Blackout Bitching: Feds Blame States For Australia’s Renewables Fiasco

Australia’s self-inflicted renewable energy calamity was as perfectly predictable as it was perfectly avoidable.

The circus started in 2001, when Liberal PM, John Howard introduced a modest Renewable Energy Target, which translated at the time to around 5% of electricity generation.

Thereafter, wind power outfits, like the notorious Babcock & Brown (which went bankrupt and Phoenixed to became the infamous Infigen) worked on every level of government to expand the Federal government’s RET and to otherwise provide carte blanche to build turbines anywhere and operate them any time, with complete impunity.

For a rundown on how it all began see our post: How a Band of Criminals, Shysters & Chancers Conjured Up the Wind Industry in Australia

Things escalated in 2009, when the Green/Labor Alliance, led by Kevin Rudd ramped up the RET to mammoth proportions. The Large-Scale RET was increased to an ultimate annual target of 41,000 GWh and domestic rooftop solar was split off to become the Small-Scale Renewable Energy Scheme, which was meant to account for another 4,000GWh.

With the LRET threatening to implode in 2015, it was slashed to an ultimate annual target of 33,000 GWh by 2020.

The mandated target and the subsidy delivered wind and solar producers under the LRET and SRES – in the form of Renewable Energy Certificates – cost power consumers around $4 billion a year. The total cost of the Federal renewable schemes will top $60 billion: Ticket to Oblivion: Australia’s $60bn Wind & Solar Subsidy Gravy Train Rolls Until 2031

Meanwhile, South Australia set and met its own 50% RET. Although, all the subsidies delivered came by the Federal LRET and SRES.

Victoria, on the other hand, has set its own 50% RET but established its own VRET with underwritten power prices for wind and large-scale solar. Wind and solar generators in Victoria get the best of both worlds, earning RECs from the Federal LRET and getting guaranteed power prices under the VRET.

But it’s not so much the outrageous subsidies to intermittent wind and solar that have pundits fuming, it is the fact that the subsidies have undermined conventional generators and their ability to deliver power as and when consumers need it.

The ensuing shortfall in reliable generation will deliver mass load shedding and blackouts this summer, whenever the sun sets and/or calm weather sets in.

Predictably, fingers are being pointed in all directions, with neither the States nor the Feds keen to own any of it.

The Australian’s Economics Editor, Judith Sloan weighs into the bun-fight with this article.

The states are shedding power and their responsibility
The Australian
Judith Sloan
27 August 2019

Most people assume the National Electricity Market covers the nation, but neither Western Australia nor the Northern Territory takes part.

And it is not national in another sense: it is not controlled by the federal government. Using Britain as the model, the NEM was established by the federal government but effectively is owned by five states and the ACT. The appointments to the various regulatory bodies that are part of the NEM’s architecture must be agreed by them, for instance.

It was created to better co-ordinate their electricity supplies and to facilitate trade across borders using an agreed set of rules. The NEM has five interconnected regions and the underlying operational system balances supply with demand — most of the time.

It started in late 1998 although Tasmania did not join until 2005. There is often some confusion about an assumed link between the NEM and the privatisation of electricity assets. In fact, the NEM has always operated with a mix of privately and government-owned assets. In Queensland, the electricity assets remain government-owned.

Initially, the NEM worked well, with real electricity ­prices falling until around the mid-2000s. But with the introduction of the renewable energy target — it was first implemented in a small way in 2001 by the Howard government but was seriously ramped up in 2009 — the blame game started.

The federal government increasingly has been regarded as the guilty party for rapidly rising electricity prices, which doubled in real terms across the decade to the end of last year.

But with the RET working towards its effective conclusion — the target set in 2015 for next year has been met — and the value of the renewable energy certificates sinking rapidly, it’s time for the federal government to step away from playing a central role in the NEM and hand responsibility back to the states and territories.

This shift is made more pressing given the looming disaster created by the Victorian government by pushing its own ridiculously ambitious renewable energy target, the VRET. This sets a goal of 25 per cent renewables by next year and 40 per cent by 2025.

It’s not quite as bad in Queensland, although that state also has a foolish renewable energy target — 50 per cent by 2030 — which at least is unlegislated, unlike Victoria. The fleet of relatively new coal-fired generators in that state will underpin reliability for some time as well as maintain its slightly lower prices.

Last week, the Australian Energy Market Operator released its Electricity Statement of Opportunities. The document differed from predecessors in two ways: there was discussion of the cost implications of the difficult market position in several regions; and there was emphasis placed on the need for more dispatchable generation.

Victoria, in particular, looks to be heading for a potentially rough patch across summer, with a significant probability of load shedding — the technical term for the lights going off — on hot days. With two major power stations experiencing outages and needing repair, the prediction is that between 260,000 and 1.3 million households could be without power for four hours.

Notwithstanding this warning, astonishingly, the Victorian government has announced its intention to further legislate the VRET to include 50 per cent by 2030. The clueless Energy, Environment and Climate Change Minister, Lily D’Ambrosio, unconvinc­ingly claims the VRET boosts jobs and drives down energy prices.

And check out his howler from D’Ambrosio: “Victoria’s investment in renewable energy will significantly improve our energy supply and reliability in the coming years — that why it’s so important we continue driving investment in this vital industry.”

But having more intermittent energy doesn’t make it less intermittent, particularly in a small state such as Victoria. The sun still sets and the wind doesn’t always blow. And battery backup is wildly expensive and of short duration.

Just last week, the news filtered through that the electricity-hungry aluminium smelter in Portland, in the southwest of Victoria, is in financial trouble because of power issues. Direct employment at the smelter is about 600, with a further 150 contractors.

The point here is that these are Victoria’s problems caused by the Victorian government’s ill-considered policies. The VRET is likely to lead to the premature closure of the Yallourn coal-fired power station, leading to a repeat of the Hazelwood experience in which wholesale prices almost doubled with that plant’s exit.

Undermining dispatchable power sources while subsidising renewable energy, the installation of which is often at odds with the preferences of local communities, is a highway to higher prices and lower reliability.

Spurred by looming power shortages, there were several predictable self-serving pleas from business groups last week — think the Australian Industry Group and the Business Council of Australia.

As they have done in the past, they pressed for some sort of bipartisan carbon-constraining energy policy certainty to spur new investment. These groups blame the absence of such federal policy for the electricity crisis.

Let’s be clear, what they are calling for is a carbon tax, either explicit or hidden, and we know what happened to that when it was introduced by the Gillard government. And let’s also be clear that a carbon tax has not solved all the problems around the world — the EU, Canada, parts of the US — and it is just misleading to suggest otherwise.

Certainly the federal government is attempting to sort out some of the problems by backing new sources of dispatchable power; by imposing a default price on retailers; by working with some of the states (and companies) to keep some plants going; by introducing a new reliability requirement; and investing in Snowy 2.0.

The bottom line is that if you are worried about electricity ­prices and reliability as well as the possible exit of businesses through power costs, drop a line to premiers Daniel Andrews or Annastacia Palaszczuk. Their policies are causing the real harm. Only their actions can stop the rot.
The Australian