Rent-Seeker’s Nirvana: Ultra-Rich Pocket $Billions in Wind & Solar Subsidies at Our Expense

The hundreds of $billions paid in subsidies to intermittent wind and solar constitute the largest wealth transfer in economic history.

In Australia, the Federal Government’s Large-Scale RET gouges $60 billion from power consumers over the life of the scam, and redirects it to such worthy outfits as AGL and our favourite whipping boys, Infigen. In the history of the Commonwealth, no other single industry subsidy scheme comes anywhere near it in value.

When motor manufacturers, General Motors Holden and Toyota put their hands out for a measly $500 million to maintain their Australian operations, then PM, Tony Abbott told them would “not chase them down the road waving a blank cheque at them“.

A mere half $billion would have saved something like 20 or 30,000 jobs across the sector.

At present, the combined subsidies to wind and solar exceed $4 billion a year, and the number of permanent jobs generated is completely trivial; the instant the subsidies go, so do the jobs briefly ‘created’: Cut the Subsidies and ‘Green’ Jobs Instantly Vanish: 80,000 German Solar Workers Sacked

There is absolutely no economic benefit in having power generated by wind and solar; delivering power at crazy random intervals, rather than when power consumers actually need it, results in a product with absolutely no commercial value. And that’s the reason that – in the absence of guaranteed Feed in Tariffs, renewable energy certificates and government underwritten contracts – power generated by nature’s wonder fuels wouldn’t find a market, anywhere, anytime, ever.

The reason that we’re still talking about this nonsense is all political.

And the reason that it’s political is because there’s money in it. Serious money.

Being able to sell a product with no inherent value, takes audacity; but it can be done.

Here’s how:

rent-seeking

ECONOMICS

noun

  1. the fact or practice of manipulating public policy or economic conditions as a strategy for increasing profits.

“cronyism and rent-seeking have become an integral part of the way our biggest companies do business”

adjective

  1. engaging in or involving the manipulation of public policy or economic conditions as a strategy for increasing profits.

“rent-seeking lobbyists”

A coterie of lobbyists from the wind and solar ‘industries’ spend their time pounding the halls of Parliament House in Canberra, hoping to maintain an environment in which the massive subsidies are guaranteed to flow, forever.

A squad have earned permanent resident status in the Energy Minister, Josh Frydenberg’s office, ready to pounce on any move that might threaten their lifeline.

However, the political environment in which these leeches operate has, all of a sudden, turned sour.

Year-on-year retail power prices increases of 20% or more over the last three years have conspired against them.

The renewable energy disaster that is South Australia hasn’t helped: with the largest proportion of generation capacity in wind and solar of any state, routine load shedding and mass blackouts quickly became the norm. Funnily, once upon a time, SA was held up as a shining example of our all RE future. These days, though, it’s become like that creepy uncle who no one dares speak his name.

The ACCC’s investigation into market manipulation and price gouging by generators, the result of routine and totally unpredictable wind power output collapses, is also rattling them.

However, as The Australian’s Judith Sloan points out, with tens of $billions still up for grabs, these boys will not give up, without a fight.

Judith Sloan: Less power to the rent-seekers
The Australian
Judith Sloan
24 July 2018

I have been a close follower of the interaction between economics and politics in Australia for a very long time. I have witnessed many examples of self-serving behaviour portrayed as being in the ­national interest.

Economists even have a name for such behaviour — rent-seeking. It involves parties looking to increase their own wealth without actually improving our wellbeing. Indeed, we are almost always made worse off while the rent-seekers become unjustifiably rich and influential.

Sadly, Australia has had more than its fair share of rent-seekers and rent-seeking industries. The individuals involved always play hardball. But there is no doubt in my mind that the rent-seekers in the renewable energy space leave most other rent-seekers for dead when it comes to misinforming, threatening and bullying.

Let me give you a few examples. John Grimes, who heads up the Smart Energy Council which represents the solar industry, ­described the 2014 Warburton ­review of the renewable energy target as “genocide”. He went on to claim that “we don’t make hollow threats”.

