Eve of Destruction: Australia’s Economy First Victim of Renewable Energy Fiasco

Coal and the PM: if only it was a marriage and not a passing affair.

 

If the objective of Australia’s energy policy is destroying its economy, we’re well on the way. With more than $70,000,000,000 squandered on subsidies to wind and solar, both large-scale and domestic, power prices rocketing out of control, routine, mass power cuts, whenever the sun sets and/or calm weather sets in, and the destruction of reliable baseload power plants (South Australia blew up its last coal-fired power plant last year, following suit Victoria took out its Hazelwood plant) – the results can be fairly called an utter fiasco.

One of the few that saw this coming, from the very beginning, was Alan Moran. Here he is detailing the self-inflicted disaster that’s beset the once Lucky Country.

Energy policy: the $72 billion fair dinkum disaster
Spectator Australia
Alan Moran
26 February 2019

Energy and climate change policy in Australia and other western democracies is now, along with immigration and its associated fear of imported third world violence, the cutting edge of the political divide.

But in Australia, the Liberal Party’s policy over the past 20 years has converged with that of the Labor Party and latterly the Greens to favour increased subsidies to electricity generated from wind and solar.  This has knocked out lower cost, more reliable coal generators and doubled wholesale prices, with costs further enhanced by a consequent need for more spending to offset wind’s unreliability and on poles and wires.

The Liberals (supported by Labor) have responded to these regulatory induced cost increases by requiring retailers to reduce prices, a measure that is certain further to deter efficient investment, bringing still higher costs.

To establish credentials among virtue signalling global warming alarmists and renewable energy subsidy-seekers, Scott Morrison has also announced a new version of the Labor-lite policy approach. The new policy entails an additional $2 billion – albeit over 10 years – of “Direct Action” expenditure on renewables, lowering farming output, subsidies to pumped storage and other misanthropic policies. It comes on top of existing subsidies to wind and solar.

The deleterious effects of these policies on efficient supply are further enhanced by state government restraints (bans in the case of Victoria) on the search for additional gas supplies.

The malaise of increased electricity prices compounded by less certain reliability reflects seductive agitprop describing renewables as being freely donated by the sun and wind.  Free they are, but harnessing them and delivering the diffuse power they provide is very expensive.

According to the exhaustive evaluation by Solstice, while a new coal plant could deliver electricity at a cost as low as $40 per MWh, the best wind could achieve is $64 per MWh with solar at $90 per MWh and both wind and solar also require firming contracts in view of their unreliability. These lift the cost of wind by over $30 per MWh.

Forcing substitution of existing low-cost coal energy by high-cost wind/solar energy panders to those who have swallowed, contrary to the evidence, the myth that human development involving fossil fuel use is bringing dangerous global warming.

The vocal support of climate alarmists is bolstered by that of others who claim that getting out of coal/gas/oil will not be expensive since wind/solar is cheaper.  Nobody making that claim has sufficient confidence in it to adopt its corollary: the elimination of subsidies supporting these forms of energy.

Economic modelling analysis of the effects of renewable regulations has offered diverse forecasts.  Such analyses are dependent on their assumptions about future costs of different energy forms, the ability of economies to adjust rapidly and the costs of such adjustment. What is certain is that three-quarters of our exports are from mining; without fossil fuels – the goal of the green left – these would disappear leaving Australia’s living standards closer to those of the third world than first world countries.

Less implausible than most such studies is a recent one by Brian Fisher.  This finds the effect on energy prices from the ALP’s goal of 45 per cent emission reduction target would reduce GDP $144 billion a year by 2030.  He also estimates that what the present government considers to be sound administration, its 26-28 per cent emission reduction target, would still mean GDP $19 billion lower in 2030.

Over the past decade, renewable energy “investments” in Australia have soaked up some $72 billion in capital. None of this would have taken place without subsidies.  By forcing the closure of lower cost coal generators, that expenditure has had a negative value-added.  It has more than cannibalised available capital and in doing so has contributed to the very low levels of productivity growth Australia (like other, similarly placed countries) has experienced.

