Subsidised Wind & Solar Root Cause of Every Power Pricing & Supply Crisis

Germany, Denmark, South Australia, California, the list of places that prove our headline grows by the day. The wind and solar cancer that saw South Australia suffer the country’s only statewide blackout and end up suffering the world’s highest power prices, bar none, quickly spread and has now taken hold across the entire Eastern Grid (which takes in Queensland, New Wales, Victoria and Tasmania as well as SA).

Wholesale power prices have more than doubled in the last six months; retail power prices are rising at double-digit rates each year – consumers face a minimum 18-20% jump in their power bills next month; and power rationing by postcode is the new normal, whenever the sun sets and/or calm weather sets in.

The last thing Australia needs is another MW of intermittent power generation, which means slashing subsidies to wind and solar, right now, re-engineering the electricity market and returning it to the condition it was in before subsidised wind and solar destroyed it.

Labor’s Energy Minister, Chris Bowen, however, apparently didn’t get the memo. Instead, he’s determined to exterminate every last vestige of reliable power generation in this country.

We’ll cross first to The Australian and another well-crafted piece by Claire Lehmann and then we will give a little insight into how Australia’s electricity market was corrupted by rent-seekers profiteering from subsidised wind and solar.

Energy crisis won’t be solved by wind and sun
The Australian
Claire Lehmann
24 June 2022

Nigerian Vice-President Yemi Osinbajo recently lambasted the rich West for its hypocrisy on energy policy. Writing in The Economist, he declared “rich countries, especially in Europe, have repeatedly called for African states to use only renewable power sources”. Objecting to the patronising efforts of Westerners to prod Nigerians into “leapfrogging” over fossil fuels into wind and solar, Osinbajo points out that a moratorium on fossil fuel sentences Nigeria to poverty. “Though solar will provide most of our power in the future, we still need natural gas for baseload power.”

Osinbajo is right with regard to the African continent, but rich Westerners are hypocritical at home as well. Advocates of new-generation renewables will often argue that we must choose wind or solar – or submit to the ravages of a changing climate. But this is a false choice. Some European countries get more than 90 per cent of their electricity from low carbon dioxide sources, such as France (nuclear energy) and Norway (hydropower). Yet no country gets most of their electricity from wind or solar.

In fact, the percentage of the world’s electricity that comes from clean sources has remained stagnant since the 1980s. Although there has been a boom in investment in wind and solar, there has been a lack of investment in nuclear. When nuclear plants shut down, coal-powered plants tend to replace them. Unfortunately, this lack of investment in nuclear has cancelled out the reductions in CO2 emissions made by new-generation renewables. In 1985, 35 per cent of the world’s electricity came from low-CO2 sources; by last year it was just 38.26 per cent.

One of the greatest lies told about climate change is that solving the problem is simply a matter of willpower. If only governments around the world would listen to Greta Thunberg and Simon Holmes a Court, and install solar panels and wind turbines at a faster rate, then temperatures would stabilise. Unfortunately, the problem of climate change is not simply a matter of goodwill. If it were, the Germans would not be reopening their mothballed coal-fired power plants after pledging to be coal-free by 2030.

The Dutch and the Austrians, similarly, would not be following the Germans in reopening their coal-fired plants as well, a week after Russia halted gas deliveries via the Nord Stream 2 pipeline.

“The cabinet has decided to im­mediately withdraw the restriction on production for coal-fired power stations from 2002 to 2024,” Dutch Climate and Energy Minister Rob Jetten told media.

“The situation is serious,” said German Economic Affairs and Climate Action Minister Robert Habeck. “It is obviously Putin’s strategy to upset us, to drive prices upwards and to divide us … We won’t allow this to happen.”

It is becoming increasingly clear that one of the biggest catastrophes of modern geopolitics has been Europe’s entanglement with Russia over energy. During the past five years, while the West was busy taking policy advice from a teenager, Russia was at work fracking and drilling for oil.

Back home, our politicians persist with the fanciful notion that an entire country’s electricity grid can be powered by wind turbines and solar panels.

On June 16, Andrew Wilkie tweeted: “While the Aus Govt’s target to cut emissions by 43% by 2030 is a step forward, it’s still not good enough. We need a 75% reduction by 2030 & net-zero by 2035. The only way to do this is to quickly phase out coal, gas & oil & fast-track to 100% renewables.”

When Climate Change and Energy Minister Chris Bowen was asked by Nine journalist Chris Uhlmann about whether the solution to Australia’s recent energy crisis (during which the Australian Energy Market Operator suspended the electricity market to ensure supply) was to invest in the continued maintenance of our coal-fired plants, Bowen fired off an angrily defensive reply. Yet just a week later, emergency powers were invoked to block the export of coal in the event of such a crisis happening again.

