Total Flop: 20 years & $60 Billion in Subsidies, Wind & Solar ‘Deliver’ Risible 7% of Australia’s Power Demand

The line that Australia’s rocketing power prices will soon plummet is just a cruel hoax.

The subsidies for large-scale wind and solar under the Federal government’s Large-Scale RET will total more than $60 billion over the life of that scheme: the Renewable Energy Certificates issued under the LRET have already added more than $18 billion to power bills, so far.

And then there’s the billions in taxpayer’s money ladled out by the Clean Energy Finance Corporation in soft loans to wind and solar power outfits, as well as billion dollar gifts and grants from the ARENA fund, eagerly lapped up by renewables rent seekers.

Contrary to the propaganda dished up by the Coalition government, and those that spruik for RE outfits, the subsidies doled out under the LRET do not end in 2020. Far from it.

The LRET target is set by s40 of the Renewable Energy (Electricity) Act 2000 (here).

Under the LRET the greatest single industry subsidy scheme of all time really only hits its straps in 2020, as the target reaches 33,000 GWh of mandated renewable energy – it runs at that rate until 2031.

But, despite a surge in solar and wind projects over the last couple years, their collective contribution to Australia’s power demand amounts to a trivial 7%.

And yet, the mainstream press would have it that we’re already well on our way to an all wind and sun powered future. It is, of course, patent nonsense.

Moreover, the failure to satisfy the mandated targets under the LRET will result in substantial financial penalties imposed on retailers, which themselves will add up to hundreds of $millions, each year; and all added to retail power bills.

Retailers are effectively forced to purchase RECs, with their alternative being a fine (referred to as the “the shortfall charge” – a ‘stealth tax’ on power consumers directed to general revenue) set at $65 for every MWh the retailer falls short of the annual LRET target.

The fine is not tax-deductible (where the REC as an expense is), meaning that the true cost of the shortfall penalty is $93, assuming a corporate tax rate of 30%. RECs are ordinarily purchased under long-term Power Purchase Agreements (rather than from the spot market), which set the price for electricity and the certificate at around $110 per MWh; the value of the certificate is in the avoidance of the shortfall penalty. Hence a notional REC price of around $85.

Here’s The Australian’s, Adam Creighton with a snapshot of Australia’s self-inflicted renewable energy disaster.

Renewables well short of electricity target
The Australian
Adam Creighton
12 July 2019

Less than 1 per cent of electricity was generated by solar power last year according to new figures that show renewable energy’s share of electricity generation falling short of the Renewable Energy Target.

Solar and wind power combined produced 15,000 gigawatt hours of electricity in the 2018 financial year or 7 per cent of the total, less than half the level required under the government’s RET. The target will require retailers to buy 33,000GWh of renewable energy (excluding hydro power) by 2020.

Tony Wood, an energy expert at the Grattan Institute, said the target would nevertheless be achieved, citing more recent figures from the Australian Energy Regulator that indicated a significant ramp up in capacity this year.

“The uncertainty around the RET caused a delay in renewable investment, so this and next year should see a significant step up in renewable generation,” he said.

The Abbott government reduced the RET from 41,000GWh to 33,000GWh when it became clear the original target would have equated to about 26 per cent of all electricity being sourced from renewable sources — rather than the 20 per cent intended when the target was set — owing to a smaller-than-expected growth in electricity demand.

Rising power prices prompted a series of inquiries into how electricity is produced and sold.

“Only 39 per cent of consumers trusted the retail market and 25 per cent of consumers are confident it works in their interests — lower than for telephone, internet, insurance, water and banking services,” the AER said in its latest power market update.

The ABS figures showed total electricity generation rose 5.1 per cent to 245,300GWh in the 2018 fin­ancial year compared with three years earlier.

The contribution from coal fell from 65 to 63 per cent, while the gas share increased from 21 to 22 per cent. Renewables in total rose from 12 to 14 per cent, about half of which came from hydro power.

An Australian Energy Council spokesman said the ABS figures included renewable generation built prior to 1997, which would count towards the target: “This means a significant amount of generation from Snowy Hydro and Hydro Tasmania … does not count towards meeting the RET.” Miners, manufacturers and transport firms collectively spent almost $9.1 billion on electricity in the 2018 financial year, up from $7.7bn three years earlier.
The Australian