Mandatory renewable energy requirements, a road to poverty

An Op ed piece in the Australian today by renewable energy lobbyist Kane Thornton points out that the renewable energy requirement currently adds only 3-5 per cent to household energy bills.  Another way of saying this is that renewable energy presently comprises 3 per cent of electricity and, as its costs are more than treble those of conventional electricity, and most of the costs of supplying household energy are in the networks the requirement that it be used adds 3 per cent to total costs.

Once the planned 20 per cent renewable requirement is in place and assuming the best wind farm sites are not yet taken, the costs would amplify.

(Addendum: It is double or more of households’ 3-5 per cent share of costs for energy intensive businesses where the energy component of costs is much higher.  The proportion of excess costs derived from renewables will also rise for all users when the carbon tax is repealed)

Thornton’s argument is equivalent to those that could be used to justify on-going subsidies to car assembly.  After all, if the cost premium for an Australian built car is, say $3500, that might mean an ex-factory subsidy of 20 per cent.  And given the manufactured price of a car comprises less than one fifth of a consumer’s annual running costs, voila! the subsidy means a mere four per cent a year to the consumer.

The impositions derived from renewable energy requirements rise year by year and the scheme’s costs are set to become over $5 billion a year by 2020.  Overall, renewable requirements would add about 40 per cent to the wholesale electricity price and would have imposed a total cost of some $23 billion and the program costs are planned continue at least until 2030.

The ALP/Green alliance tried lock-in future spending on renewable energy. To this end it set up the ALP/Green friendly Climate Change Authority (CCA) to provide a report before any modification of the renewable requirements can be contemplated.

Unsurprisingly, CCA’s December 2012 Review found that there was an on-going need for renewable subsidies, pretty much in line with the existing arrangements.

A major consideration was the CCA’s view that this would avoid increased uncertainty on the part of investors.  One CCA member, Elana Rubin, the head of a union super fund, unblushingly, said that such certainty was essential to provide good investment opportunities to super funds.  Investor certainty on the back of a government guarantee?  Nice work if you can get it – and by lobbying hard the wind industry proves they can get it and make the rest of the community pay.

And this undermines another string to the Thornton bow as he claims that the subsidy has generated $18 billion in investment.  That $18 billion in investment needs a price three times its market value to be viable.  Such mandatory dilution of the return on investment is the road to poverty.

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53 Responses to Mandatory renewable energy requirements, a road to poverty

  1. Combine Dave

    Speaking of forced “investment” into renewables, check out the latest tripe on OurSay website.

    http://oursay.org/gabv/sort:vote_count/dir:desc

    Your ideal bank
    Imagine you owned a bank with your family and friends. As the owners, you can decide how the bank operates, who it lends to, how it invests customers’ money, what financial products it sells, which like-minded organisations it partners with.

    What would you do? How would you run it?

    We will take the top three ideas to leaders of the Global Alliance for Banking on Values who are meeting in Melbourne in early March this year

  2. Charles

    It seems that Kane Thornton also has missed the bit about the Renewable Energy Certificates that are issued for wind and solar generated energy. When they are redeemed for money (somewhere in the late $20′/certificate I believe), who pays that?

    I am not sure we have found all the ways we are being screwed on the RET yet.

  3. Andrew

    Charles, does that mean we’re paying 3-5% more for our power for the (bullshit figure of) 3% being generated by the useless forms PLUS paying the World’s Biggest Carbon (sic) Tax that adds another 9% in order to subsidise them??

    If so, that’s consistent with the Germans claiming that “renewables” (sic – they have to renew the blown up turbines every 5 years when they catch fire could be where they got the name) only add 20% to the costs. And of course almost nothing to production.

    Baseload capacity: Zero.

    Peak load capacity: We tested that during the Hottest Day Evah Predicted ™ and found that wind generated 0.3% of our total needs – every time it gets hot in AUS it’s due to a stationary high pressure system which turns off the wind!

    Meanwhile the EU has notified the UK govt that they will declare “renewables” (sic) to be a “mature industry” and therefore no longer eligible for subsidies under the EU’s state aid laws. So literally the ONLY countries throwing money at this rubbish by the end of the decade will be us (and possibly a 4th term Kenyan will be doing it too).

  4. Rabz

    Renewable energy is a criminal, inexcusable misallocation of resources.

    Ideally, the grubs profiting from it (at taxpayers’ expense) would be gaoled.

  5. incoherent rambler

    “Renewable”, a pleasant eupemism for racketeering.

  6. H E

    Seriously does Thornton think we are all thick?

