Energy costs continue to dog industry

My article in today’s The Australian addresses

1             Treasury hiding the fact that the carbon tax would need to be double its $34 per tonne assumption to meet the 2020 5% emission reduction target

2             The Environment minister is expressed satisfaction that the decline in electricity consumption means what even with the Liberals diluted tax the 2020 target is within reach

3             The reduction in electricity stems from a deindustrialization caused by the tax and regulation induced higher prices (and has no effect on global emissions)

4             The renewable program continues to add costs to electricity – about 40% to the wholesale price on current trends.

Tony Wood from the ALP’s taxpayer-funded think tank the Grattan Institute has a thoughtful piece in today’s AFR.  It analyses the dilemmas caused by lower demand for conventionally wired electricity.  Unfortunately it neglects to mention the lamentable contribution of the Grattan Institute’s promotion of carbon taxes and other restraints on the forced reduced demand for electricity.


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10 Responses to Energy costs continue to dog industry

  1. Andrew of Randwick

    I do think that Treasury was hiding the future prices for carbon emissions. The media just did not read or publish what they were saying (See page 37 Strong growth low pollution: modelling a carbon price report on July and Sept 2011).
    In 2012 and 2013 Budgets it was quite explicit that a straight line interpolation method was being used to connect the initial $24 to the future high number rather than using any futures market price signals from the EU. The high number being the price that the EU ETS system needed to smash the European economies into shape so that they reach their EU published targets of emissions reduction (5% of 1990 levels) by 2020
    That this method overestimated Budget revenues is another story.

  2. Oh come on

    A mate of mine is an electronic engineer who has a senior technical position at a large power generating utility in Oz. (He’s also a fully paid-up believer in CAGW.)

    I was talking to him about the widespread installation of solar panels across the country, and suggested that must take a lot of pressure off them to increase capacity. I was surprised to hear he thinks the proliferation of rooftop solar panels is going to turn out to be hugely expensive – and possibly disastrous – for the power generation industry. The huge base-load coal fired generators that provide the vast majority of our energy are stopping and starting much more frequently than they should be due to the transient production spikes and troughs a sunny (or cloudy) day cause. As a consequence, the operating life of these generators has been shortened dramatically, and they are much more breakdown-prone. The chances of a catastrophic failure of one of these generators is much increased due to the unpredictable generating patterns of all these decentralised renewable energy production units. He thinks that rooftop solar systems should be isolated from the grid, or be required to install (very expensive) battery capacity to store solar-generated energy when the grid does not require the feed-in to reduce the strain and protect the base-load generators.

  3. Rob MW


    (OT) – have a go at comrade Gittins in the ‘Age’ this morning. Straight out of Karl Marx’s handbook of how to run an economy. (1) an economy doesn’t need to produce anything.- (2) don’t worry about competition. – (3) cost of production should be a minor consideration – (4) fix the poor vs rich bullshit with everybody earning the same in wages – (5) don’t worry if everybody ends up unemployed (recessions & depressions are just a minor inconvenience) – (6) redefine ‘Profitability’ to say: “Forget the feeling of grief when deprived of something of underlying value” – (7) curtail ambition and initiative because it disrupts the bare bones of society.

    Gittins article:

    “In summary, McAuley says we need to understand the risks of being too dependent on natural resources, break from our old obsession with producing physical products, focus on increasing customer value and not just reducing costs, get rid of the class struggle model of economic activity, stop thinking the only goal is job creation and develop realistic ideas about the rate of profitability.

    ”We pay far too little attention to our human capital. We still see education expenditure as an expense, or even as a welfare entitlement. And we pay even less attention to our environmental, social and institutional capital,” he concludes.

    It’s hard to imagine Abbott has any of these things in his field of vision.”

  4. Thanks, “Oh come on” for those revealing comments.

    I would add the erratic output of wind power also as a factor requiring base load stations to be operated in ways they were not designed for. There have been moves to build gas turbine generators to assist this issue as they can be racked up and down easier – eg a project at Dalton N of the ACT – which I think I read is on the back burner now.

    Surely nobody is surprised that after over a decade of squandering national wealth on green power schemes – there will be a price to pay – and we are seeing that now in power bills and de-industrialization.

  5. MiltonG

    On top of all the ‘carbon’ add-ons and resultant mothballing of relatively cheap coal generation it now looks like the Queensland government is playing with the power market. The government-owned generation duopoly has recently tickled electricity ‘market’ prices in Queensland up by 25% by making fewer contracts available to retailers and large buyers.

    This will also allow Newman & Co to monetise their monopoly power in an asset sale, just like the Bligh government did when it unilaterally hiked rail freight rates before the QR sale.

    Where do the Competition Authorities hide when government does the gouging?

  6. Andrew of Randwick

    Thanks Oh come on and Wazsah.
    The renewables generators never tell you that the only way to ensure a smooth and controllable electricity supply is to couple their generators to a pumped storage / dam/ hydro generation system.
    That such a system would be around 60% efficient on the pumping up and 80% efficient on the generating down means 50% of all power would be lost – thus the true cost of useful electricity is twice what they claim.

  7. Oh come on

    Basically, if the ‘solar revolution’ continues to spread, we’re either going to have to learn to live with frequent, widespread, possibly prolonged supply interruptions due to breakdowns (which will be economically disastrous) or phase out much of the capacity provided by large base load generators and replace this with many smaller gas powered generators which can be stopped and started much more quickly. This would of course be phenomenally expensive, and these smaller generators are also much more expensive to run. So power bills will skyrocket. Go solar! Thanks, greenies!

  8. Leo G

    The Environment minister is expressed satisfaction that the decline in electricity consumption means what even with the Liberals diluted tax the 2020 target is within reach
    If the decline in consumption is a consequence of the increased cost (not price) of generating electrical energy, then considering that productivity is in one sense a measure of energy transformation, why should the Environment minister be so smug?

  9. Greg Byrne

    Whom the gods would destroy they first make mad.

  10. Channel 9 ACA last night had a segment promoting Dawn Fraser spruiking rooftop solar power installations by Awesome Solar
    Is nobody in Govt asking – “what is this creeping expansion of rooftop solar doing to our electricity grid longer term”.
    Does anybody know what Govt rebates are now.

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