Renewable target is not sustainable

I have an article in the AFR today which argues that two studies of the RET have independently placed its net present value cost at $29-$37 billion.  Even if it were closed today its costs would be $6-$16 depending on the assumptions.  Addressing the latest piece of self-serving research the renewable industry and its stalking horses have commissioned I add

An analysis for the Climate Institute estimates the abolition of the RET would bring gains to coal-fired generators of $25 billion by 2030. Although coal would regain market share from not facing subsidised renewables, electricity supply is highly competitive and increased revenues to coal-fired generators would not involve any form of super-profit.

In terms of the direct impact on electricity consumers, the burden of renewable requirements this year is estimated by the energy regulator to add 12 per cent to the average household’s electricity costs. That’s about $260 per year.

The cost of renewable programs for typical households could rise as much as fourfold. The article continues,

In research IPA commissioned last week from Galaxy, people were asked whether they favoured retaining the present level of support, increasing support in line with current policy or scrapping all assistance to renewable energy. Only 14 per cent favoured increasing support along the lines of current policy. Twenty-three per cent favoured scrapping the scheme entirely.

While 62 per cent said they would be content to see the subsidy costs kept at present levels, people are rarely as profligate as they say they would be when it comes to their actual spending decisions. This is readily seen in the small take-up of consumers’ voluntary top-up sales of green energy at premium prices, which amount to only 0.7 per cent of the annual sales of electricity.

Moreover, the direct costs of renewable energy through electricity prices is only half of the costs that consumers bear – the rest come about through consequent higher costs of goods and services. And for businesses, the renewable requirements are much greater, as a share of total energy costs, than they are for consumers.

The renewable energy subsidies fail all tests. Consumers resent paying for them and they represent a dead weight on industry competitiveness and economic growth.

Restoring consumer sovereignty and allowing people and firms to make their own choices about trading off their sources of energy and price preferences is the appropriate course.

The AFR itself has a well-reasoned editorial that unfortunately stops short of the logical conclusion of immediate abolition. New MP Matt Canavan has a very good piece in The Australian calling for abolition with similar shortcomings. 

Unfortunately too many people are spooked by the ridiculous notion that if we don’t continue paying three times its worth for a product for the next 15 years nobody will ever invest here again.  Those of this view are oblivious of the outcome from retrospective wind-backs of Spain’s renewable subsidies, or indeed of the regulatory measures taken in the UK and elsewhere that have retrospectively devalued coal based generators.

Waste is waste and investors should be wary of putting money into unviable projects that are dependent on ongoing government favours.

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23 Responses to Renewable target is not sustainable

  1. blogstrop

    Renewable energy is a fantasy that costs us all way too much. Go away and make it work, guys, then get back to us.

  2. Bruce of Newcastle

    There is a new review of the Spanish renewables subsidies, and the picture is not good:

    The chapter analysing the history of the industry in Spain is laugh-a-minute stuff, a tale of incompetent politicians and civil servants bumbling from one disaster to another and fraudulent investors cheating their way to a slice of public funds.

    I would hope that the RET-based industry here is not quite so corrupt, but a look under the hood may be warranted. Waste and fraud often go together, as in the Pink Batts scandal.

  3. Alfonso

    Yawn, CAGWarming is a bright shining lie so why would anyone want to force corruptly subsidised RE on the market. RE will naturally gain market share if and when it’s COMPETITIVE. Until then go chasing GTs with poppers, a much better use of time.

  4. Ant

    And what’s it all for again?

    Oh, yeah, that’s right. Little old us have got to be good international citizens, take the lead and practice a bit of self-flagellation. We’ve got a planet to save.

  5. cohenite

    GW is a disproved theory; therefore there is no justification for renewable subsidisation or advocacy other than if they can compete on a level playing field with fossils and nukes; they can’t.

    If the green filth had advocated something like this then perhaps I would have been interested.

    But by the same principle you could have nuclear power plants in orbit; so it’s still all bullshit.

  6. Seza

    Cohenite, these space based ‘pie in the sky’ schemes are as useful as the kite generator plans. Nice and simple, using multiple 10 km long cables for stabilisation and control and beaming down 1 Gigawatt of power in the normal microwave band at 70% efficiency (meaning the satellite has to get rid of 0.5 GW of heat to stop itself burning up). The birds won’t be sliced, but at least they will be cooked.

  7. cohenite

    The birds won’t be sliced, but at least they will be cooked.

    Fried raptor; I can hear the filth screaming; not.

    I think its time the ante was upped and proposals to mine the Moon, Mars and any passing asteroid were intertained. Man belongs in outer space not the inner space of the alarmists and sundry mental midgets who have been driving the AGW scam.

  8. Tracey Conlan

    How long before Alan starts warning of the risks of wind turbine syndrome and the budget impact on medicare ?

  9. Montgomery Brewster

    Good article but I am not sure it is acccurate to say that coal-fired generators would definitely regain market share. Existing wind farms have an incentive to run whenever zero $ SRMC fuel is available. Thus in the absence of the RET, unless wind farms close down, the incentive will be to continue to run assets and bid into the market at low prices. The benefits of running in the absence of a RET are the same as for those thermal plants that are not recovering LRMC: they met financing costs and stay afloat (just). This would place wind farms in exactly the same space as other renewables like hydro generation (that do not recieve RET) support and still ensures wind farms have the merit order advatage of zero-cost fuel. Should demand increase (which is not likely) then the logic of serving new demand with existing plant – wind, hydro, gas and coal – will remain with or without the debilitating costs of the RET.

