Australia’s Power Crisis Crossroads: Energy Minister Battles to Keep the Lights On

Dubbed the “Minister for reducing electricity prices”, Angus Taylor’s biggest battle will be keeping the lights on this summer, and beyond.

When Taylor took up the role of Federal Energy Minister in September, he inherited a toxic cocktail of renewable energy policies – the product of both Federal and State governments.

The Mother of them all is the Federal government’s Large-Scale Renewable Energy Target – a $60 billion subsidy scheme for chaotically intermittent and totally unreliable wind and large-scale solar. The cost of the subsidies is added to Australian retail power bills; nowadays among the highest in the world.

As part of a weakened Liberal/National Coalition government – currently hanging on by a heartbeat – Taylor has been delivered the kind of hand that not even the most poker-faced player could bluff with.

The soft-wet lefties within his own party sound more like lunatics from the green-left, advocating for even more wind and solar, all backed up with $1 trillion worth of mythical mega-batteries and pumped hydro. His PM, Scott Morrison seems reticent to even talk about any of the things that are obviously needed to restore reliable and affordable power to Australians, such as slashing subsidies to renewables, scrapping the LRET and unleashing a nuclear-powered future. The Liberals still operate on the ludicrous premise that the Australian voting public are all prepared to pay staggering amounts for occasional power.

When asked fairly and squarely, a trifling 20% of Australians rate renewable energy as an important policy issue requiring government attention. And yet, so-called ‘Conservatives’ continue to pander to a noisy and ignorant minority, who will never vote Liberal or National in their lives.

As a result, Angus Taylor has the unenviable task of trying to fight a full-scale war with one arm tied behind his back.

Here’s Taylor outlining his efforts to prevent Australia’s Eastern Grid from suffering a total collapse.

Renewables are coming, but we need to secure supply
The Australian
Angus Taylor
7 November 2018

In the Australian electricity sector, the facts and the customers have been victims. Good policy means truth telling, with a relentless focus on the price of electricity. Let’s start with facts.

The growing market power of energy companies combined with the unprecedented investment in intermittent solar and wind generation without storage threatens the affordability, reliability and security of our National Electricity Market.

The big energy companies have developed unprecedented market power, and they’ve used it. Between 2007 and 2014, the public monopolies that own the poles and wires in NSW and Queensland almost doubled their asset bases, receiving a guaranteed return paid by customers.

Meanwhile, the three largest generator-retailers have more than 70 per cent of customers and generation in most markets. It’s unprecedented and unhealthy.

Customers who don’t negotiate a price each year get a raw deal, paying a large “loyalty tax” for trusting their retailers to ­deliver fair pricing. Companies have raised prices when generators close down (Hazelwood). Withdrawn supply has not been replaced in a timely way, putting further upward pressure on ­prices. New retailers struggle to get access to electricity supply, particularly in South Australia where prices are among the world’s highest. Gas prices are used as an excuse for higher pricing, but the Australian Competi­tion & Consumer Commission shows it is unwarranted. Any classical liberal or conservative should be incensed by this sustained use of market power.

Meanwhile, the rush into ­intermittent generation has created big new risks. Solar and wind have an important role as costs continue to fall but we need balance, particularly while large-scale storage is relatively expen­sive. In the next three years we’ll see committed renewables investment of $15 billion coming into the NEM, a 250 per cent ­increase in solar and wind, rising from 9 per cent to 23.5 per cent.

Unprecedented emissions reductions are assured, but there are risks to keeping the lights on, serving industrial customers without interruption and lowering prices. A 50 per cent renewable target in South Australia helped to push coal and gas out of the system, leading to record high prices.

Labor makes the ludicrous claim that its 50 per cent renewables target will lower prices — it will do the opposite. We have not replaced the more than 5000 megawatts of baseload ­capacity lost since 2012. Baseload generators with falling usage and constant flexing to deal with sun and wind fluctuations have been put at a serious disadvantage and prefer to opt out. We are paying the price.

Some claim eliminating federal subsidies to renewables will solve the problem. The abolition of the carbon tax helped in 2014, as did the reduction of the large-scale renewable energy target that year. But the LRET, which has contributed to the committed investment, will drop to a fraction of its present subsidies within three years. It simply won’t ­encourage new investment.

Others say leaving the Paris Agreement will lead to a miraculous drop in prices. Wrong. Like it or not, we will reach a 26 per cent reduction in emissions in the NEM well ahead of time based on investment commitments already made. Paris won’t require new interventions and won’t create new price pressures.

The real answer is to refocus energy companies and the entire sector on the customer. The ACCC has made excellent recommendations to deliver this, and the government has committed to most of these.

