End Game: Subsidy Wind Down Heralds Collapse in Wind & Solar Investment

Wind and solar power are always and everywhere the product of massive (and seemingly) endless subsidies. Except, there is an end. There always is.

Australia’s Large-Scale Renewable Energy Target expires in December 2030. The 33,000 GWh annual target was meant to be reached with a surge in wind and large-scale solar capacity by 2020, but the volumes of wind and solar actually delivered to the grid next year are odds-on to fall well short of the target, bringing into play the “shortfall charge” a whopping $65 per MWh fine on electricity retailers for every MWh they fall short of the target; the subsidies and the fines get added to (already rocketing) retail power bills.

The inability to deliver electricity as and when consumers need it, means that chaotically intermittent wind and solar have no commercial value, except for the subsidies they attract. Under the LRET the Renewable Energy Certificate aka Large-Scale Generation Certificate is the subsidy. For a rundown of how that scam works see our post: Ticket to Oblivion: Australia’s $60bn Wind & Solar Subsidy Gravy Train Rolls Until 2031

The clock is now ticking as the number of RECs that can be recovered under the LRET by wind and solar outfits before 2030 obviously reduces year by year. With a decade to go, the total number of RECs that a project started now can earn is a whole lot less than a project that was up and running a decade ago.

In its original guise, the LRET is meant to kickstart the ‘glorious’ wind industry which would, eventually, have no need for subsidies, at all. Hence the policy’s built-in sunset of December 2030. Except, for some strange reason, renewable energy rent seekers aren’t so upbeat about their prospects from this point forward.

The Australian’s Chief Economics Editor, Judith Sloan picks up the thread below.

The once easy path to wind and sun riches has not been renewed
The Australian
Judith Sloan
16 July 2019

I call it my Biggest Losers list — nothing to do with weight but everything to do with the degree of torment visited on certain individuals and groups as a result of Labor’s unexpected election loss.

Topping the list is the renewable energy sector. The boosters, the investors and some state governments were banking on a Labor government imposing a higher renewable energy target and restarting the flow of subsidies.

The sector’s nightmare has become reality. Not only has the Coalition been re-elected with no intention of rebooting the RET — it will run out in the early 2020s — but the sector’s bete noire, Angus Taylor, remains Energy Minister with additional responsibility for emissions reduction.

The renewable energy players will not give up without a fight even though the immediate outlook is grim for large-scale operators. There has been a veritable tsunami of investment in renewable energy, particularly in western Victoria and Queensland. On a per capita basis, Australia has had the highest rate of renewable energy investment in the world, with Japan coming in second. (Worldwide, there was a significant plateauing in renewable energy investment.)

So much for those critics who claim the lack of a coherent federal energy policy has led to a paucity of investment in electricity generation — there has been oodles, it’s just been almost exclusively in ­intermittent, large-scale wind and solar as well as rooftop solar PV.

Why is the outlook for the renewables sector grim? The price the generators are receiving during the middle of the day is now close to zero and were it not for the renewable energy certificates that they are still receiving, many would be broke.

The price of these large-scale generation certificates is now below $40, having been worth more than $80 not long ago. The Clean Energy Regulator expects the LGCs to be about $33 across 2019, and the forward price in 2021 is less than $15. This is scary stuff for any industry, particularly one in which there is oversupply at certain times of the day.

Of course, a number of state and territory governments are continuing the flow of subsidies through their reverse auctions and other interventions. But given the competitive nature of these auctions, the profits margins for operators are fine even if the cash flows are guaranteed.

The deteriorating economic outlook for the renewable sector is driving the desperate bid by some players to resurrect the dead, buried and cremated national energy guarantee.

This is being led by Victoria, with its target of 50 per cent renewable energy by 2030, and key players in the renewables industry. It is why they are getting into such a lather about bringing on a Council of Australian Governments meeting so that the topic can be raised. Why would the federal government be interested in even considering the NEG given that the Paris emissions reduction commitment of 26 to 28 per cent by 2030 will be met by the electricity sector by the early 2020s? The reliability component has been dealt with separately, with the reliability requirements now in force.

