Politics of Power: Spiralling Power Prices Signal End for Wind & Solar Subsidies

In Australia, nothing stops a barbecue like the topic of ever spiralling power prices. Across the country, retail power prices have been rising at double-digit rates for the last four years: across the NEM States and the ACT retail power prices have increased between 13 and 28% – year-on-year – over the last three years.

More than 200,000 households struggled through winter without electricity. For RE zealots, though, freezing someone else’s granny to death is all part of the ‘inevitable transition’ to an all-wind and sun powered future. It is, after all, all for the greater good.

Renewable energy rent seekers and the eco-zealots who run interference for them, are living in desperate times.

They’re being forced to ramp up the usual string of lies, in order to deflect attention from the bleeding obvious: adding heavily subsidised and chaotically intermittent wind and solar has driven Australian power prices through the roof.

Being true fanatics, this crowd has simply doubled down: making claims that power prices have actually fallen and, provided everyone signs up to Josh Frydenberg’s National Energy Guarantee, will return to the rates enjoyed in the 1970s. Fat chance of that. The graphic above shows the percentage increase in average retail power prices to 2017. The graphic below shows the increase in the NEM States and the ACT up to 30 June 2018, which applies to retail rates from hereon.

Three or four years ago Australia’s wind power capital, South Australia was held up as the shining example of what awaited us if only we would believe in the power of nature’s wonder fuels.

These days, however, with SA suffering the world’s highest power prices – and plenty of international publicity about its routine load shedding and statewide blackouts – wind and sun worshippers run very silent on Australia’s RE ‘superpower’.

And it’s no wonder. Anyone looking to see what an all wind and sun powered future looks like, need look no further than the economic backwater that is South Australia.

Of course, ignoring reality is an essential prerequisite for those still attempting to promote wind and solar as meaningful power generation sources.

There is one reality, however, that they can never ignore: and that’s the need for government mandated targets, penalties, subsidies and soft loans.

Hence, the present state of fear and panic amongst those with skin in the game.

Josh Frydenberg’s NEG is the product of a last-ditch effort to lock in a policy that has bipartisan support.

RE rent seekers are keenly aware that they need the policies that feed them to have uniform support from both left and right.

The Federal government’s Large-Scale RET (ramped up to 41,000 GWh by Labor in 2008 and ramped down to 33,000 GWh by Tony Abbott’s Liberal/National Coalition in 2015) was seen as safe and secure, permitting wind and solar outfits to invest in the confident belief that the subsidies would keep rolling until 2031 (when the LRET expires).

The NEG is being put forward on the basis that it will undo the chaos created by the LRET, including reversing power price rises. It won’t, but that’s another story.

The real issue for RE rent seekers is that neither the left, nor the right in politics have the faintest interest in supporting a policy that simply expands and extends the LRET over the horizon.

The Greens and the hard green-left from the ALP detest the NEG because it doesn’t go far enough. Whereas, conservatives within the Liberal and National parties hate it because it looks, smells and sounds like it was cooked up by the Green/Labor Alliance.

Whatever happens when Frydenberg meets with the State and Territory Energy Minister’s this Friday, one thing is certain: the NEG that emerges will never garner bipartisan support.

On that basis, there isn’t a wind or solar power outfit in existence that will ever invest so much as a penny based on what, if anything, Frydenberg manages to cobble together with the states and territories.

Assuming that the NEG negotiates the labyrinth of State and Federal Parliaments, at some point in the not-too-distant future a Federal government will be forced to either scrap the NEG in its entirety; to reduce its mandates or targets, or to slash them altogether.

The principal threat to the NEG comes from retail power prices, that will continue to rise over the next electoral cycle. Whichever party holds Federal government will be met with an electorate that’s even angrier about energy policy, than it is right now, and that government will be forced to retreat from what is simply the RET on steroids.

The reason for Australia’s self-inflicted energy crisis is all political.

There is no shortage of coal, gas or uranium; just a shortage of common sense, logic and reason.

By perpetually pandering to ideologues, Australia has been hijacked by crony capitalists: there is far more money to be made in the (occasional) production of completely unreliable electricity, than there is in taking electricity and turning it into something useful and productive, in its own right.

Rocketing power prices and shrinking supply is literally destroying Australia’s manufacturing and industrial base. On the current trajectory, a raft of energy hungry businesses and industries will simply disappear. First among them will be mineral processors, then manufacturers and then miners, and so on.

In the article below, The Australian’s Graham Lloyd pulls together a pretty decent synopsis of the politics of power that is in play in this country. A couple of his conclusions stand out: the first is that rising power prices come with a serious political cost; the second is that the NEG will never enjoy bipartisan support.