More recently, Grimes has promised to run an expensive “ruthless campaign” against the proposed national energy guarantee. This is notwithstanding the fact that his council could manage only a three-page submission devoid of any analytical content to the Energy Security Board whose task is to finalise the details of the NEG.

Needless to say, the Smart Energy Council is only one of a number of rent-seekers in the renewable energy space. Many are also associated with lobbyists close to both the federal and state governments.

GetUp! has decided that the NEG doesn’t provide enough ongoing subsidisation of renewable energy. In an email from Miriam Lyons of GetUp! to the members titled “We need one more state to block Turnbull’s dirty energy plan”, she outlines why it is important to persuade a state government to veto the NEG in order for the ACT government to act on its aversion to the NEG.

“For state governments to defy Turnbull, they need to know they have the support of their constituents. So we have to show them just how much public support there is for a clean and cheaper sun-powered future.” (Evidently, wind is so yesterday.)

“Can you take a few minutes right now to message your state energy minister and let them know you want an energy plan that creates more renewables, not less?” GetUp! has helpfully prepared “the ultimate list of reasons to reject the NEG backed by evidence — tailored for every state energy minister”. It’s a sort of rent-an-email campaign.

Mind you, when you look at the ultimate list, it’s incredibly lame. But here’s the one I really love: “The NEG’s targets are too weak to cut power prices.”

Among the ridiculous claims the renewable energy sector continues to make is the idea that more renewable energy will lead to lower electricity prices. Of course our experience has been the reverse, but that doesn’t stop them throwing in the factoid that renewable energy is now the cheapest form of power — just don’t stop the subsidies, though.

Take a look at the period 2008 to 2018, when electricity prices rose by almost 120 per cent. Over the same period, the proportion of electricity sourced from renewable energy rose about 75 per cent.

If we look internationally, we find a very close correlation between the electricity prices in a country and the proportion of electricity sourced from renewable energy. For example, Germany and Denmark have very high penetrations of renewable energy and among the highest electricity prices in the world.

Of course, it is never easy to predict future prices, but this doesn’t stop the very small band of climate modellers in this country giving it a shot. Often shrouded by a lack of clarity about the identity of the modellers or the modelling firm, predictions tend to be made without the key assumptions being clear.

Take the modelling done for the Warburton review. The ludicrous claim was made that the only scenario that would lead to lower prices compared with keeping the scheme as it was then was having renewable energy making up an even higher proportion of electricity generation. Closing the scheme to new entrants would have led to the highest price rises, according to the modellers.

These were clearly nonsense, but that didn’t stop them influencing the Abbott government’s decision to revise the RET rather than ditch it. It turns out that the key assumption that the modellers were making was that there would be no retirement of any baseload plants over the period to 2030.

What the renewable energy rent-seekers refuse to acknowledge is that electricity generation and the need for 24/7 reliability is not a normal market. Additional intermittent supply will generally not cut prices.

Given the load factors (the proportion of actual electricity generated to nameplate capacity) — 30 per cent for wind and 20 per cent for solar — it is entirely possible that more renewable energy will actually increase prices as it forces the pace of the retirement of cheap dispatchable power plants. This happened with the closure of the Northern power plant in South Australia — which wasn’t particularly old — and of Hazelwood.

It’s all very well talking up batteries, pumped hydro, additional interstate connections and gas peaking plants, but none is cheap. The Australian Energy Market Operator estimates the additional expenditure to keep the electricity system ticking over until 2030 could be $27 billion. This capital spending will require an adequate return.

Mind you, we wouldn’t be betting our houses on the prognostications of AEMO, which has been all over the shop on electricity market issues. First, we had nothing to worry about with the closure of Hazelwood. Six months later, we were told to panic.

Now we are told coal-fired plants will remain the cheapest source of electricity for decades and we must keep them operating. Turns out AEMO’s vision of the beautiful transformation of our system to distributed generation with lots of demand management has its downsides.

And then we have the equally nonsensical projections of the Energy Security Board, again from unknown modellers using hidden assumptions, that under the NEG, residential electricity bills will fall by between $100 and $115 a year to 2030. Pull the other one. On this basis, our annual bills will be more than $1000 lower by then.

