Mission Possible: Australia’s Renewable Energy Scam Destroying Reliable & Affordable Baseload Power

 

Australia is in the process of destroying what was the world’s most reliable and affordable power supply. The destruction is all down to heavily subsidised and chaotically intermittent wind and solar.

Meanwhile, our major Asian trading partners, China and Japan are chewing up Australian coal and uranium as fast as we can ship it – and building hundreds of new plants to use our high-grade thermal coal: Full-Steam Ahead: China & Japan Snub Intermittent Wind & Solar to Build Hundreds of New-Age Coal-Fired Plants

That a country once renowned as an affordable energy superpower is throttling itself to death with a cocktail of suicidal renewable energy policies, is not just ironic, it is flat out criminal.

Tens of thousands of blue-collar jobs in mining, mineral processing and manufacturing have already been destroyed by rocketing power prices; and tens of thousands more remain under threat. Once lost, those jobs will never return. And all that economic damage and household suffering is, of course, utterly pointless.

The latter point is not lost on NSW Liberal MP, Craig Kelly.

The closure of the Hazelwood power station
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Michael McLaren and Craig Kelly
26 March 2019

A report just released by the Victorian Energy Policy Centre should be compulsory reading for all that mindlessly sprout the renewables mantra at dinner parties.

The report examines the fallout from the Hazelwood Power Station’s closure and found that the loss of the 1600 MW of coal power opened the door for the big energy players, especially for AGL to reap an additional $832 million in gross profits from its electricity wholesale business.

Michael is joined by Craig Kelly MP, Liberal Member for Hughes who is on the government’s Committee for Environment and Energy to discuss what will surely be front and centre of the federal election in May.
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Transcript

Michael McLaren: Well the issue of energy prices deserves to be front and centre of the federal election in May, and of course, Australians know we pay far too much for electricity and gas. We’re one of the world’s leading energy exporters, we’re awash with coal, gas, uranium, all of that. Yet we have some of the highest power prices in the world. Put simply it’s killing business, it’s suffocating manufacturing in particular and it’s sending households to the wall. We’re constantly told that help is on the horizon, with the renewables calvary about to ride to the rescue with saddles full of clean and cheap electricity, but the truth is, well it is something quite different.

The recent closure of Victoria’s Hazelwood coal-fired power station proves it, you see a report just released by the Victorian Energy Policy Centre should be compulsory reading for all of those mindlessly sprout the renewables mantra at dinner parties. It examined the fall out from Hazelwood’s closure and found that the loss of the 16 hundred megawatts of coal power opened the door for the big energy players, and especially for AGL to reap an addition 832 million dollars in gross profits from is electricity wholesale business. Now they did this, apparently, by holding back supply to the market once Hazelwood shut in March of 2017. That, in turn, forced up the price of electricity generated from their other generators. They’re able to do this because in the case of AGL they control nearly a third of the entire national energy market. It seems like an odd market to me.

Now the Victorian report follows an Australian Energy Regulator Report from last year, and that found that the exit of Hazelwood removed a significant lost cost fuel supply that drove prices higher. The Victorian Report reckons that residential consumers, all of us, have been paying 200 dollars a year more on average in the wake of Hazelwood’s closure. Bear in mind if Labor and their anti-coal energy policies come to be law, well independent research reckons that wholesale electricity prices will rocket a further 58%. The average wage will be hit by over nine thousand dollars over time, and yet the true believers still believe more renewables equals cheaper power. Well, some people will never be convinced I guess it’s amazing.

Common sense at least in this space always lingers when Craig Kelly has something to say. He’s, of course, the Member for Hughes. He also sits on the government’s committee for environment and energy. I’m glad to say Craig Kelly joins me on the line. Good morning Craig.

Craig Kelly: Yeah, good morning Michael.

Michael McLaren: I mean this is game, set, and match isn’t it with all this nonsense about how we need to get rid of coal?

Craig Kelly: Well there’s a few points that need to be made. Firstly, with Hazelwood there was a proposal to close it down. Now a lot of us warned what this would do to electricity prices. Now the reason that Hazelwood closed down was because the Labor government in Victoria and Daniel Andrews tripled the royalties on coal. That turned Hazelwood, it made the business unprofitable and basically, they chased them out of town. At the time Andrews and I think the lady’s name is Lily, that’s the energy minister down there. They said not a problem we’ve got all these renewables coming in. We’ve got all these wind turbines, all these solar panels. We don’t need Hazelwood. It will only have a very minor effect on prices.

