Guest Post: Bruce of Newcastle – Electricity Shock!

This week’s Essential poll included the following question:

  1. The Labor Party recently announced their policy to tackle climate change which includes a target of reducing Australia’s carbon emissions by 45% by 2030 (compared to the Coalition Government’s target of 26-28%) and introducing an emissions trading scheme. Do you approve or disapprove of this policy?

Total approve:            57%
Total disapprove:       21%

So almost a three-to-one ratio of voters are happy with massively increasing renewable energy, to 50% of the electricity generation mix according to the ALP policy.  That raises the obvious question: what does 50% renewable electricity generation do to retail electricity prices?  For that matter what would the LNP’s policy of increasing renewable energy to 26-28% do?

No one seems to have said much about it but some useful information exists.  I have seen two empirical graphs of electricity prices and renewable energy generation.  You can find them here and here.  Both are coming from the same original data, but the latter article has more analysis including a comparison with nuclear energy capacity.

Very interestingly the graphs show a straight-line empirical relationship between renewable energy and the residential electricity price in each country.  Neither of the articles include Australia.  So I grabbed the same original data and added some extra points:

– USA
– Australia today
– Australia in 2030

I was curious to see how the US would look in comparison since the original graphs are for mainly EU countries, and there is extensive data easily available for both the US and Australia.  Here is how it turned out:

Bruce - electricity

The black regression line includes the US and AUS 2014 points but not the two points for 2030. Some assumptions I made were:

– That the LNP would target 27% renewable electricity and the ALP 50%.
– The Australian retail price is from May 2014, which is just before the removal of the carbon tax.
– All data points include taxes: in Australia the 10% GST and an average 8.45% sales tax for the US.
– Exchange rates were assumed to be AUD/EUR 0.65 and AUD/USD 0.75.
– Australian electricity generation in 2030 was assumed to be 350 TWh, which is from a Climate Change Authority report, and Australian population in 2030 was assumed to be 29 million.

As you can see the regression coefficient is pretty good, although a little lower than for the corresponding Europe-only graph.  The US is notable for having the lowest electricity price, and Australia is relatively high for the current renewables generation factor.  Both are as you would expect.  Australia is fairly highly regulated and is a large sparsely populated country with relatively high poles and wires costs.  The US by contrast is about the same size as Australia but with 13 times the population, and is also much less heavily regulated than EU countries.

To get the numbers for 2030 I used the regression equation, then added the difference that our 2014 retail price is ‘above the line’.  That retains the local high costs that poles and wires, and sheer distance, add to our prices.  The red dashed line has been drawn in to show that gap.

The gap also reflects the carbon tax as it was in early 2014.  Without it the price would fall perhaps 2c/kWh, but since the ALP has promised to bring in an ETS, and there is speculation the LNP will do likewise, it has been left in for this rough comparison.  The numbers are in constant 2014 dollars so the only difference is the result of the respective policies.

So what are we up for?  A lot:

– the LNP would raise residential prices from 28 to 34 c/kWh, or 20%.
– the ALP though would increase retail electricity prices by 53% to 43 c/kWh.

As a comparison it is worth noting that Denmark already has about 50% renewable electricity.  It has the highest retail price and almost the highest renewable MW/million people.  The ALP policy is also for 50% renewable electricity generation.  So that suggests my estimate is low, and that in practice we could reach 50 c/kWh, or even higher.

I wonder if the voters who approved of the ALP policy in the Essential poll would still say that if they knew they were voting to increase prices by 53%?

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33 Responses to Guest Post: Bruce of Newcastle – Electricity Shock!

  1. Baldrick

    So the difference between Labor and Liberal policy is somewhere between 0.09c and 0.16c/kWh.

  2. Andrew

    It’s also possible that they’re voting to make the budget deficit $600bn larger, or some partial combination.

    People are genuinely that stupid. Some Regressives have said things like
    – it’s just $650 a year, that’s a trivial cost I’m happy to pay
    – it doesn’t matter because the Polluter pays
    – renewables create jobs and are cheaper than eeeebil coal
    – the Reeeeeeeeeeeeec!
    – there will be no coal when Tesla batteries take people off the grid (none have ever felt universal Teslaisation would also render the SLF’s $600bn of windmills totally useless).

  3. Mater

    From the OT:

    Bruce,
    Given your excellent post, I wondered if this might assistant any further research you do.