The only reason the Victorian government and the renewable energy players want to revive the NEG is to insert — or be able to insert — a much higher emissions reduction target. But at this point of time you would have to say there is no chance of the NEG being resurrected.

Don’t get me wrong — there is plenty wrong with the electricity system now and in the future, and I am not just talking about high prices. As the percentage of renewable energy generation increases, the system becomes more unstable and the cost of connecting far-flung installations increases.

In the meantime, the low afternoon prices are reducing the profitability of coal-fired baseload plants, although they are also being used as peaking plants — something for which they are not designed — to accommodate the unreliability of renewable energy. It is hardly surprising that faults are occurring in these plants at an alarming rate.

The Victorian situation is clearly worrying the Australian Energy Market Operator — given the stated partiality for renewable energy of its CEO, Audrey Zibelman — because of delays in connecting up some new renewable energy installations, the lack of storage and the increasing unreliability of base­load stations.

In the meantime, there is plenty Taylor must consider. The operational and regulatory architecture that applies to the energy industry is truly bizarre and needs to be ­rationalised and streamlined.

There is now no need for the Energy Security Board, chaired by Kerry Schott (another fan of the NEG). It should be abolished forthwith. The other agencies tend to fall over each other while putting out contradictory reports.

Using the principles of separating regulation from administration and ensuring transparency, it should be possible to save money while creating a more coherent oversight arrangement.

Taylor also needs to proceed with what has misleadingly been described as the “big stick” legislation. (Given Labor’s incessant bashing of the top end of town, it was ironic that Labor would side with the oligopolistic energy companies — think AGL, Origin and Energy Australia — and oppose legislation to prevent market ­manipulation.) The last thing we want to see is further price spikes associated with the closures, either temporary or permanent, of baseload plants.

We have engaged in an uncontrolled experiment in which ­various governments have sought to ramp up investment in renewable energy in the name of saving the planet.

The end result has been runaway electricity prices and an unstable system. Firming — backing up renewable energy — is expensive and large-scale storage is a pipedream or prohibitively ­expensive.

It will take some time to get the system into better order — the government must encourage more reliable generation — but the ambitious dreams of the ­renewable energy sector are fading fast.
The Australian