With rising power prices and without bipartisan support, the NEG is doomed. And with it, so is the future for subsidised wind and solar.

Political play for power
The Australian
Graham Lloyd
3 August 2018

With one week to go until the Council of Australian Governments Energy Council ministers decide whether to put an end to more than a decade of partisan squabbles over climate and energy policy that have crippled Australia’s electricity sector, the key political flashpoints of the national energy guarantee are unresolved.

The federal government’s poor showing at last weekend’s Super Saturday by-elections adds pressure for a deal that puts lower electricity prices at the top of the agenda.

But in the final days of negotiation for a NEG, federal Environment and Energy Minister Josh Frydenberg faces a three-pronged campaign from the ALP, GetUp! and the states that seeks to boost the renewable energy mandate.

Against the evidence, the claim is being put forcefully that more renewable energy means lower prices. The reliability of supply must be taken on trust.

The NEG, a proposal born ultimately from the ashes of the South Australian blackout in September 2016 as a way to deliver more reliable, cheaper and cleaner electricity, has been hijacked.

Even if state energy ministers can agree at next week’s COAG meeting, the Turnbull government is on notice that the NEG in its present form will not be supported in parliament.

Energy policy and the NEG are hostage to the politics of lifting ambition on cutting greenhouse gas emissions and getting quickly out of coal. This is despite the fact coal use is rising globally and thousands of new-generation, lower-emissions plants are being built around the world.

The NEG debate has lost focus, cementing instead a partisan divide over climate policy and further splitting a tense Coalition partyroom on the issue.

As Australia prepares to double down, public hostility to the cost of green initiatives is rising.

The backflip by retailer Coles following its ban on single-use plastic bags — it now says it will offer reusable plastic bags for free until August 29 after a customer backlash — has again proven that consumers are happy to save the world as long as it does not cause inconvenience or cost any money.

The acute price sensitivity of good intentions was acknowledged by Dick Smith when he folded his line of patriotic produce because shoppers had shown they would rather buy cheaper imports from Aldi.

On climate action, the maxim holds true around the world. Canadian states are in revolt over the introduction of a once-popular federal carbon tax, an issue that could cost Prime Minister Justin Trudeau the election next year.

A Gallup poll in the US last month shows climate change does not rate anywhere on a list of major mainstream concerns, which are dominated by immigration and bad politics.

Meanwhile, a cornerstone of the Paris Agreement on which justification for the NEG is based has disintegrated into bitter dispute over who will control the purse strings as wealth is transferred from the developed world to developing countries at a rate of more than $US100 billion ($135bn) a year.

Newspoll shows 48 per cent of Australian voters support following the US out of the Paris Agreement if it lowers electricity prices.

But debate over the NEG remains fixed on how big the number will be for greenhouse gas emissions cuts into the future.

In its final detailed design report, the Energy Security Board has said the NEG would help lift renewable energy production to 36 per cent of total generation capacity within 11 years. This will be up from the present 17 per cent. Reliance on coal will fall from 75 per cent of generation capacity to 60 per cent.

The question is how much more renewable energy will be mandated by government policy under the NEG.

The battle lines were clearly drawn in dozens of submissions made to the Energy Security Board’s investigation into how the NEG should operate.

The ACTU and federal Labor have opposed the NEG as doing too little to cut greenhouse gas emissions and not enough to help workers displaced from closing coalmines.

Welfare groups say the renewable energy transition does not go far enough but simultaneously demand a compensation scheme for low-income families similar to the one that accompanied the Gillard government’s carbon tax.

On the other side, industry groups are concerned that Australia’s longstanding competitive advantage of cheap energy is being squandered as they face the prospect of rationing through “demand management” or heavy investment in their own electricity supplies.

On the table with the NEG is a highly complex arrangement that seeks to lower electricity prices while ensuring demand for electricity is met and greenhouse gas emissions reduced. Demand and supply will be managed through tightly controlled contracts and derivative trading, which those closest to the action say is wide open to being gamed.

The first challenge, according to submissions to the Electricity Security Board, is to establish exactly where each megawatt of electricity traded is coming from. This will be necessary to ensure all parties are doing what the law says they must.

Fines of up to $100 million will apply to companies that do not meet their emissions reductions targets, on the one hand, or fail to deliver reliable electricity supplies on the other.

In theory, new technologies for storage and grid management together with billions of dollars of new investment in pumped hydro-electricity schemes backed by government will produce a transfor­ma­tion to a low emissions future.