Businesses, including those owned by governments, with existing coal and hydro generation assets, have seen a massive profit bonanza from the doubling of prices that has been the outcome of the subsidies to renewable energy.  This is most tellingly illustrated by the NSW coal generator, Vales Point, sold in 2015 for $1 million and now worth in excess of $700 million. The big three with coal assets (AGL, Origin and EnergyAustralia) have made corresponding gains, as have the coal generators owned by the Queensland government and the major hydro assets in Tasmania and the Snowy.

Such windfall gains are by-products of regulatory measures rather than from meeting new or expanded customer needs.

The way forward has to include the removal of all subsidies to wind and solar but, given the proclivities of governments to intervene in the energy market, such measures may now be insufficient.  Loss of investor confidence in the stability of energy policy may now require additional assurances, perhaps in the form of contractual guarantees.  Such an approach is envisaged in the government’s Underwriting New Generation Investments (UNGI) but that program is at pains to provide scope for renewables to also gain further subsidies.

If the UNGI does represent half a step to redressing the subsidy to renewable energy, it is accompanied by multitudes of steps backwards.  Not the least of these is the cavalcade of regulatory barriers placed one after another before the prospective Adani coal mine in Queensland. This is a message to all investors that politics is raising the cost of doing business in Australia.  Then there is the dictum in the Rocky Hill case by the head of the NSW Environment Court which would seem to ban all future coal mining, or at the very least exorbitantly raise its costs by requiring expenditure on offsetting emission reductions.

In addition, we are seeing investor associations, reported by the Australian Financial Review, especially by funds with extensive exposure to renewable investments, placing pressure on coal industry mining firms to desist or slow down coal investments.

Almost all the portents for the immediate future of the Australian energy system (and hence for the Australian economy) are negative.  Aside from the minor conservative parties and a handful of Coalition politicians, the politics is driven by focus group analyses which report people being in favour of ‘free stuff’.

There is little stomach for leadership by politicians who either support the prevailing ideology or, valuing their careers above the public good, prefer not to explain that the free stuff is both paid for and undermines the low-cost electricity from which Australia should be benefitting.

Sub-optimal economic performance is therefore set to continue.

Longer term relief for Australia may have to await the results of the outcome in strong economic performance stemming from the leadership that President Trump is demonstrating in abandoning costly measures that require suppression of carbon dioxide emissions. Trump has shown commendable scepticism about climatic catastrophism.  Moreover, he has recognised that actions by the US – indeed the entire western world – can have no climatic effect in view of the explosive growth of India, China and other developing nations, growth that is powered by fossil fuels, the resulting emissions of which now dwarf those of the rest of the world.

Trump’s leadership is already paying dividends with US growth outpacing that of other developed countries.  Energy-intensive industries, including those of the Pratt Group, are responding by shifting the balance of new venture spending towards the US.

But it may be some time before Australia awakens to the self-inflicted injurious policies that have transformed the nation’s energy supply from the world’s cheapest to among the world’s most expensive.
Spectator Australia

About stopthesethings

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

Comments

  1. toby robertson says:

    these numbers are based on REC’S at $85 and 93$. currently these REC’s are trading around 35$ for 2020 (and now) so these numbers are likely to be wrong by a considerable degree. We will comfortably achieve the 33,000 Gwh of energy required under the RET, so there is more competition to sell them pushing down the price. I hate wind and solar as much as anybody because of my understanding of their impact…BUT this sort of exaggerated claim is exactly what started me fighting against “clean energy”….you need to be careful about what you publish that its factual not just suiting the bias of most of us who love your blog?!

    • Toby, there is no exaggeration. The vast majority of LGCs have been presold under power purchase agreements entered by retailers, years ago, many PPAs going back to 2010, when the LRET was increased. The PPA prices vary between $90-120 per MWh. That price includes the LGC. Very few LGCs are not forward sold in this way. The LGC is only needed to avoid the $65 per MWh shortfall penalty. Now that most retailers have sufficient LGCs (most purchsed under their PPAs) to meet their LRET obligations they do not need to purchase them in the spot market, which is the price you are referring to.

      If you look at the future price it is down to $11, reflecting the fact that most retailers have sufficient LGCs to avoid the penalty. If you follow the market, you will see the price fall to zero. But all that means is that retailers have all the certs they need, with no further demand the spot price will fall to zero.

      However, as noted above, the vast majority LGCs have been prepurchased under PPAs at prices equivalent to $85, which is the tax effective value to a retailer of avoiding the non-tax deductible $65 per MWh shortfall penalty. Accordingly, there is no exaggeration of the cost of the LGC subsidy added to retail power bills. The cost is as set out in our numerous posts on the issue.

