Australia’s Renewable Energy Policy Implodes: With Power Prices Rocketing MPs Demand Immediate End to Wind & Solar Subsidies

In less than a week, RE zealots went from full-scale offensive to wholesale retreat, with disaster now imminent for wind and solar outfits.

Instead of getting their National Energy Guarantee up and running – a policy which would have effectively doubled the amount of subsidised and intermittent wind and solar capacity in Australia – Audrey Zibleman, Kerry Schott and Chloe Munro are watching on in horror, as a growing number of Liberal and National MPs single out Australia’s existing renewable energy policy – the Federal government’s Large-Scale RET – for attention, with the ‘rebel’ MP’s leaders demanding immediate and radical intervention.

The LRET is a scheme designed to channel $60 billion in subsidies – drawn from all Australian power consumers – into the pockets of wind and solar outfits like AGL, Origin and Energy Australia. With households and businesses screaming about rocketing power prices and power retailer-generators gloating about posting record profits, the effort by eco-zealots to double wind and solar capacity could not have come at a worse time (for them).

Audrey and her gang have called in an airstrike on their own position: not only is their NEG terminal, but the LRET is under mortal threat, too.

Leading the rebel charge is former PM, Tony Abbott.

Government must focus on lowering prices in any energy guarantee
Daily Telegraph
Tony Abbott
16 August 2018

Ask people what they want from energy policy and the answer, overwhelmingly, is lower power bills. In this week’s Newspoll, 63 per cent said the government’s priority should be cutting prices, 10 per cent preventing blackouts, and just 24 per cent reducing emissions. The message is pretty clear: a government that wants to win an election (but has lost 38 successive Newspolls) must focus on price.

That’s exactly what the so-called National Energy Guarantee does NOT do. The NEG legislation seeks to turn the non-binding, aspirational emissions target agreed to at Paris into L-A-W law, backed up by $100 million fines. A “best endeavours” target that made sense three years ago, when all countries were supposed to have them and when existing policy was supposed to achieve it, makes no sense now; especially with the biggest emitters having no targets or quitting the agreement.

Given that emissions targets and unreliable wind and solar energy have helped to double power prices over the past decade, it’s very hard to see how even more renewables and even higher emissions targets could possibly lower them. The NEG says “investment certainty” will drive prices down, but how can there be any certainty when a review of emissions targets is scheduled for 2024, with Labor promising to raise them immediately should it win the election?

If John Howard’s ministers had brought a submission to the party room that had at least six MPs threatening to cross the floor and at least a dozen more expressing deep scepticism, along the lines that “this is putting lipstick on a pig”, they would have been sent straight back to the drawing board – and this is where the energy minister should go.

The government should be grateful that Victoria is still saying that the NEG is completely unacceptable and take this escape while it’s still on offer. The government could then craft a new energy policy based largely on the ACCC’s recommendations which, unlike the NEG, were all about cutting price.

First, because old coal is the cheapest power available, let’s keep the Liddell power station open by using competition law to stop anti-competitive conduct. When the Prime Minister tells AGL not to put an essential service at risk, he must mean it.

Second, let’s end all the consumer subsidies for new intermittent power – because if the barrackers are right and it’s cheapest, they don’t need subsidies anyway. This will need legislation but what better way to demonstrate that the Coalition wants lower prices, and Labor doesn’t.

Third, require retailers to offer their best price to domestic consumers and end the loyalty tax on customers, especially pensioners, who can’t shop around.

Fourth, escalate the fight with the states over their bans on gas exploration and extraction. It’s another good way to show that the government is on the side of struggling families while Labor is in the pocket of the green left.

Fifth, require all new renewable generators to provide 24/7 power. This stipulation in the scheduling rules should never have been removed during the Rudd-Gillard era government, and reliability is the only part of the NEG that’s worth preserving.

Sixth, end the legal ban on nuclear power. It’s not currently economic here but it might be soon and is the only practical way for Australia to have fully emissions-free baseload power. And it would generate another fight with Labor and the green left.

Seventh, accept the ACCC’s recommendation four for the government to underwrite new baseload power at a competitive price. Subsidising renewables to lower emissions and then having to subsidise coal to keep the lights on is hardly optimum policy but it might be necessary given the mess we’re in. A more straightforward alternative might be for a government entity to secure any gap between likely demand and available 24/7 power and to use the additional capacity to keep the market honest.

The last thing MPs want to do is fight their own side. If the PM had been as attentive to his own backbench as he is to the senate cross bench, the government would not be in its current fix. Here is a way forward that builds on things that the government has already said it supports and that avoids the showdown over the Paris targets that is otherwise looming.

It is impossible to reconcile competitive industries and low household bills with the emissions obsession that has driven energy policy for the past decade. There’s no point trying to find a consensus with Labor on this. The government should accept this contest and win it.
Daily Telegraph

Tony Abbott: Rebel-in-Chief signals end to wind & solar insanity.

All sensible stuff from the former PM. But it’s this recommendation that deserves the full STT treatment:

Fifth, require all new renewable generators to provide 24/7 power. This stipulation in the scheduling rules should never have been removed during the Rudd-Gillard era government, and reliability is the only part of the NEG that’s worth preserving.

Once upon a time, the rules required electricity generators to tell the grid manager when and how much power they intended to deliver, and over what time-frame.

Demand was forecast in advance, based on seasonal variations, time-of-day and day of the week, with allowances made for extreme weather conditions, when the use of air conditioners (either for heating or cooling) would lead to spikes in demand. Supply was organised according to schedules to match forecast demand.

Generators hoping to participate in the National Electricity Market were required to offer power according to scheduled demand, in a manner that would satisfy all power consumer’s needs.

Then, along came wind power.

