationals leader, Michael McCormack (among plenty of others) blurt out the phrase “technology agnostic”.

It’s used as a hopeful mantra by those MPs – terrified of renewables rent-seekers and the wind and sun cult – to shield them from the inevitable attack, should it appear that they just might be in favour of reliable and affordable coal-fired power.

In July 2018, anyone claiming to be ‘technology agnostic’ clearly hasn’t been paying attention and shouldn’t be anywhere near the controls (or anything that’s either sharp or hot).

These people fit into the category of characters who stand for nothing, which means that they inevitably fall for anything. And they have.

For those still clinging on to the myth that wind and solar will soon deliver the goods: get over it, grow up and move on.

The results are in: intermittent, subsidised wind and solar do not work. Period.

The ACCC has said so.

Now it’s time for those in power to stop flapping about and fix the mess they created.

About stopthesethings

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

Comments

  1. IMO Recommendation 4 in the report doesn’t foreshadow new coal plants at all….but the ‘new dispatchables’ ie weather-dependent intermittents firmed with batteries and pumped hydro…the firming technologies being subsidised by government as Josh Frydenberg has said on several occasions.

    Most of the MPs now just ignore the fact that the so-called new dispatchables are weather dependent and that batteries and PHES…both needing to be charged with weather-dependent wind and solar…are therefore also weather-dependent and PHES is at risk from drought…as happened with Snowy Hydro in 2007.

    They seem to be just tired of it all and will wave the NEG through…which has been Turnbull’s strategy all along IMO….to make it a nebulous nothingness apart from its Ode to Paris… a Trojan horse for getting his TRANSITION of Australia from 1st world prosperity to 3rd world poverty and chaos past the PARTY ROOM and the Australian people to make it a fait accompli via LABORLEFT -dominated COAG before it’s even debated…with everything else ..rule changes etc designed to facilitate one technology…the weather-dependent intermittents….and to disadvantage COAL.

    It’s the absolute antithesis of tech neutral but Turnbull doesn’t give a damn …he knows SKY and ABC will cover for him by pretending it is.

    Snowy 2.0’s CEO expressly ruled out using coal-fired electricity for pumping…wants coal GONE….so sort of gives the show away for the self-styled man from Snowy River.

    LNP MPs have grabbed this government underwriting lifeline because they’re hostage to Turnbull and become more so as the election looms.

    The cheap pricing that’s quoted might logically indicate coal…but the RE cult regularly brags about dispatchable PPAs at similar and even lower prices…and the government would adjust it to suit RE anyway.
    Turnbull…Sims…Frydenberg and most of the MPs are pretending the ACCC plan is ‘ tech agnostic’…that it COULD include a HELE plant..but the whole deal seems very unlikely to attract HELE plant investors IMO…and Recommendation 5 specifically emphasizes reduction of carbon emissions…which would nobble COAL vs wind farms etc.

    ‘The National Energy Guarantee seeks to provide a settled policy framework under which ….new investment is encouraged in a way that enables achievement of the objective of reducing carbon emissions’.

    I think this whole scheme is designed as cover for the fact that Turnbull /Frydenberg & co KNOW wind and solar investment will drop off after subsidies for THEM end…..and we know lenders have seen not only PPAs but also the subsidies the new builds attract…as crucial elements of their viability for loans.

    So IMO Government will subsidize batteries and pumped hydro, as Frydenberg has said…and so strengthen the case in the eyes of lending authorities for the loans to go to intermittents with PPAs for the first 5 years…then government will underwrite the next 15 years …giving a wind or solar project a charmed life for 20years …which is as long as they’ll last anyway.

    A HELE plant would surely want certainty for much longer than that…and in these times of mindless demonisation of coal they’d need to be built by Government with TPM IMO.

  2. Ron Little says:

    An excellent read, this is the path the US is avoiding by leaving the Paris Accord. Canada is hell bent on following Australia’s path to disaster. Get rid of the Democrat/Liberal govt’s and the problem is solved.

  3. Brilliant news from Ontario! ***Ontario government slams brakes on renewables.. To include projects that haven’t reached development milestones..effectively taking the wind out of their sail, cancelling 758 projects saving over 790 million dollars! Many happy faces today as a sigh of relief is heard across Ontario
    Great day for the Ontario opposition & hope politicians everywhere are paying attention!! Community health & safety & protection of our environment are top priority!
    https://news.ontario.ca/mndmf/en/2018/07/ontario-to-cancel-energy-contracts-to-bring-hydro-bills-down.html?utm_source=ondemand&utm_medium=email&utm_campaign=p

  4. wal1957 says:

    “Now it’s time for those in power to stop flapping about and fix the mess they created.”

    Unfortunately we, the taxpayer will be the ones paying to fix their bloody mess!

    Given that both major parties have shown absolutely no common sense re this debacle, what choice come election day?

    Turnbull is an absolute dunce, and Shortone, as well as being a dunce, has to be one of the most disingenuous people I have come across.

    The Libs will be wiped out at the next election. Those that think that the last election was a nightmare for the Libs have not seen anything yet!

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