    The costs of ‘Global Warming’ bedwetting are like malignant tentacles which are interwoven throughout both Retail and Distribution charges. They call them ‘Government Policy Initiatives’ but really it is just Government interference in the market. It’s designed to make it difficult for someone to definitively say how much money such measures have added to people’s bills. Let’s face it, if someone did, piano wire would be in short supply. This report does a pretty good job pulling it apart. It was commissioned by the Power Industry.

  4. incoherent rambler

    So the difference between Labor and Liberal policy is somewhere between 0.09c and 0.16c/kWh.

    It gets better. The production cost of electricity from Latrobe Valley is somewhere around 4c to 6c per kwh.
    I imagine something similar for the newer coal plants in NSW.
    Rephrased, based on a lie, retail costs are an order(s) of magnitude greater than the production cost.

  5. Rabz

    I wonder if the voters who approved of the ALP policy in the Essential poll would still say that if they knew they were voting to increase prices by 53%?

    Why would they give a rodent’s? Labor will promise them da compensayshun, paid by da rich.

    BTW – will people existing in Victoriastan will be slugged for two separate air taxes once Peanut Head introduces his ETS?

    Above all, why are we still allowing these despicable, grotesque imbeciles to get away with this monstrous treasonous stupidity?

  6. stackja

    I wonder if the voters who approved of the ALP policy in the Essential poll would still say that if they knew they were voting to increase prices by 53%?

    The voters who approved of the ALP policy do not think they will be paying, only the ‘rich’ will pay. Gullibility knows no end.

  7. JJF

    It will all be okay because the ALP will provide a “compensation package”.

    That will “protect” the most vulnerable. And just to make sure increasing our electricity is just, Bronco Billy will announce we will increase our refugee intake to 250,000 per year.

    Music to the ABCs ears!!

  8. political power of the evil fossil fuel industry.

    Incoherent, The bulk supply price from a modern large coal fired power station in NSW Nand Queensland using black coal is around the 3.5c to 4c/kWh. The reason that these costs are never explained is that both parties are pursuing the same mad policies only to different degrees. I am sure that if you asked the same question with the addition of,” Do you want to pay this extra cost for it”, you would get a different answer.

    If you ask around you will find an alarming number of people who stil believe that renewable energy id almost free and the oinly reason we do not have more of it is because of the

  9. CameronH

    I am not too sure what happened to the previous post but I continue.

    Incoherent, The bulk supply price from a modern large coal fired power station in NSW and Queensland using black coal is around the 3.5c to 4c/kWh. The reason that these costs are never explained is that both parties are pursuing the same mad policies only to different degrees. I am sure that if you asked the same question with the addition of,” Do you want to pay this extra cost for it”, you would get a different answer.

    If you ask around you will find an alarming number of people who stil believe that renewable energy is almost free and the only reason we do not have more of it is because of the political power of the evil fossil fuel industry.

  10. Bruce of Newcastle

    Don’t forget to read Steve Kates’ article ‘The snow job of Kilimanjaro‘ as he has a link to an article about Denmark cutting renewable energy subsidies because of high electricity prices.

    As I said the ALP policy gets us close to Denmark in renewable electricity but with no adjacent countries to use as giant batteries when the wind doesn’t blow (or blows too hard). Denmark draws on Swedish hydropower for such times, and sometimes has to pay Sweden to take the excess wind power off their hands.

  11. incoherent rambler

    CameronH, so the question becomes:

    Do you agree with the policy of cutting your $600 quarterly electricity bill to $100?

  12. Ross B

    Nobody left with the stomach to bother arguing against the madness and the centre-right party is worse than worthless. Move on…

  13. JC

    I wonder if the voters who approved of the ALP policy in the Essential poll would still say that if they knew they were voting to increase prices by 53%?

    Bruce, is there anyone in the Libs who would tell voters those lunatics would raise the costs to 43 cents?

    I also think the question is one of those motherhood type questions, which outside of election polling I find useless.

    If the question was asked of those same people along like this…

    The Liars Party wants to raise your electricity prices by over 50% – making it the highest cost of energy in the western world. The lunatic shysters would do this by introducing 50% renew ball mandate for 2030. Do you support these nutballs or not?

    … I think you would find a totally different result.

