Electricity: no end to the damage regulations are doing

There is no let up in the lies, ignorance and dissembling that passes for debate on Australian energy policy.

Tanya Plibersek ventured onto the Bolt program and said, in line with green ideology, that the Renewable Energy Target means cheaper prices – a canard also voiced by the ABC insider duo of Lenore Taylor and Laura Tingle and central to the policy of the Victorian and other governments.

In its initial stage, a renewable subsidy does, indeed, depress general prices.  Wind gets a subsidy of ~$85 per MWh on top of the $40 it, like other generators, can earn in the market.  So the wind suppliers will offer electricity at any time because they earn revenue whatever the price.  This drives down the aggregate price but only as long as the unsubsidised generators can cover their marginal costs.

Marginal costs eventually become total costs once major refurbishments and repairs are necessary.  And so it was with the two South Australian coal power stations that have closed and so it is with the giant Hazelwood facility in Victoria.

All this is severely aggravated by gas policy in all states but Queensland which have shut the door on new supplies.  So gas, which will always be dearer than coal but plays a useful peaking role, cannot run because any available supplies have been constrained by regulatory policy and gas generators cannot cover their costs unless “directed on” by the market manager.  This then (on behalf of consumers) takes the risk that costs won’t be covered.

The sorry picture of whether prices rise or fall when governments force the substitution for wind (that requires $110 per MWh for profitable operation) and coal (that requires $40-45 per MWh) is demonstrated by the forward price for electricity shown here for Victoria.

What we have is the tragedy of the world’s lowest cost electricity system destroyed by political intervention.

Not only is wind high cost but as we are seeing in South Australia its episodic nature means it does not offer reliability.

Here is the generation throughout the nation at 6.30 this morning.

Wind which as a result of subsidies and penalties to fossil fuels, dominates investment in energy could barely produce one per cent of the supply.

But the ABC-ALP-Green left is only the worst of the culprits.

The coal industry lobby groups themselves are less than fulsome in promoting the domestic use of the industry’s product since they are dominated by BHP, which is under the control of a CEO who is a True Believer in the global warming fraud and understandably ashamed of his firm’s role in boiling the world.  This forces BCA, Minerals Council and other lobby groups to call for various forms of “Clean Coal” that would add anything from 25 per cent to 300 per cent to the costs of coal generation.

The Minister, Josh Frydenberg, though by no means a swamp drainer, is about as diligent and honest as we can expect from a traditional politician.  He is using the ALP’s extremism against Mr Shorten, hoping that others will overlook the fact that the Coalition policy over the next few years is identical to that of the ALP and that the problems wind has created to date will get far worse over the next few years as, in line with Commonwealth requirements, the wind share is of supply is set to double.

Josh claims he is being up-front in saying that the cost of the government’s policy will be $63 per household.  He may believe that but it defies credibility.  As I have previously demonstrated present Australian regulator y and budgetary spending on green energy is $5 billion a year (five times the one-off waste of money by the Andrews government’s cancellation of the East West road).   $5 billion comes to $500 per year per household.  And this excludes the costs of other regulations on appliances, buildings, motor vehicles and the like all of which bring costs to consumers.

Continuing on the current path, let alone shifting up to the ALP’s will vastly undermine future living standards.  The tax on consumers is one thing but far greater damage is done by the lost businesses (think aluminium smelters) and forestalled business investment that the high costs of energy is creating.

There can be no half-way measures.  We must immediately cancel all subsidies to energy and other interventions by government allow the market to repair itself.

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51 Responses to Electricity: no end to the damage regulations are doing

  1. Roger

    Josh claims he is being up-front in saying that the cost of the government’s policy will be $63 per household.

    Has he factored the cost of throwing out a freezer of spoiled meat several times a year into that figure?

  2. stackja

    There can be no half-way measures. We must immediately cancel all subsidies to energy and other interventions by government allow the market to repair itself.

    And Senate votes for subsidies!

  3. incoherent rambler

    There can be no half-way measures. We must immediately cancel all subsidies to energy and other interventions by government allow the market to repair itself.

    Not sure it can repair itself.
    It is clear that VIC, SA and TAS are in need of additional generation facilities. There is a minimum 5 year lead time to order and construct any serious capacity. Who is going to invest to build it?
    If the generation business regained sanity tomorrow, there would still be at least 5 years of business exodus.
    Deep doodoo.

  4. RobK

    “There can be no half-way measures. We must immediately cancel all subsidies to energy and other interventions by government allow the market to repair itself.”
    If only that could be done. I fear the apprehension about CO2 abatement has undermined the desire for long term investment which is required for baseload investment. The investment gurus see an upside to the carbon caper. In particular, the human resources are cheap in the developing countries, coupled with cheap energy in these selected regions, an orderly arrangement of centralized control is effected. This arrangement will take a bit to unravel.