We can’t accept the big companies using their market power to manipulate prices, whether by cutting out competitors, inflating regulated network prices, shutting down capacity prematurely or charging excessive late payment penalties. We’ll soon bring forward our big-stick legislation package to stop abuses of market power, complementing recent ­reforms. Our hope is that using the stick won’t be necessary, that the companies will do the right thing. But we will use it if we must.

We also need a strong supply of affordable electricity when customers flick the switch. Electricity runs everything. Affordable electricity must be available on demand and not just when the wind blows and sun shines.

We are working towards a shortlist of electricity generation investment projects by early next year that deliver when customers need it (likely to include coal, gas and hydro), balancing the unprecedented investments in solar and wind. These new projects will drive increased competition and supply to enhance affordability and reliability.

We need project proponents to sharpen their pencils, bringing forward bankable projects as quickly as possible. We recognise government has no choice but to play a role in underwriting these investments, given the distorted history of this sector, and the ­unavoidable political risks of ­future Labor-Greens policies.

We are committed to obligations for retailers to ensure ­reliability of supply by mid-next year. Requiring investment years ahead to meet expected demand, even when the sun isn’t shining and wind isn’t blowing, is standard in most developed countries. Many say this is all too interventionist, but we must deal with the world as it is. Previous poor policy is biting years later and the government must act.

Electricity is a public-private partnership in ways other non-essential services are not. Labor, siding with the energy companies, simply cannot deliver its rapid emissions reductions without more exorbitant costs to citizens and businesses. Hardworking families and business demand a better deal on electricity. Our government is determined to ­deliver that deal.
The Australian

Dr Michael Crawford’s graphic depicts what occurred to Australian power prices as a result of the government mandated roll-out of heavily subsidised and chaotically intermittent wind and solar over the last 15 years.

With more to come, the only way for power prices is up. The forward wholesale prices for power this summer in SA ($142 per MWh) NSW ($105 per MWh) and Victoria ($129 per MWh) are at record levels for Victoria and NSW – SA’s are on a par with previous efforts.

The biggest fear though, is that the type of mass load shedding events – for which Australia’s wind and solar capital, South Australia has become notorious – will be visited upon the prosperous and populous eastern states of NSW and Victoria.

Queensland has an abundant supply of coal-fired power and can easily hold onto the power it generates by shutting down its interconnector to NSW. So, Queenslanders are unlikely to be plunged into Stone Age darkness, anytime soon. But Victorians and New South Welshman will soon get a taste of what South Australians regard as the new normal: portable generators will be the must have item this Christmas.

The fact that there is a serious shortfall in generating capacity emerges whenever the sun sets and/or calm weather sets in, and wind and solar power output naturally plummets.

The worst-case is a breathless 42°C summer’s evening, when air conditioners are being run at full throttle, 2,000 wind turbines down tools and millions of solar panels amount to nothing more than expensive, vanity signalling roof ornaments. South-East Australia routinely experiences those kinds of events through January, February and even into March; and they can last a week, at a time. Hence efforts by Angus Taylor to secure reliable, dispatchable generating capacity.

Angus Taylor must shift focus to creating power supply
The Australian
Judith Sloan
8 November 2018

The trouble with calling Angus Taylor the minister for reducing electricity prices is that there is actually very little he can achieve in the short term. And the short term is all he has.

Calling together the leading energy companies for a less than friendly lecture from the Energy Minister was never likely to lead to very much. To be sure, insisting that the retailers get rid of high priced standing offers and ensuring that their loyal customers get a better deal is not nothing.

But the impact will not be very great — the percentage of customers on standing offers is quite low — and most electricity customers won’t notice any difference. The fact that the energy companies refused to commit to lowering prices any further — there have been some very modest, patchy reductions in the past year — is hardly surprising.

The reality is that the chain that leads to the final outcome on retail electricity prices is both complex and different between the states.

It was only NSW and Queensland where there was a massive ramp-up in investment on poles and wires — under government ownership and gaming by the transmission/distribution entities. And the unexpected closure of the Hazelwood coal-fired plant in Victoria had its greatest impact on electricity prices in Victoria and South Australia.

The explosion of recent investment in wind and solar installation is putting pressure on the economics of the remaining reliable means of electricity generation, with unit costs higher in the face of lower output. The recent higher prices of thermal black coal and gas are also part of the explanation for higher wholesale prices.

While there has been some egregious behaviour by the electricity retailers, including the three big gentailers, fixing this up is only a part of the solution and arguably a relatively small part. The retailer’s costs are generally under one-fifth of the total retail price of electricity.

The most important lasting contribution that Taylor could make now is to press on with getting some new sources of reliable electricity into the market, to firm up the increasing prevalence of wind and solar.