  7. oldmiseryguts

    The Road to Poverty?

    I’m already on it. Latest electricity bill for 1 month. Small house no aircon, 1 fridge, no freezer, no dishwasher = $265.00, for a month!

    Still my wealthier neighbour up the road with his solar panels is enjoying taking some of my money to pay his bills. Some win, some lose. Funny how those with more to start with get the win.

  8. newchum

    When the carbon tax was introduced the Australian Government produced a leaflet explaining “Where every $100 on your electricity bill goes”

  9. Baldrick

    Let’s call the Renewable Energy Target for what it is – a tax, pure and simple.

  10. .

    I don’t think morally anymore I could get a solar system, given the subsidies.

    It might be in your interests to get small scale trigeneration (down to 10 kW). To be more precise this would be mostly hydronic and have more to do with heat exchange, rejection and transfer than it would running off solar cells.

  11. manalive

    I don’t think morally anymore I could get a solar system, given the subsidies …

    By their lobbying, the renewable energy industry like those with solar panels is acting rationally.
    It’s the government subsidy that is at fault.

  12. James of the Glen

    A brilliant summation by Alan Moran.

    In other words, how to bleed a country dry, all in the name of faux science, investor parasitism from within (union super funds) and from overseas.
    And greed from the rent-seekers with the virtual removal of property rights and values of adjacent neighbours. Soviet-style policy is no exaggeration.

    The disasters of such policies are writ large in Spain, Portugal and California, not to mention a number of other European countries to lesser extents, including the UK. And of course, looming in rust-bucket SA.

    Charles (above) rightly refers to the iniquitous Renewable Energy Certificates which are of course the real currency of wind ‘farm’ companies; up to $800,000 per turbine per year (from taxpayers); the electricity is just the bait to catch the REC’s.

    It is a scandal of immense proportions.

  13. Rod

    We are all missing the bigger piece of corruption here and that is the Union backdoor link here:

    This subsidy program has create taxpayer funding to Pacific Hydro , Australias largest Wind Power Development Company, guess who own this company?

    Australia Super!

    Guess whom are the the biggest members of Australian Super?

    Major Labor Unions?

    getting the idea :)

  14. Bruce of Newcastle

    the renewable energy requirement currently adds only 3-5 per cent to household energy bills

    Many if not most of the roof top solar installations here in NSW attract a feed-in-tariff of 60c/kWh.

    That is quite a lot higher than 3-5% above what I pay. The energy companies have to cope with that since O’Farrell tried but couldn’t get out of the contracts.

    Electricity in South Australia seems to be the most expensive, at around 40c/kWh incl GST and without discounts. SA has the highest renewables installed capacity of any state and would be close to the 20% RET target on average. By comparison I pay a bit less than 28c/kWh here in NSW on the same basis.

    That would suggest it is at least 40% more, not 3-5%, and maybe 60-80% more given our solar FIT’s are already wrapped into my Energy Aust bill.

    I call bullshit on the 3-5%. Tell me where my bootleg calc is wrong.

  15. Eyrie

    Andrew “Peak load capacity: We tested that during the Hottest Day Evah Predicted ™ and found that wind generated 0.3% of our total needs – every time it gets hot in AUS it’s due to a stationary high pressure system which turns off the wind! ”

    Not necessarily true. Sometimes it gets hot with quite strong northerly winds. Those are the really high fire danger days. It is likely to be cold in winter with large stationary highs which have extensive strato cumulus cloud cover so neither wind nor solar work.

    Used to do that meteorology stuff for a living. Wouldn’t rely on any predictions.

  16. .

    Many if not most of the roof top solar installations here in NSW attract a feed-in-tariff of 60c/kWh.

    I thought they got 6 c/kWh these days…

  17. James of the Glen

    Rod, well highlighted.

  18. James of the Glen

    Bruce: “I call bullshit on the 3-5%. Tell me where my bootleg calc is wrong”.

    You are correct, Bruce.

    Ever been to a wind farm company “information’ session? Moral and economic bankruptcy does not even start to cover it.

  19. gabrianga

    I take it Elena Rubin hasn’t heard of the Chicago Carbon Exchange ,recommended by none other than Al Gore

    None so blind as those who refuse to see ?

  20. cohenite

    The FIT scheme in NSW at 60c per Kilowatt hour was going to cost NSW $4billion; when Robertson, the maggot who introduced it claimed it would cost less than $300 mill.

    The carbon tax has collected over $4billion, mainly from energy providers with a few now defunct aluminium smelters thrown in.