Craig Kelly: Now that report only tells part of the damage. We look back and these numbers are all public. In February 2015, before Hazelwood closed down and before the Norther Power Station closed down, and before the Labor government in Victoria tripled the royalties on coal. The wholesale price of electricity average for the month was 28 dollars a megawatt hour. That’s with Hazelwood in, and the Northern Power Station in.

Michael McLaren: 28 dollars a megawatt hour?

Craig Kelly: 28 dollars a megawatt-hour, February 2015. Now the numbers from February this year 2019 in Victoria were 111 dollars a megawatt hour.

Michael McLaren: So 4 times the price.

Craig Kelly: That’s not double, that’s a fourfold increase in price. That price gets paid to everyone that generates electricity. So the biggest winners of this are the coal generators like AGL. They benefited from their competitors exiting the market, so they’re still there with their coal-fired power stations. Now there’s no one that’s spent more money over the last couple of years in this nation than AGL, vilifying coal-fired power. Saying how we need to change to renewables because they’ve got the most to gain or the most to lose if a new competitor comes in with a coal-fired power station. That’s what this report clearly shows to that.

Michael McLaren: Of course AGL, the operators of Liddell in New South Wales, they also have Bayswater. There’s a big argument over whether indeed the state government should of privatised those assets and let AGL in. That’s perhaps a debate for another day. They’ve got those assets, they’re very on the record as you know. They wanna shut down Liddell, one would only imagine that would further improve the profitability of Bayswater, wouldn’t it?

Craig Kelly: Look this is what we want, let’s at least learn from the failures of policy about allowing Hazelwood to close and try to chase it out and think you can replace it with intermittent renewables. Now AGL know very well if Liddell exit the market in 2022 that will keep the wholesale price of electricity high.

Michael McLaren: Sorry Craig, before we go on can we explain for the listeners who may not yet understand why that’s the case. My take is this, as soon as you take out guaranteed dispatchable power coal you replace it with renewables. That seems the way to go, but they’re not as reliable. When they’re not performing, because it’s a cloudy day or the wind isn’t blowing or whatever. The last few existing coal-fired power stations are asked to pump out more, but they can charge more to fill the gap. That’s the story, isn’t it? If you own the last few coal-fired power stations then you can see the dollars roll in.

Craig Kelly: Now just remember the way the wholesale price of electricity works it’s on a bidding market, where everyone gets paid the last bid. Where there’s a shortage of supply on the market, let’s say the last person to bid in the last ten megawatts of the market. These are the last megawatts the market needs could be someone with an old diesel generator. They can ask up to 14 thousand dollars a megawatt hour. We saw this earlier this year in Victoria and South Australia, where these coal generators were actually being paid 14 thousand dollars a megawatt hour. Because they get the last prices, well everyone gets paid that 14 thousand dollars because of the shortage of supply. When a few years ago I’ll give you 20 and 30 dollars a megawatt. This is why there’s no other market that operates like this. Why you cannot leave the market short of dispatchable power.

Craig Kelly: This is why we’re going to so much effort in government to try and get more baseload power underwritten. Because the route is no one, even though we’re seeing hundreds if not thousands of coal-fired power stations being built all around the world.

Michael McLaren: Funnelled with Australian coal.

Craig Kelly: Yeah, they can pay the premium to import the coal from Australia. There’s hundreds of these being built. The reason it’s not being built in Australia is because the risk of the change in government policy. That’s why we’ve got all these proposals on the table. Now there’s at least half a dozen proposals for new coal fired generators. They can make a go of it, they can run profitably, but they just need a guarantee that a future Labor joint government is not gonna change the rules.

Michael McLaren: What do you say to some of your colleagues as well, who are on the record saying we really shouldn’t have any new coal-fired power stations. If the government has to underwrite it or guarantee it because the banks won’t. We’re not in the business of that, they say and they chant this mantra as you know Craig. They say the market has to decide, let the market. Surely the role of government is to step in if the market is not delivering for the citizens. In the case of electricity, the market is failing the voters.

Craig Kelly: We are talking about an essential service, this is not like …

Michael McLaren: It’s not optional.

Craig Kelly: It’s not like a hamburger restaurant or new café that the government has to get involved in. This is an essential service a life saving essential service. Now throughout our history almost every coal-fired generator in this nation has been built by the government, because of the high amounts of capital that are involved and because of the length – they need to go and get a return over 50 years. It’s the one area, it’s one of the very few areas where the government has a clear role to play. To underwrite to make sure, otherwise, what do you do? You just sit back and watch that we don’t have enough dispatchable power in the nation and the lights go out? Or we sit back and we watch our industries close down one after the other and go and move to China? Is that what we’re meant to do?