In response to our recent power crisis, environmentalists at home have called for a blockage on gas exports, a gas export tax and increased government subsidies for battery storage technologies. Yet these are simply Band-Aid solutions. To ensure energy security, Australia needs to extract more gas, invest in and maintain our existing coal-fired power plants, and think seriously about a long-term transition to nuclear energy. While nuclear energy is often dismissed as being too costly, the question is: compared with what? The battery storage required to power the whole of Australia has been estimated to cost $6.5 trillion. If this is a cost-effective solution, then God help us all.

An inconvenient truth is that the push for wind and solar may have other motivations than simply concern about climate change.

Last year, The Economist constructed a portfolio of companies that would benefit from the world’s energy transition and estimated that these companies had a total market value of $US3.7 trillion. Tracking these companies’ economic performance, it found that since the start of 2020, they had performed twice as well as the S&P 500, with the “greenest 25% of firms (seeing) their share prices rise by 110%”. But the problem is, according to The Economist, that 30 per cent of these companies do not yet turn a profit.

Just as the cryptocurrency bubble has burst this year, the new-generation renewable energy bubble is likely to burst in the foreseeable future. While big money has piled into the push to transition energy – and this investor exuberance has led to increased pressure on politicians to “transition faster” – the real world presents obstacles in the form of physics and thugs such as Vladimir Putin.

When Putin continues to use energy as a weapon against Europeans, a Nigerian vice-president calls out the hypocrisy of Western leaders, and when countries such as Australia are threatened by blackouts, more people will start to see through the wind and solar hype. The question is, will Australian politicians continue living in a fantasy or will they have the courage to face up to reality?
The Australian

Some fair points, Claire. But we thought it timely to provide a little depth to the analysis – the hows and whys that have led to Australians suffering routine power rationing and continually rocketing power prices, notwithstanding the abundance of coal, gas and uranium under their feet.

This country’s shortest route to solving its immediate power pricing and supply calamity is to fix the power market dispatch rules, which give preference to intermittent wind and solar.

Once upon a time, those rules required electricity generators to tell the grid manager when and how much power they intended to deliver, and over what time-frame.

Demand was forecast in advance, based on seasonal variations, time-of-day and day of the week, with allowances made for extreme weather conditions, when the use of air conditioners (either for heating or cooling) would lead to spikes in demand. Supply was organised according to schedules to match forecast demand.

Generators hoping to participate in the National Electricity Market were required to offer power according to scheduled demand, in a manner that would satisfy all power consumer’s needs.

Then, along came wind power.

With their output determined by the weather, wind power generators determined to rewrite the rules, they could never satisfy.

The Genesis of the disaster occurred in 2000 when the Liberal/National Coalition headed by PM, John Howard introduced Federal legislation dictating the purchase of wind power on a mandated basis, with subsidies paid to an eager band of rent seekers; Babcock & Brown headed the queue.

Initially, the target was modest, but the die had been cast. For a full breakdown on the origins of the RET see this article by Ray Evans and Tom Quirk: The High Price of PC Power from March 2009.

After Kevin Rudd’s Labor government took power in 2007, the Renewable Energy Target was jacked up ten-fold to 45,000 GWh: 41,000 GWh of wind and large-scale solar (LRET) and 4,000 GWh of domestic rooftop solar (SRES).

Under the dispatch rules that then existed, wind power was designated “non-scheduled”, which meant that wind and large-scale solar power outfits had no right to dispatch power to the NEM, unless the grid manager, the National Electricity Market Management Company (NEMMCO) permitted them to do so. The alternative was to try and meet the requirements set by the definition for “scheduled” generators: namely, guaranteeing delivery of set volumes of power, over a pre-determined time-frame. Obviously, the fickleness of Mother Nature meant wind and solar generators could never satisfy that definition.

Moreover, the grid manager hits “scheduled” generators with substantial financial penalties, in the event that they fail to deliver power according to the pre-ordained schedule.

Unable to satisfy the dispatch rules, the wind lobby did the next most obvious thing: it rewrote them.

The Australian Energy Market Commission was inundated with complaints about how unfair it was that wind power outfits were unable to ‘compete’ in a market where customers had this pesky habit of demanding power as and when they needed it, rather than having it delivered at crazy, random intervals.

If a wind power outfit wanted to guarantee regular participation in the NEM, it effectively had to build an equivalent capacity in fast-start up gas (Open Cycle Gas Turbines) or diesel generation to match whatever wind power capacity it built.

AGL did just that back in 2001, when it built its Hallett Power Station (200 MW of OCGTs that it runs on diesel), in order to match the wind power capacity, it was then planning to build between Jamestown and Hallett.

The cost of building utterly unreliable wind power capacity – as well as being forced to build additional reliable plant to compensate for the inherent intermittency and unreliability of weather-dependent wind – was viewed with contempt: operators like AGL determined that it was much fairer to pass the true cost of intermittent wind power generation to somebody else; namely, Australian power consumers.