  10. Elwood

    If the RET is abolished, windfarms will continue to run flat out, until the turbines wear out. Their marginal cost is zero, and even at spot prices they still make a cash profit. But they would never recover invested capital, (Unless power prices rise a lot, which is very unlikely).

  11. Bear Necessities

    How long before Alan starts warning of the risks of wind turbine syndrome and the budget impact on medicare ?

    If Wind/Solar energy is so commercially sound, it wouldn’t need any subsidies from the government to exist. But they do….

    Put your money were your mouth is, Not MY money were your mouth is.

  12. Major Elvis Newton

    After years of trolling the Bolt Fora Tracey Conlan sees fit to bob up at the Cat to offer ‘her’ sage advice and commentary.

  13. Bruce of Newcastle

    Their marginal cost is zero, and even at spot prices they still make a cash profit.

    Not true. Their marginal cost is borne by the coal generators. They are the ones who must now balance the intermittency of the wind operators.

    The value of the energy produced by the wind turbines is nearly zero, and may even be negative, because the coal guys have to burn coal and waste energy so they have ‘spinning reserve’ available for when the wind slows. If the wind turbines were turned off tomorrow the coal power stations would not burn much more coal because its already being burnt. And the extra power would all be cream on top of their fixed costs so they could drop the wholesale prices.

    Open-cycle gas turbines are a bit different in that if the wind turbines were turned off they would have to be modified to closed-cycle to get the efficiency benefit. But when they did that they would almost double their efficiency of electricity generation per m^3 of gas.

    Wind energy is really the biggest power generation scam ever. If it were to operate fairly every wind turbine would have to be matched with pumped storage or a battery, and their costs would triple.

  14. cohenite

    Existing wind farms have an incentive to run whenever zero $ SRMC fuel is available. Thus in the absence of the RET, unless wind farms close down, the incentive will be to continue to run assets and bid into the market at low prices.

    Once wind farms are up and the obscene infrastructure costs to get them up have been met I guess you could say there are no SRMC. But the out-put of the things is so intermittent that no meaningful, that is sustained, regular and predictable electricity is produced by them. So, if you want regular electricity the fossils have to be kept running all the time.

    It is simply a nonsense to do any cost analysis of wind and solar because they are intermittent. Only idiots like Tracey Conlan can support them because they have shit for brains.

  15. Boambee John

    So the RET costs the average family some $260 pa, and is a “good thing”

    The increase in petrol excise (another bad policy) costs $0.01 per litre, and must be fought ot the death by many of the same people who favour retaining the RET?

    Well, I’m glad that’s clear then!

  16. egg_

    Tracey Conlan
    #1422204, posted on August 19, 2014 at 9:38 am

    The Lavatory Rodeo expert on renewable energy?
    Pffft!

  17. alan moran

    Montgomery Brewster, Bruce of Newcastle
    Good points made there. If the new wind farms are not financed, additional market share will not be lost. But some reclaimof share is likely since windfarms do actually have a marginal cost of around $11 and the reflection of wear and tear this largely represents will bring an earlier abandonment. The issue needs to be assessed and I doubt the work conducted for the Climate Institute would have it right.

  18. Bruce of Newcastle

    If the new wind farms are not financed, additional market share will not be lost.

    Alan – That is the case only if there is a contract to take or pay. If the coal operators say to the distributors we will sell you power at this price with wind and this other lower price without wind, thereby externalising the cost they now are forced to pay, then the wind operators could be cut out of the grid completely.

    In a deregulated power market its not out of the question. Alternatively the coal operators might say to the wind generators ‘you guys are costing me a difference in coal efficiency of 10 percentage points’, and send them a bill and an affidavit. If it went to the High Court the wind operators could lose a case.

    The baseload duty is an implicit contract, that must be paid for. At the moment the coal guys get the pointy end of the pineapple without recompense. Eventually they will say enough is enough.

  19. cohenite

    I repeat I am nonplussed about any cost analysis of wind or solar power. Miskelly and Quirk’s analysis of the reliability point means any power from wind [and by inference solar] is essentially useless without the constant back-up of the fossils.

  20. Top Ender

    Nice piece. Please go on exposing these ridiculous scams which simply line the pockets of the snake oil salesmen.

  21. Helen

    So buying RET power is $260.00, that is the same as buying 26,000 liters of fuel (at 1 c per litre excise). Poor people cant afford one, but can afford the other? Lefty Moral Maths.

  22. Damien Spillane

    Bruce of Newcastle et al.

    Any feedback on this graph put out by the AFR (source: AEMO)?

    Claims RET only accounts for 3% of avg electricity bill.

    http://www.afr.com/p/national/abbott_plan_to_axe_ret_H2znp8ix2CuwbJe6jyb5ZP

  23. Paul McCarthy

    I agree entirely on the issue of sovereign risk, Alan.

    There is always a risk that regulation and/or legislation will change with circumstances. The best way for a project developer to hedge that is to ensure that their end product satisfies real end-consumer demand.

    We could continue down the same destructive path and end up like the UK where power sector investment is primarily driven by the Renewable Obligation Credit market – even for the dominant “Big 6″ energy suppliers – and the country has suffered a proliferation of the wrong type, size and location of new plant with the end result being an imminent risk of supply shortfalls.

    An additional problem faced here in WA is that there is a reserve capacity mechanism that pays generators subsidies simply for existing in addition to MWh generation revenues, with the consequence that new plant does not displace existing plant. The drive for renewables has thus duplicated capacity yet that original capacity still gets paid – ultimately by the long-suffering consumer.

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