    These polls are pretty close to being less useless than used toilet paper.

  14. Siltstone

    Excellent analysis Bruce

  15. stevem

    I wonder if the voters who approved of the ALP policy in the Essential poll would still say that if they knew they were voting to increase prices by 53%?

    People keep hearing the lies spread by the Greens and the renewable energy lobby that renewable energy sources are already cheaper than coal and will only get cheaper. This gives the illusion that converting to non-fossil fuel electricity generation will result in lower power bills. They are under the stupid misapprehension that the electricity generators are, for some reason, deliberately reducing their profit margin just to emit carbon. They also don’t realise it’s carbon dioxide.

  16. Robk

    Good analysis Bruce,
    I would add, you are being conservative in your estimation of the difficulties the Australian situation faces. Denmark has connectors to Sweden which has vast hydro storage capacity. Denmark also has the grid to the rest of Europe with a high population density…still they are having trouble with grid capacity due to weather induced surges requiring the grid to be greatly beefed up. Denmark has little in the way of carbon fuel resources so has been developing wind power since the early 80’s for strategic reasons and has riden the climate change meme for all it’s worth (good luck to them), fostering an export industry. Not everyone can be exporting this niche type of technology.
    Battery storage may help buffer short term surges in the grid (minutes) at a considerable cost. The technology to store significant amounts of power is only able to be done by hydro in very specific settings…you would need more dams.

  17. Rafe Champion

    Great analysis Bruce, but for people in a hurry and with ADD what if you put the price increase in big print right up near the top.
    The people who most need to take that number on board need to have it spelled out in very simple terms. What about a bumper sticker?

  18. Lloyd Dobler

    With cross subsidised renewables pushing up the price of electricity for consumers, the only outcome we are guaranteed in Austealia is a total and utter annihilation of the manufacturing sector.

    Ergo the loss of demand from the manufacturing sector ultimately increases the price of electricity for the remaining customers.

    But alas not a single iceberg reforms for the Polar Bears to do a Greg Louganis routine from.

  19. Gerry

    From NOTrickZone……”In fact Germany’s CO2 emissions have not dropped at all over the past 7 years, and even went up a percentage point last year. Moreover, weather conditions continue today as they always have: typically rainy, cool, gray, windy and raw. For the roughly €1200 or so per year the average household has to fork out each year, it all sounds like an awfully raw deal (unless you happen to be one of the lucky few making money hand over fist in the scam). And that €1200 figure is only going to go up rapidly in the years ahead.”

    €1 is equal to A$1.50

  20. Robk

    The low energy density and intermittent nature of both wind and solar is in many respects paralleled in the history of shipping. Sailing ships could navigate the globe given enough time. The shipping industry soon went to steam power then oil and for critical applications, nuclear. Today we could build sailing ships far superior to the craft of a hundred years ago but we don’t because theyre uneconomic. The only sail craft today are owned by hobbyists and historical buffs. I think most of the green types have no idea of commercial and industrial use of power.

  21. Dr Faustus

    Good work here Bruce. I suspect that the Australian prices would be even higher above the regression line because the system support charges will be much higher here than in much of Europe and most of the US.

    Building out windmills and solar farms is only a fraction of the technical/economic problem. In Europe cross border diversity substitutes for storage when renewables are off-line. Here? Capacity overbuilding, standby gas generation, or some unproven storage technology.

  22. v_maet

    These kinds of polling questions about carbon abatement are worthless without a subsequent question regarding willingness to pay.

    The few studies that included willingness to pay generally found a large majority of people were not happy to pay any more than $10 per month for carbon abatement programs and yet, labor’s 50% renewable target will cost between $523-$930 per year ($43-$78 per month) on top of the coalition plan of 27% renewables based on teh average household consumption of 5817kWh per year in 2014.

  23. Wadard

    I wonder if the voters who approved of the ALP policy in the Essential poll would still say that if they knew they were voting to increase prices by 53%?

    Still way cheaper in the long run than doing nothing at all, assuming that AGW is real and is how all the preeminent scientific institutions around the world say.

    Oh – you wanted something for nothing? Well, that just shows poor morality.

  24. duncanm

    I’ve had a green energy discussion with otherwise intelligent people.