      • thankyou for your detailed and well explained explanation. Do these ppa’s hold out to the 2030 date or are they for shorter periods? eg do they expire after a period of time or are they for extended periods of time like more than 10 years meaning these parasites are sucking these 90-120 $ prices out until the 2030 date?

        also the people that are so pro renewables keep insisting the recent agreements are going through at 40-50$ mw including the REC’s, is this actually true or are they collecting the REC on top..whatever that may be in the spot market?

        thx for your time.

      • PPA terms vary, but they generally run to cover the life of the LRET ie 2030.

        The figures quoted do not include the LGC.

      • It is understood that PPA’s remain unchanged when a wind farm is sold to overseas purchasers.

      • If the contract is novated, substituting the purchaser, yes.

  2. Jackie Rovensky says:

    I am sure it wasn’t the intension in the attempts to try and bring all nations including those lagging behind the rest of the developed world to become ‘equal’ to the lowest denominator. But that’s what’s happening.
    Except for some, they are ignoring the desire for all to be ‘equal’. These are the Nations ignoring the cry of Climate Change and the spouting from the UN and its controllers who decreed the abolition of ‘bad’ emissions into the environment without considering the implications of such a demand.
    The opportunity of seeing those Third World nations rising above their poverty is forgotten, and the desire has become to see existing First World nations decline to meet Third World levels of poverty, all the while knowing they could maintain their population’s ambitions if only they could extricate themselves from the dictates of fools and manipulators.
    Those who have to have a cause no matter how stupid, banal, idiotic and unbelievably pious, dictate to others who cannot see beyond the surface of spin and uttering of nonsensical tripe has blinded too many to this change.
    If their rhetoric cannot be shut down, recognised and overcome then we are doomed to continue down the path to our own demise as a Nation able to stand tall and proud and become a dominion of those who ignored the bluster and spin never to rise to independence and prosperity again.
    To help the people of this Nation to understand the ramifications of what is happening we need members of the media and Politicians to wake up and clear festering crust thickening over their eyes and in their brains and stop this demise of our Nation.

  3. Reblogged this on ajmarciniak and commented:
    If the objective of Australia’s energy policy is destroying its economy, we’re well on the way. With more than $70,000,000,000 squandered on subsidies to wind and solar, both large-scale and domestic, power prices rocketing out of control, routine, mass power cuts, whenever the sun sets and/or calm weather sets in, and the destruction of reliable baseload power plants (South Australia blew up its last coal-fired power plant last year, following suit Victoria took out its Hazelwood plant) – the results can be fairly called an utter fiasco.

    One of the few that saw this coming, from the very beginning, was Alan Moran. Here he is detailing the self-inflicted disaster that’s beset the once Lucky Country.

  4. Son of a goat says:

    Tales from the Kooyong chronicle

    Update 3: Yoda 4 Kooyong # Burnsided not blindsided

    Breaking news: The Goat fired by Yoda Yates as his honourary campaign director!

    I was less than comfortable when Rupert Murdoch tied the knot with Jerry Hall , similarly, I was less than enthusiastic when Yoda Yates got into bed with Get Up in their bid to win the Federal seat of Kooyong.
    Lets face it, a union between the ideologys of a high flying merchant banker with them radicals from Get Up under the umbrella of a clean energy policy was only ever going to be a marriage of convenience.

    In recent dramatic developments my fears were confirmed when prominent human rights lawyer Julian Burnside announced he will now run for the Greens in Kooyong. A man whose Hawthorn mansion and grounds are that large that they can be seen from outer space , yet no asylum seeker has ever passed through their gates.

    Obviously Yoda’s credentials were not green enough for some and effectively his left flank has now been taken out, leaving him stranded in the middle, his campaign floundering.

    In a long and heated exchange between myself and Yoda I was told my campaign style had infuriated Get Up, they were less than impressed as to be labelled the “great unwashed.”
    My employment was to be terminated immediately.

    Unfortunately for myself my career as a political campaigner is over before an election is even called.
    Its back to the gluing my butt onto the seat of the John Deere tractor , heading off into the sunset listening to “Empire of the Sun”, with their hit DNA.

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