    Anyway now matter how much the tax or the fucking RET cost the point is renewables do not work; they are intermittent.

    I saw a happy fellow cruising around this morning in his solar battery van; store it for later was emblazoned on his van; this is typical; if you store it for later it means you can’t use it now.

    Australia: home of the solar powered fuckwit.

  21. rebel with cause

    This is the ‘just a cup of coffee’ school of economic analysis that attempts to excuse away marginal impacts because the $’s involved appear small on a per day/per week basis. These claims are not credible – changes at the margin always matter unless demand is perfectly inelastic. What’s more, given the way that powerbills have been increasing by a few per cent year-on-year, this compounds to a very significant increase in power prices over a five – ten year period.

  22. incoherent rambler

    Small house no aircon, 1 fridge, no freezer, no dishwasher = $265.00, for a month!

    Move your house to Canada and that $265 becomes $35.

  23. .

    Very well said rebel.

    rambler – shocking. The fact that we have such expensive energy makes us a joke as a developed nation.

  24. Bruce of Newcastle

    Dot – The FIT for new installations is 8.8c/kWh from memory, although I haven’t looked at it for a while.

    But when the previous ALP government started the scheme it was 60 c/kWh and the sign up was massive. O’Farrell tried to cut the FIT to 20 c/kWh and there was a revolt. Also the contractual basis almost certainly would have prevented it anyway, and legal wrangles would be awful, so he gave up.

    The FIT is only a part of the issue. Many pole top transformers could not cope with reverse flows and had to be replaced. I haven’t counted them all but there are at least 4 big ugly new galvanised transformers on hanging off power poles within about 100 m of my house. Expensive bits of kit – all rolling into the RET cost component of the residential tariff.

  25. Dan

    At how many cents/kWh do the turbine guys have to wholesale their electricity to get a ROI for, say, a five year lifespan?

  26. brc

    Look, people may not realize it, but these are all positive steps forward. It wasnt that long ago these people were arguing your bills would go down because of free energy from the sun and wind, and that wondrous new industries with employment would be created.

    The fact that they are admitting it costs more establishes that they are subsidy whores. All we are doing now is haggling over the price.

  27. brc

    When the carbon tax was introduced the Australian Government produced a leaflet explaining “Where every $100 on your electricity bill goes”

    I still have mine. I plan to scare young children with it one day.

  28. incoherent rambler

    If you want to get an idea of how electricity markets are corrupted, read this

    Tonyfromoz is good value..

    AGL is purchasing the two Macquarie Generation power plants, Bayswater and nearby Liddell.

    Macquarie Generation has accepted the price on offer, $1.725 Billion.

    There are two things I want to explain given what is happening here, and I’ll place them in separate comments so both can be addressed.

    So then, you tell me what is going to happen now.

    Keep in mind that Bayswater is now nigh on 35years old.

    A number of years back now, the owners of the plant were going to upgrade it with Bayswater B, a 2000MW+ site and to appease concerns, they offered up two options. One of them was for a new technology USC coal fired plant, which would have lowered emissions by 17% in comparison with older technology coal fired power plants. The second option was for a CCGT plant of the same capacity. Now while the USC plant was slated to cost $3.6 Billion, and the CCGT was a little cheaper at $2.8 Billion, but here, keep in mind that the cost of the construction of a gas pipeline was not added to that construction cost, so there is every possibility that the CCGT, overall, would end up costing more.

    As to the fuel. MacGen owned the nearby coal mine so the cost of coal would have been nowhere near as high even as the current, now depressed price for steaming coal. Had the gas fired option been taken, then they would have to purchase the gas at market price, hence more expensive again.

    Now, a couple of weeks back a Gas fired plant barely 11 years old was closed because it was more lucrative to sell the gas into the export market, rather than use it to generate electricity. That quite obviously now makes the CCGT option most probably off the table completely. Keep in mind here that the CO2 Tax is also a huge impost on this CCGT plant as well.

    The USC coal fired option is also problematic, also because of that added and huge impost of the CO2 Tax, even if the Legislation is voted down in the future, but the bigger problem would have been the opposition from green and green leaning opponents.

    Now. MacGen, the owners, have sold the plant. That tells me in huge headlines that Bayswater B has been canned totally, because, if constructed, it would have been a source of income for anything up to 40 or 50 years.

    The new owners will not shell out that amount of money for a problematic new plant, no matter which option, with a cost that would only be increasing almost exponentially, and why would MacGen sell up Bayswater at a depressed price, if the replacement was still on the table.