  5. Gidday Alan – in your paragraph 3 you say – “This drives down the aggregate price but only as long as the unsubsidised generators can cover their marginal costs.” Only when the wind is good though.
    I see later you cover that issue – and I note right now Nemwatch shows we are in a National wind drought.
    http://reneweconomy.com.au/nem-watch/
    Excluding a miserly 132MW from WA – the 5 Eastern States are producing 97MW – risible.

    There is a campaign afoot to “Keep Hazelwood open”
    if you google that – Google finds a Facebook page with a new Twitter handle and a blog post.
    https://www.google.com.au/?gfe_rd=cr&ei=q3qrVM-5DaKN8QeovYG4BQ&gws_rd=ssl#q=Keep+Hazelwood+open

    How about Cats email pollies with the message – “Keep Hazelwood open”

  6. Up The Workers!

    Don’t worry about the cost of all the spoiled meat that will be thrown out, Roger – The costs of the “spoiled meat” will be well-covered by all the Parliamentary Pensions, Superannuation, lurks, perks, schemes and scams-for-life they pay themselves whenever we throw them out.

  7. Zyconoclast

    Not sure it can repair itself.
    It is clear that VIC, SA and TAS are in need of additional generation facilities. There is a minimum 5 year lead time to order and construct any serious capacity. Who is going to invest to build it?
    If the generation business regained sanity tomorrow, there would still be at least 5 years of business exodus.
    Deep doodoo.

    I’m not saying they should, but if they can sign scandalously expensive 25-30 contracts with operators of redundant desal plants, they can do the same with a brand new, you beaut coal fired power station.
    At least the power station will be fully utilised for this time.

  8. Tim Neilson

    Plibershriek is speaking middle class pinko, not standard English.
    “Cheaper”, like “affordable”, in middle class pinko speak, means “paid for wholly or primarily by the taxpayer”.
    If there were taxpayer subsidies for champagne fixed at a level of about $80 or 90 per bottle, it would be “cheap” (in the middle class pinko sense) to fill the bath with Veuve Clicquot instead of tap water.

  9. Tim Neilson

    I’m not saying they should, but if they can sign scandalously expensive 25-30 contracts with operators of redundant desal plants, they can do the same with a brand new, you beaut coal fired power station.
    At least the power station will be fully utilised for this time.

    It’s true that the current state of the “market” will distort any investment decision. Taxpayers would inevitably take it up the tradesman’s entrance if we were to get a new station. The best we could do is mitigate that as much as possible.

    Do a normal PPP – get private enterprise to bid for a build own & operate contract, and whoever seeks the least taxpayer funded subsidy gets the gig.

    Of course here in CFMEUistan, the CFMEU would have to get its multi-hundreds of millions of dollars rakeoff. So better for us if they are all built north of the Murray and there’s an upgrade to the transmission grid if need be.

  10. RobK

    Perhaps a clever leader will come along and convince everyone that cheap reliable energy will facilitate a comprehensive rudimentary safety net and allow for meaningful and gainful employment etc.
    Where’s our Trump.

  11. Cannibal

    I’m in the market for a good diesel powered generator 6 – 8 kVA.
    This expensive and ‘dirty’ option is being forced on me by government.

  12. H B Bear

    I doubt the Australian electricity “market” is capable of fixing itself. You could drop all subsidies for renewables tomorrow and the level of regulatory risk is now so high no private generators or bankers would touch it.

    To quote Peanut Head, “We poisoned the wells …”

  13. RobK

    If there was an immediate decoupling from the UN Climate Change Caper the energy issues would resolve themselves as quickly as possible.

  14. struth

    Let’s face it.
    This is a time factor.
    We only have this election for liberal voters to move away from the left wing liberal party in droves.

    This is a story of the complete capitulation to the noisy minority left by the elitist liberal party and how quickly right wing forces can one, wake up, and two, get alternatives like Bernardi and ALA to be able to at least block them, in some way, from killing us off.
    It is probably too late for many of us.
    But for our children.
    We will die not reaching our full wealth potential, possibilities for happiness lost in poverty and corruption all around, with some little brainwashed 20 something socialist bitch in government deciding that we are over 50 and therefore do not qualify for the minor surgery we paid for with our taxes that would save us, and automatically seizing our property.
    But my guess is we will be so happy and dazed to be in a hospital with lights and air conditioning, to make sure of a comfortable work environment for public servants, we won’t even notice when the plug gets pulled.

  15. Greg

    Baa Baa black night
    Have you any power?
    No Bill Shorten
    It’s been out for hours.
    No night time solar
    The wind doesn’t blow
    Labor doesn’t have a clue
    And doesn’t want to know.

  16. Bruce of Newcastle

    Plibersek lied.

    The larger the proportion of electricity from wind and solar the higher the retail electricity price that the poor voters have to pay.