About stopthesethings

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

Comments

  1. Reblogged this on ajmarciniak.

  2. Jacqueline Rovensky says:

    “We have engaged in an uncontrolled experiment …”
    So truly and succinctly stated.
    No government anywhere in the world followed the maxim – Do no harm – No Government in the world – Australia included followed the Precautionary Principle when they wholeheartedly fell into step with the UN idiots who pushed for everyone to work toward ‘cleaner’ ways to produce energy.
    Wind Turbines was decided the way to go and no one thought to first ensure these things were capable of truly fulfilling their claims, no one ensured there were clearly defined standards to be followed, which protected all living things including human beings. No one thought to set Standards that could be easily adjusted as technology enabled these things to become bigger, no one thought to ensure the numbers in a project would not destroy environments.
    No they sat back on their haunches rubbing their hands together saying – we are saving the World and doing what the UN dictated we should do. NO thought NO consideration NO brain activity.
    When concerns began to be raised about effects on the environment where both domesticated and wild creatures live as well as human beings, relating to the noises these turbines produce, those who wildly and noisily supported the status quo of not worrying to investigate before forging ahead, shouted down those who questioned the security of these things, delaying attempts to thoroughly research the dangers. When researchers did provide evidence of dangers they were demonised by loud fools who should have known better but were happy to push their own faulty barrow to garner personal media interest.
    The cry continues to going out that energy prices will go down and we will have a clean world environment – all the while prices continue to grow and the world’s air is even ‘dirtier’.
    Some authorities are slowly, oh so slowly, looking into the problem of the noises these turbines produce and the effect that has on people, all the time ensuring they are still supporting the manic process of installation of more and more of these things before the subsidies end.
    Others which are there to look after the environment and protect all creatures are failing and in Australia they simply require project applicants to ‘mitigate’ harm, not prevent it.
    In a current discussion paper from the EPA SA on page 6 point 2.4 they propose ‘The noise generated by existing WTGs from a previous stage should not be considered as part of the background noise in determining criteria for subsequent stages.’
    Now that’s obviously going to ensure a miss representation of the full strength of noise(s) being emitted into the environment isn’t it. How can an Environment Protection body suggest such a thing!
    All Governments around the world should be taken to task about their lack of care of the people they are there to protect, the lack of acceptance they have a duty of care and to ‘Do no Harm’.
    PRINCIPLE 15 of the RIO Declaration states:-
    In order to protect the environment, the precautionary approach shall be widely applied by States according to their capabilities. Where there are threats of serious or irreversible damage, lack
    of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation.
    The onus of proof is now on the sufferer NOT those causing the damage, and those causing harm can with impunity stall and flounder and still go all out to demonise research evidence produced by independent people and bodies. With what appears to be unrestricted Government support.
    Maybe our Governments believe they don’t have the capability to protect their people!
    So they are exonerated and don’t have to ensure the safety of the environment and all that exist within it.
    They only have to follow the dictates of a signed and incredibly faulty Document in its requirements, a document which requires countries to do something that NO ONE EVER ensured was safe and possible to do without destroying Nations viability, living standards and environments.
    The UN is a waste of time and money, it’s run by people without the capacity to understand what Duty of Care means and that ensuring the environments of the World takes more than someone sitting down and pulling a ‘solution’ out of a hat like playing a game of charades.
    Who will pay the penalty for the complete dereliction of duty our Politicians have decided to follow – us and our future generations unless they stop this dereliction of duty and bring us back onto an even Kiel able to live and prosper in a healthy environment for all with plenty of natures bounty to enjoy rather than an industrialised rural and regional ‘dead’ environment.

  3. Son of a goat says:

    Spare a thought for the former head honchos of Senvion’s ill feted 600mw Ceres project here on Yorke Peninsula.
    Overwhelmingly rejected by the farmers and the surrounding communities, its proponents in the form of an “angry garden gnome” and a “Mr Pretty boy” were run out of town with their tails between their legs.

    Alas even with their egos and pride dented, the smell of riches in the form of the RET in their nostrils was too much to ignore.

    Having been stitched up by angry farmers, the angry garden gnome embarked on the audacious project of Australia’s first offshore wind farm the 2000mw “Star of the south” off the coast of the Gippsland. No farmers out there!

    Whilst Pretty boy joined in UPC renewables now infamous 1000mw Robbins island wind farm off the NW coast of Tasmania.
    Why, what could go wrong?
    Only one farmer to deal with and after all, Tasmania was home to the green movement.

    Unfortunately for these poor souls, the Karma train moves in mysterious ways.

    The liberals winning the Federal election was a front on collision that they never saw coming.
    Who would have thought that the Chief priest of the Greenies would come out and condemn the proposed Robbins island wind farm as a bird killer, eye sore and a sellout to a multinational company.

    For the windies the gravy train is now a train wreck.

    Bummer!

  4. toby robertson says:

    Dear STT, how do you think the falling value of REC’S will impact the $60b in subsidy you expect the renewables industry to receive by 2030?

    • Same response as previously. The bulk of the RECs which will be generated and surrendered have already been purchased under PPAs. What gets purchased now is at the margins.

      • toby robertson says:

        does this mean that they are selling renewable credits that have not as yet been generated but have been sold in the forward market? (and hence earned the high 80-85 credit?) I dont really understand how the PPA’s and credits get added together to get to the 60b figure? I dont feel like i understand your points well enough to argue them and that is what i want to be able to do…like you i cant find much upside from our unreliables crusade.

  5. Reblogged this on Climate- Science.

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