    As I said at the top here, you tell me what’s going to happen now.

    Bayswater will not be replaced and the new owners will just sell the electricity remaining in the plant until it reaches its use by date ….. without thought of an Upgrade.

    I’ve read a number of articles about the sale, and a couple of them said that the CO2 Tax considerably depressed the sale price.

    Keep in mind that the new owners have only purchased the plant and not the nearby mine which supplies the coal, so instead of MacGen paying a much lesser cost for coal they already own, the new owners will have to purchase the coal at current market price.

    It will probably be a case of Peter paying Paul if the CO2 tax is dumped, as the savings made if it is dropped will go on the coct of coal.

    This does not assure the supply of electricity into the future as a new Bayswater B might have done.

    Tony.

  29. Ant

    Of the “renewable energy” options around, wind turbines have to be most spectacularly stupid on all levels.

    Imagine a car powered by wind and you’re close to understanding the stupidity behind it.

    The idea is a renewable boondoggle for the leeches who line their pockets by screwing consumers – especially the poorer ones.

  30. Squirrel

    The market distortions which have been imposed in the name of responding to climate change are, by and large, just a re-run of the vanity and naivety which has too-often characterised our handling of trade issues – skipping along, like a bunch of self-satisfied Polyannas, and regularly getting done over by shrewder and more sophisticated operators.

  31. Bruce of Newcastle

    Of the “renewable energy” options around, wind turbines have to be most spectacularly stupid on all levels.

    And they don’t even save CO2 emissions. Not here in Australia since the coal fired power plants have to operate less efficiently to cope with the variations.

    When you factor in the CO2 cost of their construction (ie life cycle basis comparison with efficient baseload coal) they are probably causing more CO2 emissions than coal is.

    And that is even before you look at the birds and bats that are killed by them in breathtaking numbers. These people are supposed to be friends of the environment. Bloody hypocrites is what they are.

  32. Charles

    Eyrie is close to right on his characterisation of wind speeds under various seasonal conditions. However, what many people don’t know is that wind turbines have a relatively small range of wind speed where it is possible for them to generate electricity.

    If it is below 15 kmh or so it doesn’t generate any useful amount of electricity, and if it is above about 30-35 kmh then they have to turn them off as becomes too dangerous to keep them spinning. So, even though the wind blows a significant proportion of the time, unless it is in that operating range it doesn’t really work.

    Just another example of the complete uselessness of this industry.

  33. incoherent rambler

    Bloody hypocrites racketeers is what they are.

    Fixed it.

  34. Ant

    Speaking of the union super fund pigs with their snouts in the public trough, while wind turbines are spectacularly stupid, Victoria’s desal plant is spectacularly criminal.

    Same pigs, same snouts, same trough, BTW. Funny that.

  35. Rabz

    Victoria’s desal plant is spectacularly criminal

    Quite so. The fact that certain individuals didn’t end up behind bars over that cretinous, craptastic crock is an outrage.

  36. Fred Lenin

    Bring in an unearned income taxpertaining to all this GW rubbish I suggest 99 cents in the dollar,this tax applying to everyone receiving government subsidy,this would also apply yo superfunds, Its easy to invest in renewables if you own the government that can supply the subsidy,thats why the union wankers can show results ,it beats thinking every time thinking might hurt their tiny brains,give them migraines.Must be a lot of worriedsuperfund bosses,with this Royal Commission coming up ? Probably skimming off funds to pay Slater and gordon amd morrie blackballs to “defend” the against the “spurious” accusations coming up.
    haaaaahaaaaa !

  37. Ant

    On the Vic desal plant, for me Labor and the unions pushed it all the way to its final stupendously wasteful and idiotic conclusion because they a.) are corrupt, and b.) were largely given a free pass in the media – who, being leftist stormtroopers for green authoritarians, greased its skids to let it slide right under the noses of the largely politically disengaged morons who are graced with the undeserved right to vote.

    Am I shooting the messenger? Hell yes! Because their not messengers. Delivery the message is not their MO. They are first and foremost propaganda agents for a political cause.

  38. Ant

    Allow myself to correct myself: “Because they’re not messengers. Delivering the message…”

  39. johanna

    From what I have heard, the Victorian desal. plant would provide a rich vein of material for the RC into unions.

  40. Raider580

    The age of entitlement is still kicking along nicely.

  41. Combine Dave

    Out of curiosity, with dams out of the question in Victoria (for some reason?) how would you have ensured the water supply for that state and for Melb city?

    What happens if they return to drought and long dry spells again?