After the current wind projects are completed, the Australian Energy Market Operator’s long-term forecasts indicate solar energy will be the big winner at a utility and household level. The stark reality is energy users who can afford it are voting with their feet, installing solar panels and batteries in increasing numbers. High electricity prices are encouraging the trend which, if not properly managed, spells further disaster for an electricity network that must be vastly expanded but supported by a dwindling pool of customers.

Grid expansion is needed so that weather conditions in Queensland can balance intermittent wind generation in Victoria and South Australia.

The challenges are great but the politics quite simple.

The federal government wants an NEG that promotes resilience and lowers costs while meeting existing climate change targets. The opposition says higher ambition is needed so that more renewable energy projects can be built.

Frydenberg is struggling to maintain government unity on the issue. But Labor’s position is being aggressively pushed by pro-renewables lobby groups such as GetUp! using modelling funded by Greenpeace that shows more renewable energy means lower power prices.

GetUp!, it has been revealed, is receiving millions of dollars in support from the renewable energy industry to push the maximalist case for wind and solar.

What is missing from the high-ambition cohort is a credible explanation of how existing base-load coal-fired plants will be kept profitable as their access to market is further eroded by the forced introduction of more intermittent renewables into the national electricity system.

A key AEMO recommendation is that existing coal-fired generators be kept operating as long as possible.

Although the NEG is claimed to be technology-neutral, the incentive to invest in new fossil fuel capacity is far from clear.

Also unclear is the potential for new small-scale nuclear reactors, which may become available in the next decade to offer load-following emissions-free power at potentially competitive prices. Consideration of nuclear is banned by federal and state ­legislation.

One suggestion by the Australian Competition & Consumer Commission has been for government to underwrite the purchase of electricity generated by new “dispatchable” plants long into the future to give financiers comfort to invest.

The problem for coal has been that renewable energy projects have been given priority access to the market as well as a generous subsidy under the renewable energy target, squeezing them out.

The RET will be closed to new entrants in 2020 but subsidy payments in the form of renewable energy certificates will continue until 2030.

As more wind and solar projects have been built, the price of renewable energy certificates has fallen from $85 late last year to less than $35 today.

Energy analyst Hugh Grossman from RepuTex says the price of renewable energy certificates is expected to fall towards zero after 2020 and they will not play a role in driving new projects between 2020 and 2030.

Ironically, supporters of renewable energy claim wind and solar projects are cost competitive without a subsidy. But they also say higher government mandates are needed under the NEG to encourage investment, effectively forcing utilities and big energy users to buy renewables.

Opposition climate change and energy spokesman Mark Butler says, as it stands, the RET will ­destroy renewable energy ­investment.

Modelling for green groups suggests a vast increase in the amount of wind and solar would push down electricity prices in the wholesale market, resulting in lower bills for consumers.

But while a glut of renewable energy supply may depress wholesale prices at times of peak production, the issue of intermittency — low electricity production when there is no sun or wind — is far from resolved.

The real challenge for the NEG is to encourage investment that guarantees uninterrupted electricity supplies for households and industry at an affordable rate. To achieve this, the vision for Australia’s electricity future, from the power industry and government, remains largely wedded to storage technologies that are unproven at scale or yet to be built.

According to the AEMO, when coal-fired plants retire they can be replaced most economically with a portfolio of utility-scale renewable generation, storage, distributed energy such as rooftop solar, ­flexible thermal such as peaking gas plants and upgrades to ­transmission.

Green groups want the transition away from coal to be much quicker and are pushing for a maximalist approach with the NEG.

The demands are outlined in a submission to the Electricity Security Board by the Australian Conservation Foundation and mirrored in submissions by other like-minded groups.

They want higher ambition on carbon dioxide emissions cuts, greater support for renewable energy investment, no exemption for emissions-intensive trade exposed industries and no use of domestic or international emissions permits to offset power sector obligations.

The federal government is proposing a limited use of national emissions permits, which will underpin the continuation of the sort of carbon farming projects kickstarted by the direct action reverse auction scheme.

But Butler told the Clean Energy Summit this week that Labor would “oppose the use of any offsets in the electricity generation sector”.

The federal government wants the electricity sector to achieve its share of the overall Paris Agreement pledge of 26 per cent to 28 per cent below 2005 levels by 2030.

It had proposed to lock that level in for 10 years to provide investment certainty. But faced with a big public campaign urging Queensland and Victoria to push for a higher limit, the federal government has offered to review the target after five years.

The Electricity Security Board has said the proposed NEG will be compatible with higher carbon ­dioxide emissions abatement ­targets.