But I will defend the NEG against the self-serving criticisms being made by renewables rent-seekers. With a number of adjustments — a tighter definition of reliability, the use of carbon offsets to meet emissions targets and new user-driven dispatchable plants with the later years guaranteed by the government — I can probably live with it. It’s also the only game in town.

If prices could at least stabilise or fall slightly, that would be a better outcome than ongoing increases. We have been extremely foolish to get where we are, but let’s not forget that omelets are impossible to unscramble.
The Australian

With all due respect to Judith Sloan, the NEG isn’t the only game in town.

As an economist, Judith knows that doing nothing is always an option. The most likely outcome (given that Josh Frydenberg has absolutely no hope of selling his version of the NEG) is that the LRET will remain as is, but will be gutted, in a few critical ways.

With dozens of Liberal and National backbenchers terrified of what’s coming (that’s right, your constituents will soon open power bills which will leave them completely gobsmacked), expect to see some simple, but radical moves ahead.

The ACCC’s report on market manipulation and price gouging provides Coalition MPs with a clear way out of political perdition.

The ingredients are fairly simple: kill the subsidies to wind and solar now (by cutting the shortfall penalty from $65 per MWh to $zero); change the market dispatch rules to allow baseload generators to, once again, dispatch according to the market’s demands, rather than the vagaries of the weather; and underwrite the immediate refurbishment of existing coal-fired plant and, over time, the construction of new High Efficiency Low Emissions plant.

STT hears that the ACCC are about to take a very close look at the NEM scheduling rules, which currently allow wind and solar generators to avoid any financial consequence from their routine failure to deliver electricity to the grid.

Back in 2008, under pressure from wind lobbyists, wind and large-scale solar generators were redefined as “semi-scheduled”. Baseload generators (defined as “scheduled”) that fail to deliver according to preordained schedules, get hit with very substantial financial penalties. Whereas, semi-scheduled wind and solar can deliver any volume of power, whenever they like, and face no penalties whatsoever for any failure to do so.

STT hears that the ACCC is going to push for the return of the dispatch rules to what they were in 2008 and, thereby, to make the penalties faced by scheduled generators for a failure to deliver apply with equal force to intermittent wind and solar generators, as well.

And when they do, you’ll be able to hear the rent seekers in Canberra scream like fury, wherever you are.

About stopthesethings

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

Comments

  1. The trouble with this… “omelette”, is that it should never have been tried on in the first place. The planners of this fiasco, and all who have contributed to the ongoing debacle should all be fired for gross incompetence and/or negligence.

    We are talking about a lot of money here as well.
    Should we wonder whether any hands have/are being greased?

    Politicians are the lowest of the low!
    They perform so poorly at their jobs, and then wonder why we loathe them so much.

    • This is what happens when a country is run and designed by Lawyers.All the “Smart” Electrical engineers have long since left the Australian generation system, they all seen this mess coming back in the days when Paul Keating forced the states to sell off their electricity generation systems that had been run efficiently so Australians had the cheapest power in the world. Let a few politicians get mixed up in the system and they will always destroy it. You cannot legislate common sense and many years of tried and true experience but half witted lawyers think you can.

    • J Smythe says:

      Can’t understand how the rent seekers are even allowed into the halls of parliament! In SA no one can get past the parliament’s front security desk.

  2. Terry Conn says:

    I made a ‘comment’ to Judith’s article ‘ don’t worry about unscrambling the omelette, just throw it out’ – and that is what every working Australian wants.

  3. Reblogged this on Climatism and commented:
    “AT present, the combined subsidies to wind and solar exceed $4 billion a year, and the number of permanent jobs generated is completely trivial; the instant the subsidies go, so do the jobs briefly ‘created’: Cut the Subsidies and ‘Green’ Jobs Instantly Vanish: 80,000 German Solar Workers Sacked.

    “The reason that we’re still talking about this nonsense is all political.
    And the reason that it’s political is because there’s money in it. Serious money.
    Being able to sell a product with no inherent value, takes audacity; but it can be done.
    Here’s how: …”

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