  42. incoherent rambler

    What happens if they return to drought and long dry spells again?

    It will happen. The next government will hopefully do some forward planning for water supply. Hence dams, dams, dams! (Hopefully in valleys that a lot of ganggreens live in!)

  43. Combine Dave

    What happens if they return to drought and long dry spells again?

    It will happen. The next government will hopefully do some forward planning for water supply. Hence dams, dams, dams! (Hopefully in valleys that a lot of ganggreens live in!)

    Here’s hoping!

  44. brc

    Out of curiosity, with dams out of the question in Victoria (for some reason?) how would you have ensured the water supply for that state and for Melb city?

    What happens if they return to drought and long dry spells again?

    The answer is in the question. Dams cannot be out of the question.

    What was (is) needed is for leaders to stand up and frankly educate the public that dams are the only answer. Dams bring life,power, jobs,prosperity and water security.

    In short, you need to stare down the greens and wear their shrieking with pride. The greens rely on a sliver of a vote and have become a parody of themselves. Pound the table with facts. Gutless joining the bandwagon by Howard and others is what enabled the madness in the first place.

  45. Ant

    “with dams out of the question”? Really? OUT of the question???

    Says bloody who? The local student union? The pointy nosed inner urban elite? The media class?

    Dams are what currently sustain every single urbanised area in this country. It’s like saying “with breathing out of the question”.

    The desal plant was built on a mountain of lies: Global warming, the long passed drought being “the new normal”, dams being unsustainable and environmentally damaging, our cities becoming “ghost metropolises”. Lies, lies, lies.

    It was a massive boondoggle built to shaft taxpayers and funnel money into Labor/union super funds. It cost ~$6,000,000,000 to build. It costs Victorian taxpayers around $1,500,000 per day to run – and that’s without it producing a single glass of water. It consumes massive amounts of electricity even when it’s not desalinating sea water. It dumps megalitres of water with high salt concentrations back into the ocean. It will take 3 decades to pay off.

    I like to tell my primary school kids that by the time they reach my age they’ll still be paying for it! Even if we never need the water.

    In fact, it costs so much that the state government could build a major hospital every single year for 30 years with the money it’s flushing down the toilet.

    There was time and place in history when those responsible for it would have had their testicles removed from their person and served up to them in a glass of desalinated water.

  46. .

    I’d like to see inner city luvvies survive if Warragamba, Cordeaux, Cataract, Nepean, Avon dams and Prospect Reservoir were demolished immediately.

  47. H B Bear

    From what I have heard, the Victorian desal. plant would provide a rich vein of material for the RC into unions.

    Doesn’t that also include Julia’s “Gal Pal”?

  48. 132andBush

    @Combine Dave

    The pipeline from Tasmania was probably the best option. Check out Tophers vid on YouTube.

  49. wazsah

    re dams – something the Abbott Govt and State Govts could do to at stroke of a pen to make our dams more valuable is to review and reduce crazy environmental flow EF requirements. For example the huge Thomson Dam east of Melbourne had 35% of inflows released unders EF’s during the drought last decade. Mad Green inspired sabotage.
    numero duo – are Cats aware the price for Certified Emission Reductions on the euro-carbon exchange is now E0.33 or ~AU50c. Compare the Gillard carbon tax of – what AU$24?
    https://www.theice.com/marketdata/reports/ReportCenter.shtml#report/94

  50. wazsah

    Dams and our water supply – another dubious Govt action was the shutdown of the Shoalhaven to Warragamba pipeline – back about 2008 I recall – the pipeline was built to make the Sydney supply system more resilient by having the option to top up Warragamba from the Shoalhaven. Now more Shoalhaven water wastes to sea. I think there is an issue about the Govt not having to buy Kurnell desal water if Warragamba is over 80%. So there was an incentive for somebody to keep Warragamba under 80%.

  51. mundi

    I still remember how we were going to raise the dam at springin to make one nearly 3 times the size of Wyvenhoe. But peter beattie dismissed it in a single sentence and then Bligh spent 3 times what was asked for to instead building some pipes and a desalination plant….

    No only did we miss the usually 10 to 15 year cycle of mass storm systems that fill the damns, there are ZERO plans to build anymore. So we can expect another round from 2020-2025 of mass flooding in SE QLD with no attempt to capture any of the water.

    And all the people who claimed the dams would never fill again are now blaming global warming for causing them to fill. Despite the fact that the we know it just random event of large storms following weeks of ground saturation from el nina.

    Anyway, you can make a lot of money better for/against floods in the insurance sector.

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