    They always seem to fall back to the ‘think about the children’ defense. ie: ‘Isn’t it a good idea to reduce our pollution?’, and just don’t seem to understand the concept of opportunity cost (nor the fact that CO2 isn’t a pollutant)

  25. duncanm

    If you ask around you will find an alarming number of people who stil believe that renewable energy is almost free and the only reason we do not have more of it is because of the political power of the evil fossil fuel industry.

    indeed. Pointing out prime examples like the Spanish experiment seems to do little to sway their opinion.

  26. JohnA

    Baldrick #2020567, posted on May 5, 2016 at 9:22 am

    So the difference between Labor and Liberal policy is somewhere between 0.09c and 0.16c/kWh.

    Is that about say, cigarette-paper-thin?

  27. incoherent rambler

    duncanm.
    I have pointed out to renewable fanatics that CO2 comprises ~0.04% of the atmosphere as compared to say argon @ 0.9%. I get answers like: “bull, it is 400ppm” or “that can’t be right”.

    Pointing out that coal/nuclear is the path to lifting billions out of poverty, nah, not even that works.

    Methinks “Renewable” fascination is a long term feature of our education system. Expect more crap like it.

  28. John Constantine

    It is free.

    The Tories just want to charge for free sun and free wind.

    Once.Stalin finds out what the Tories are.doing, then they will be sorry.

    ( if you don’t agree with this, your social life will pay the penalty.)

  29. Robert O

    Let’s take the goal of 50% renewable energy by 2030.
    Currently we need a bit over 25,000 MW to provide for our usage plus enough to keep the network going, let’s say 30,000 GW, therefore 15, 000 GW is half.
    Wind energy is the only means of production as solar is limited to production between 10 am. and 4 pm. on sunny days. For the past two months production has been less than 1000 MW 30% of the time from Australia’s 3669 MW of wind turbines . Using a mean of 500 MW for this period one would require 15,000 x 3669/500 = 110,070 MW of turbines to produce the mandated 15,000 GW.
    Using a high figure of 2 MW of production per sq. km. this is about 55,000 sq. km. of suitable land devoted to windfarms. If one uses 1.4 MW (the British average) it’s 78,000 sq. km.

    The area of Metropolitan Sydney is about 12,000 sq. km., so its from 4 to 7 times the area of Sydney under windfarm and by 2030!

    Another way to look at it is line of 27, 500 4 MW units 625 m. apart or 17,000 km., that’s a conga line halfway to London

    Unfortunately, neither the greens nor the other politicians, have any understanding of the reality of their pipedreams.

    For anyone interested about electricity generation look up the AEMO site, energy.anero.id.au/wind energy. There is a wealth of information about the usage and production of stations on the national grid.

  30. Australian Viking

    https://en.wikipedia.org/wiki/Energy_in_Denmark#Overview

    Honestly, much of our expensive energy is not exactly linked to green energy (although it’s an important component), but more so our social democratic governments using energy as a cash cow for state revenue.
    We could easily become a middle of the road (in the european sense) country, if there was political will for it.

  31. Bruce of Newcastle

    Robert – It’s probably worse than that since wind producers tend to build the best sites first. Britain is fairly windy, Australia is not, except for a bit along the South Australian and Tasmanian coasts.

    I haven’t seen a comparable map for Australia but here is one for the US (from link). You can see the good sites for wind turbines are quite limited…except for off shore. But off shore costs three times as much and is high maintenance because of all the pounding by the sea.

    So as you build more turbines they produce less and less because they are built on worse sites. The number could be twice what you say just because of this.

    And building along the coast, where all the population is, is sure to cause plenty of angst.

  32. Robert O

    I have been looking at the production figures for sometime now and what I quoted is accurate. What I didn’t mention was production was below 200 MW on 8 occasions and it even got down to 100 MW at one stage in March. Even though you build more capacity into the grid it still doesn’t cover these times. So it’s blackouts, no trains nor trams and so on. But when it’s windy, like the past couple of days, what do one do with 80,000 MW from the 110,070 MW of windmills?

    So one has to have back-up generation most of the time, so what’s the point as you use the same amount of coal, or more costly gas. As you say lot’s of cost, lack of suitable sites, lots of opposition from neighbours, heaps of bird kill, the list goes on. But this is the rubbish that our ignorant politicians are peddling and a lot of people still believe them.

    If Donald gets in Washington it’s over for the global warmists. Gracias a Dios.

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