This may involve totally new sources or extensions of existing facilities. If government guarantees are required, so be it. Taylor should do this with or without the support of the gentailers and as quickly as possible. He should make this initiative a key element of the policy story.

Waving a big stick at the gentailers is unlikely to be effective. Certainly as the law stands, the view of the ACCC is that nothing much can be done to rein in their behaviour and threatening them with divestment is only meaningful if the law would permit this, which it probably does not.

The fact that the return on equity now enjoyed by these large energy companies is in the low teens and exceeds some of the big banks is telling. They have gorged on high wholesale prices which, in turn, have been partly the result of the market distortions caused by lousy government policy, most notably the continuation of the Renewable Energy Target.

Short of threatening a royal commission, to which the gentailers would seriously object, Taylor has to be realistic about what he can achieve and communicate this to the public.
The Australian

Things we did last summer: the entire output of every wind turbine connected to Australia’s Eastern Grid in February.

As we noted above, Angus Taylor is battling with the legacy of a toxic cocktail of renewable energy policies, principally the Federal government’s Renewable Energy Target – commenced under a Liberal PM, John Howard in 2001 and exponentially increased as the LRET and Small-Scale Renewable Energy Scheme (SRES) by Kevin Rudd’s Labor government in 2009.

Then there’s the ludicrous state-based renewable energy targets set by the likes of South Australia’s Labor government: 50% in SA’s case, which it not only set but managed to achieve. Albeit, by relying upon coal-fired power, sourced via two interconnectors from Victoria and a fleet of diesel fuelled generators. And with the result that South Australian’s pay the world’s highest retail power prices.

In a ‘South Australia never happened’ moment, Victoria’s Labor government is keen to repeat the disaster. Angus Taylor is keen to avoid it.

Taylor wastes no energy upbraiding 2030 target
The Australian
Samantha Hutchinson and Rachael Baxendale
9 November 2018

Federal Energy Minister Angus Taylor has lashed a Victorian plan to expand the state’s renewable ­energy target to 50 per cent by 2030, which he says will lift the price of power and put jobs at risk.

Mr Taylor accused Premier Daniel Andrews of making up policy on the run in a bid to shore up Labor’s flagging hold on a raft of seats in inner Melbourne. Victoria’s existing commitment was 25 per cent renewable energy by 2020, moving to 40 per cent by 2025.

The announcement came on the same day the Australian ­Energy Market Commission handed down a ruling requiring all big power stations to give at least three years’ notice before closing.

The ruling is based on one of the recommendations of the Finkel review, and is designed to boost ­reliability of the national energy supply, as well as protect against any major price shocks from the sudden closure of a big generator.

Mr Taylor said the AEMC would help avoid a repeat of the situation in Victoria when the ­Hazelwood power station closed in last year with just six months’ ­notice, driving up prices and leading to a big drop in dispatchable power.

But he said Mr Andrews’s VRET plan was likely to cost jobs and would compromise the stability of the National Energy Market.

“The Andrews government is making policy on the run to win votes in marginal inner-city seats,” Mr Taylor told The Australian.

“They taxed Hazelwood into closing, and their ban on unconventional gas is driving gas prices higher and hurting Victorian businesses. The cost of their plan to subsidise more intermittent wind and solar without any reliability measures will mean Victorians will pay more for their power and have fewer jobs to pay for it.”

On the hustings alongside Mr Andrews, Victorian Energy Minister Lily D’Ambrosio sold the beefed-up renewables target as a way to boost industry confidence to invest in new technology and ­create jobs in Victoria.

The Andrews government ­already has a policy in place that forces all large-scale power producers to provide at least five years’ notice before shutting down.

The Victorian Coalition has promised to scrap the renewable energy target if elected, with Opposition Leader Matthew Guy saying he believed a national target was the best option.

EnergyAustralia energy executive Ross Edwards said yesterday’s announcement would rattle workers employed at Victoria’s Yallourn coal-fired power station.

“We will need to carefully model the potential impacts,” he said.

“This will be unsettling for our people at Yallourn, who do a great job keeping the system stable and the lights on, 365 days a year.”
The Australian

Dan, Dan he’s our man, if he can’t wreck it, Lily can.

About stopthesethings

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

Comments

  1. If this chaotic situation now requires the additional purchase of a portable household generator, on top of high electricity prices and an unreliable grid supply, then the government is going to have to pay for it.

    Enough is enough.

  2. Weasels 2 Go says:

    Clearly Minister Taylor has his hands tied by the Renewable Energy Act. The question whether he can force the AEMO to make its stack pricing model work on a normal pricing basis.

    DeFrock.org has some details on that matter.

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