The federal opposition already has committed to a target of 40 per cent.

The arguments being put forward as part of NEG negotiations are twofold: first, that the electricity sector should do more than its pro-rata share of total emissions cuts to take the pressure of other areas such as agriculture and transport; second, that the national target is too low and should be increased.

Frydenberg is facing hostility from all sides. He now reportedly is proposing to seek agreement from state energy ministers and his parliamentary colleagues on how the NEG will operate before dealing with the issue of targets at a later meeting.

If agreement can be reached over two stages, the government still faces a parliamentary challenge to legislate.

The NEG has become a proxy for Australia’s commitment to tackling climate change.

Despite claims of support for a bipartisan approach, the reality is that keen politics and division remain.

The by-election results suggest high electricity prices are an important concern for voters.

Electricity bill relief has been identified as one of three key issues, along with company tax and Catholic school funding, that the government must resolve or face a wipe-out at the next federal election.

A solution to Australia’s expensive and deteriorating energy system is desperately needed.

But the NEG negotiations to date show agreement by next Friday’s COAG deadline now seems improbable, and power politics will remain high on the agenda for the federal poll next year.
The Australian

Rocketing power prices spells political oblivion for Liberal’s Dynamic Duo.

About stopthesethings

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

Comments

  1. What a mess, inevitable when politicians are allowed to dictate any activity. Politicians should only be allowed to make SMALL changes to the status quo, which has always come about by sensible market-driven evolution. Thus, part of the status quo is coal-fired baseload, so most of that should be maintained, replacing ageing plant with shiny new ones on the same sites.

    Nowhere else has made “the transition” in an isolated state, they have all had inter-connectors to somewhere else with surplus dispatcheable power. The storage myth of batteries needs to be relentlessly exposed, because it appears that many have been suckered. Batteries can only deal with instabilities resulting from intermittency, not with the absence of energy aspect of intermittency.

  2. Building Nuclear power stations probably makes less sense than renewable energy. The cost of a small or large Nuclear power station would be in the vicinity of $10Billion plus the cost of building a Nuclear industry to service,fuel and maintain the Nuclear PS., a large one Gigawatt coal fired power station is $2.5 Billion. The question is how many power stations do you build and if it’s only one as STT seems to want you will still need another one as a back up, good engineering!!! Where is this lone expensive Nuclear power station going to be built??? Australia is virtually a one off compared to other countries in that it has four main load centers and the system extends over 2500 miles long with very little width. This then causes many problems with how far you can transmit large amounts of power efficiently which is usually agreed by engineers is around 400 miles.

    • Engineers in NSW have 3 in mind, with sites already identified. Nuclear power is inevitable. The French get 75% of their power from nuclear and consumers pay fully half the cost of power than consumers pay in SA. You were saying something about making sense….

  3. Steven J Bernard says:

    RE zealots continue to try to make silk purses out of sow’s ears. It just ain’t gonna happen. If want to reduce carbon emissions at an affordable price, you’ve got to start with the right technology, and technologies like wind and solar which need constant fossil fuel back up, storage, smart grid, demand response et al, just aren’t it. Pick something simple, reliable and affordable, that can be used as a drop-in replacement for existing fossil fuel plants, and stop being afraid to use the N-word.

    • When I am looking at my bills for gas and electricity, I see that I burn a lot of energy for heating. Just for heating. And the footprint is much bigger or deeper than from burning electricity for all other stuff.
      If the Gov would changed their focus to “pink batts”, then Australia would reduce carbon emission in much bigger scope. Poor insulation is causing me to burn and burn gas at winter. It is also causing us to burn electricity for aircons at hot time.

      Australia can reach carbon targets without switching to unreliable solar and wind, adding better comfort to houses, means better quality of life.

    • singletonengineer says:

      Right on! It is way past the time where all options should be on the table, with no preference apart from that that can be counted for or against any particular option. I’m for nuclear, especially small nuclear (SMR) as part of the South Australian response and, indeed, anything that can work at the best available price elsewhere.

      But the major “environmental” organizations just want to rely on loud shoutiness and opinion instead of science. Goodbye Friends of the Earth and “Dr” Jim Green. Goodbye Guardian Australia. Goodbye also Australia’s ABC, which tries so very hard to ensure that F-wits get equal time.

      Come back when you have decided to grow up a bit.

      In particular, Goodbye Australian Greens and your decision to vote against the carbon tax way back when, on the grounds that it wasn’t pure enough for you. The perfect, in that case, was indeed the enemy of the good.

      Now we have to find a way to live with the economic realities and the climate mess that you have all contributed to.

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