The AEMC (packed with Big Wind friendlies) willingly obliged: under its Rule Determination issued in May 2008 it created an all-new category of generator defined as “semi-scheduled”, tailored to suit the chaotic delivery of wind and solar. Masters of the English language might scratch their heads at a linguistic concept that sounds a lot like the idea of being half pregnant.

The new dispatch rule came into force in January 2009 and the rest, as they say, is history: from that point forward, thousands of turbines with a combined capacity of 9,854 MW were speared across four states and connected to the Eastern Grid.

Over the last six years, plenty of large-scale solar has been rolled out across SA, southern Queensland and northern New South Wales, enjoying the same care-free classification: “semi-scheduled”.

From 2009, semi-scheduled wind and solar were then, and thereafter, entitled to dispatch electricity to the NEM, whenever the wind and sun permitted.

Critically, the failure of a semi-scheduled generator to deliver power to the grid has no consequences at all for the wind or solar power outfit concerned. Consistent with their general manner of operation, it was all care and no responsibility for the wind and solar industries, from then on.

The conventional generators (coal, gas and hydro) are still designated “scheduled” generators: a failure to deliver according to the agreed schedule results in the imposition of very substantial financial penalties. True it is that their operation isn’t dependent on the time-of-day or whether the wind is blowing, which makes them unlikely to be hit by those penalties. However, they still need to schedule, well in advance, if they wish to participate in the market, at all.

Once a coal or gas-fired plant is scheduled to deliver, that plant must remain online at all times, irrespective of whether it’s able to dispatch power to the grid.

When the wind is blowing and the sun is up, wind and large-scale solar generators use the value of their Renewable Energy Certificates – they receive one REC for every MWh dispatched, with a REC currently worth $50 and at times up to $89 – to undercut coal and gas generators. Those generators (forced to remain online because they’re scheduled and would face penalties if they didn’t) continue to burn fuel, pay wages and overheads, but are unable to dispatch electricity and earn revenue.

So, the scheduling rules that need immediate attention involve a double whammy for conventional generators: they suffer financial penalties imposed by the grid manager if they fail to deliver power according to the grid manager’s pre-ordained schedule; and they suffer financial losses because they can’t deliver power when the sun is shining and the wind is blowing, even though they continue to burn coal and gas and run up other costs. Hence, the increasing number of breakdowns of coal-fired generating units, that require urgent repairs, due to a lack of scheduled maintenance. Which the MSM refers to as “coal outages”.

If anyone studying the operation of markets is looking for an example of an unequal playing field, Australia’s electricity market is it.

While there’s been plenty of talk from Liberal and National backbenchers over the years about refurbishing Australia’s existing fleet of coal-fired power plants and building new High-Efficiency Low Emissions coal-fired plants, unless and until the dispatch rules are returned to what they were in 2008, conventional generators will suffer the same disadvantage that’s making them unprofitable, now; and which has done so, since 2009.

The first and most obvious step towards restoring reliability to Australia’s power grid and affordable power to Australian power consumers, is redefining wind and large-scale solar as non-scheduled generators. By that definition, wind and solar power outfits would no longer be able to participate in the NEM, without the permission of the grid manager. Scheduled generators, on the other hand, would be able to dispatch electricity according to the schedule, without interference from chaotically intermittent and heavily subsidised wind and solar.

The alternative is to classify all generators as “scheduled” generators; thereby requiring wind and solar power generators to actually compete in the power market and to suffer the same financial penalties that apply to every other generator in the market. Either way, the characters who keep claiming that wind and solar are truly competitive would get the opportunity that they fear the most: a head-to-head with coal, gas and hydro.

If Labor PM, Anthony Albanese ever wants to meet his promise to cut power prices, his other target must be an immediate end to the subsidies directed to wind and solar (currently worth more than $7 billion a year) that created the mess, in the first place.

The direct cost of those subsidies is added to every Australian power bill; namely the cost to retailers of purchasing the mandated number of Renewable Energy Certificates each year: the mandated requirement hit 33 million in 2020, with that number needed each year until 2031. The alternative for retailers is paying the shortfall penalty, a $65 per MWh fine imposed for failing to meet the LRET’s mandated targets, set by the Federal government’s Renewable Energy (Electricity)(Large-Scale Generation Shortfall) Act 2000.

The indirect costs of intermittent wind and solar are also born by power consumers, totally unnecessary costs which include: power market gaming around wind and solar output collapses, that send the spot price all the way to the regulated market cap of $15,500 per MWh, for power that – before the destruction coal-fired generator’s ability to dispatch power in lockstep with demand – cost those generators less than $50 to deliver to the grid; and escalating distribution costs, the result of building networks to take spurts of ‘occasional’ wind and solar power from hundreds of increasingly remote locations.

Not that any of the above will signify with the current energy intelligentsia. But we thought it worthwhile throwing a little light on the subject, as an antidote to the ingrained ignorance and practised delusion that currently prevails among politicos and the MSM.

Bowen signals the only direction for power prices on his watch.