Michael McLaren: And say oh well that’s the market for you what can you do?

Craig Kelly: We also, we’re talking about China, now the Chinese National Office of Statistics came out with some numbers only recently. Last year in China what they added in just 12 months in their coal-fired electricity generation, they actually generated three times more than they’re total capacity. So if we hadn’t closed down every single coal-fired power station in this nation last year, China added, in 12 months, three times more than that.

Michael McLaren: Of course in this space, we’re told all the time, particularly by people like Daniel Andrews in Victoria. The Labor Party, the Greens, some of your own colleagues. They say renewables are becoming cheaper and cheaper all the time, Craig Kelly, get over coal, forget it. Renewables are the way to go, it’s gonna bring down power prices. Well the Australian energy regulator, the AER was asked by your government, in fact, to examine what occurred in Victoria and South Australia in the electricity markets post-Hazelwood in March 2017. This is separate to the report we were speaking about earlier. But the AER report found that the exit of the generator, the exit of Hazelwood removed a significant lost cost fuel supply that drove prices higher. Even the government report says even if you start taking these coal generators out prices are going up not down up.

Craig Kelly: Exactly, look I hear people say this the renewables are cheaper now because the prices have come down. But you are not making an apples for apples comparison. You cannot compare the price of electricity that’s generated on an intermittent basis when the weather is favorable, against electricity that you can generate on demand. They’re not the same product, they’re not interchangeable. Even if you could get your wind power and your solar power for free, the cost of backing those up and you gotta be able to back them up 100%. If you have a day with no wind you gotta be able to generate all the electricity that you need without any wind power. The same during the night time, you gotta be able to generate. In the middle of the night, we can have times where there’s no solar power and there’s zero wind. And you’re still gonna be able to guarantee supply. You’ve gotta back these things up 100%. When you add these costs on the idea that renewables are cheaper is just a complete fallacy.

Michael McLaren: Even the Victoria Energy Policy said a report, the one we started talking about, that backs it up as well. They say, in fact, the generators themselves say that wholesale power prices surged after the shut down of Hazelwood. After the shut down of the 16 hundred megawatts coal-fired power station at Hazelwood. Now that’s one issue, but the other issue in this report is the issue of market manipulation by the big energy companies. We’ve established prices certainly went up, but how much of that was to do with the fact that renewables were replacing coal? How much was to do with the fact that some of these companies like AGL clearly have too much skin in the game and may well have a vested interest in forcing prices up?

Craig Kelly: Well this is why we wanna strengthen our competition laws, we’ve currently got proposed laws that would enable divestiture. Let’s say for example AGL decided to close their Liddell power station down, to reduce the amount of supply in the marketplace. Now if that was found to be an anti-competitive activity the proposal that we have, the legislation that we have ready to go before the Parliament could result in the same competition, also the same provisions that supply in the USA that that company, there would be a divestiture order. That would mean it doesn’t mean the government takes it over, it means they would be forced to break themselves up into smaller companies competing against each other. Now the other thing that is clear from this report today that legislation is essential for our nation.

Michael McLaren: This is the big stick energy policy you’re talking about.

Craig Kelly: This is the big stick. So what it does is if these companies are gonna act in an anti-competitive way to gauge consumers, that the courts would have the power with ACCC to bring a case against them for acting in an anti-competitive way. That the company would be broken up. Similar to what happened to Standard Oil in the USA back in the early part of the last century.

Michael McLaren: Well is it time for a Royal Commission into this Craig?

Craig Kelly: We’ve got the law set, now what’s stopping those laws at the moment is we’ve got the Labor Party and Bill Shorten saying he wants to be the friend of the big energy companies and put their interests ahead of the interests of consumers. Now I would hope after this report today that Bill Shorten and the Labor Party sit down and have a look at it. They say look we’ve got this wrong, we’ll support the Coalition on this policy. If they do we’ll still have a couple of days in Parliament left. We can still even have a possibility of getting this legislation through before the election. It all depends, we can’t get it through with the limited time in Parliament. We can’t get it through without the Labor party’s support. I would hope the Labor party would admit they’ve got it wrong and come support us on this.

Michael McLaren: Well everyone should hope that because it’s costing consumers three billion dollars a year while nothing happens. Good to talk. That is an extra three billion extra. Good to talk Craig, we’ll speak again soon. Thank you so much for your time.

Craig Kelly: Thanks Michael.

Michael McLaren: That’s Craig Kelly there, the member for Hughes and as I said also he’s a part of that committee for environment and energy.
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