With their output dictated by the weather, and the daily needs of customers held in contempt, wind power generators determined to rewrite the rules, they could never satisfy.

After Kevin Rudd’s Labor government took power in 2007, the Renewable Energy Target was jacked up ten-fold to 45,000 GWh: 41,000 GWh of wind and large-scale solar (LRET) and 4,000 GWh of domestic rooftop solar (SRES).

Under the dispatch rules that then existed, wind power was designated “non-scheduled”, which meant that wind and large-scale solar power outfits had no right to dispatch power to the NEM, unless the grid manager, the National Electricity Market Management Company (NEMMCO) permitted them to do so. The alternative was to try and meet the requirements set by the definition for “scheduled” generators: namely, guaranteeing delivery of set volumes of power, over a pre-determined time-frame. Obviously, the fickleness of Mother Nature meant wind and solar generators could never satisfy that definition.

Moreover, the grid manager hits “scheduled” generators with substantial financial penalties, in the event that they fail to deliver power according to the pre-ordained schedule.

Unable to satisfy the dispatch rules, the wind lobby did the next most obvious thing: it rewrote them.

The Australian Energy Market Commission was inundated with complaints about how unfair it was that wind power outfits were unable to ‘compete’ in a market where customers had this pesky habit of demanding power as and when they needed it, rather than having it delivered at crazy, random intervals.

If a wind power outfit wanted to guarantee regular participation in the NEM, it effectively had to build an equivalent capacity in fast-start up gas (Open Cycle Gas Turbines) or diesel generation to match whatever wind power capacity it built.

AGL did just that back in 2001, when it built its Hallett Power Station (200 MW of OCGTs that it runs on diesel), in order to match the wind power capacity, it was then planning to build between Jamestown and Hallett.

The cost of building utterly unreliable wind power capacity – as well as being forced to build additional reliable plant to compensate for the inherent intermittency and unreliability of weather-dependent wind – was viewed with contempt: operators like AGL determined that it was much fairer to pass the true cost of intermittent wind power generation to somebody else; namely, Australian power consumers.

The AEMC (packed with Big Wind friendlies) willingly obliged: under its Rule Determination issued in May 2008 it created an all new category of generator defined as “semi-scheduled”, tailored to suit the chaotic delivery of wind and solar. Masters of the English language might scratch their heads at a linguistic concept that sounds a lot like the idea of being half pregnant.

The new dispatch rule came into force in January 2009 and the rest, as they say, is history: from that point forward, more than 1,600 wind turbines were speared across four states and connected to the Eastern Grid.

Over the last three or four years, plenty of large-scale solar has been rolled out across southern Queensland and northern New South Wales, enjoying the same care-free classification: “semi-scheduled”.

From 2009, semi-scheduled wind and solar were then, and thereafter, entitled to dispatch electricity to the NEM, whenever the wind and sun permitted.

Critically, the failure of a semi-scheduled generator to deliver power to the grid has no consequences at all for the wind or solar power outfit concerned. Consistent with their general manner of operation, it was all care and no responsibility for the wind and solar industries, from then on.

The conventional generators (coal, gas and hydro) are still designated “scheduled” generators: a failure to deliver according to the agreed schedule results in the imposition of very substantial financial penalties. True it is that their operation isn’t dependent on the time-of-day or whether the wind is blowing, which makes them unlikely to be hit by those penalties. However, they still need to schedule, well in advance, if they wish to participate in the market, at all.

Once a coal or gas-fired plant is scheduled to deliver, that plant must remain online at all times, irrespective of whether it’s able to dispatch power to the grid.

When the wind is blowing and the sun is up, wind and large-scale solar generators use the value of their Renewable Energy Certificates – they receive one REC for every MWh dispatched, with a REC currently worth $85 – to undercut coal and gas generators. Those generators (forced to remain online because they’re scheduled and would face penalties if they didn’t) continue to burn fuel, pay wages and overheads, but are unable to dispatch electricity and earn revenue.

So, the scheduling rules being targeted by Tony Abbott come with a double whammy for conventional generators: they suffer financial penalties imposed by the grid manager if they fail to deliver power according to the grid manager’s pre-ordained schedule; and they suffer financial losses because they can’t deliver power when the sun is shining and the wind is blowing, even though they continue to burn coal and gas and run up other costs.

If anyone studying the operation of markets is looking for an example of an unequal playing field, Australia’s electricity market is it.

While there’s been plenty of talk from Liberal and National MPs about refurbishing Australia’s existing fleet of coal-fired power plants and building new High Efficiency Low Emissions coal-fired plants, unless and until the dispatch rules are returned to what they were in 2008, conventional generators will suffer the same disadvantage that’s making them unprofitable, now; and which has done so, since 2009.

The first and most obvious step towards restoring reliability to Australia’s power grid and affordable power to Australian power consumers, is redefining wind and large-scale solar as non-scheduled generators. By that definition, wind and solar power outfits would no longer be able to participate in the NEM, without the permission of the grid manager. Scheduled generators, on the other hand, would be able to dispatch electricity according to the schedule, without interference from chaotically intermittent and heavily subsidised wind and solar.

The alternative is to classify all generators as “scheduled” generators; thereby requiring wind and solar power generators to actually compete in the power market and to suffer the same financial penalties that apply to every other generator in the market. Either way, the characters who keep claiming that wind and solar are truly competitive would get the opportunity that they fear the most: a head-to-head with coal, gas and hydro.

STT hears that – whatever happens to Josh Frydenberg’s NEG – there is a growing group of Liberal and National MPs, headed up by Tony Abbott and Craig Kelly, who are now very interested in the utterly perverse operation of Australia’s National Electricity Market.

Their first point of interest is reversing a rule change that allowed wind and large-scale solar generators to literally get away with murder. Let the reckoning begin.