  17. incoherent rambler

    Wee Willy needs to understand that the every wukkas job needs (cheap or at least competitive) electricity.

  18. What would be interesting is to have a couple of 500 Mw reactors on board ships that could offload their output into the grid via cable.
    And lease it to governments at a hefty markup.
    Peak leasing season would be before elections, I bet.

  19. Hydra

    Victoria and South Australia have 2705 MW of installed wind power capacity and combined are currently producing 7 MW between them.

  20. Snoopy

    Forget Plibersek. The real scoundrels here are Frydenberg and Turnbull attempting to argue that being pregnant is a disaster but being half pregnant is tickety-boo.

  21. NewChum

    It boggles the mind how someone like Plibersek can get up and say that the RET makes power cheaper when the last ten years of RET has seen power prices double. She is either ocean-going class ignorant or forced to spit these lies by her handlers.

    Power prices should go down over time in real costs. The technology gets better, there is economies of scale, new ways of getting longer out of existing capital, etc.

    Why should making electrons get more expensive over time when everything else gets cheaper over time?

    The answer is clear, make more big power stations out of coal or hydro, and stop regulating, subsidising and central planning into a mess.

    Oh, how we used to laugh at the soviets for their breadlines. They can’t even organise bread in the bakeries! Those stupid communists!

    Meanwhile, a person with a blacked-out house is standing in a queue, hoping for enough electrons.

    Who is the stupid communists now? I bet the Russians don’t queue for electrons or bread anymore.

  22. NewChum

    What would be interesting is to have a couple of 500 Mw reactors on board ships that could offload their output into the grid via cable.
    And lease it to governments at a hefty markup.
    Peak leasing season would be before elections, I bet.

    It’s a nice idea but your electricity is not allowed by the state. You do not have the necessary paperwork in triplicate! Only electricity provided by approved unicorns is allowed into people’s homestead factories.

  23. min

    Let Frydenberg get on with his job. he has Malcolm singing from his song sheet . He will get the present thinking changed but Malcolm has had to make a massive shift already but he has said this was his plan on 2GB last night with Miranda Devine. I think that Josh is smart enough to work out the costs and also how to pay for the mix when he has all info .Mitchell River dam maybe a good site for pumping water for electricity.
    Does anyone know if this is so?
    Why are the Libs not quoting numbers of coal fired power stations being built in EU and how the so called renewable countries actually work.

  24. Art Vandelay

    Tanya Plibersek ventured onto the Bolt program and said, in line with green ideology, that the Renewable Energy Target means cheaper prices – a canard also voiced by the ABC insider duo of Lenore Taylor and Laura Tingle and central to the policy of the Victorian and other governments.

    This is standard operating procedure for the Left. They only focus on wholesale prices because these wholesale prices don’t include the cost of the enormous subsidies paid under the RET. As Alan notes, wind producers can dump their power on the market at low wholesale prices because they know they’ll get a subsidy of around $85 per MWh on top of that.

    The cost of the subsidies only becomes more apparent when you look at retail prices (which, as everyone knows, are increasing).

    This misleading and dishonest focus only on wholesale prices by the ALP and ABC needs to be called out more often but that’s unfortunately not going to happen because the Liberals are hopeless (and they support the RET too) and Australia’s journalists are economically illiterate cheerleaders for the Green scam.

  25. Aussiepundit

    A market correction is only possible with a political correction.
    But there is not going to be any political correction. Not on this one.

  26. Rafe

    BoltA has published a letter from a fact checker sorting out the green lies on his show. He realised he should have done better himself.

  27. Dr Faustus

    And the subsidies for our renewable rentiers are only beginning.

    The data in the preliminary AEMO report into last week’s Third World episode makes perfectly clear that non-dispatchable renewables must be fully backed up at all times by ‘available’ coal, gas, or hydro power – or storage.

    For Australia, the urgency of our situation means being an early large-scale adopter of battery/inverter/power management technology that is still under development and high on the cost curve. (Rather like buying one of the early plasma TV screens in 2000 and paying $25,000 for a 40″ 852 x 480 resolution model that flickers behind moving images, burns in and loses pixels.)

    Frydenberg’s conversion to belief in coal means SFA. Given the lead time to build new base load coal/gas fired, we are already committed to $billions in additional subsidies for inefficient, panic-bought storage for the existing windmill fleet.

  28. egg_

    It is clear that VIC, SA and TAS are in need of additional generation facilities. There is a minimum 5 year lead time to order and construct any serious capacity. Who is going to invest to build it?

    State Govt Technocrats need their @rses kicked.

  29. egg_

    Australia’s journalists are economically illiterate cheerleaders for the Green scam.

    As is regularly exhibited on Insiders.

  30. NewChum

    A market correction is only possible with a political correction.
    But there is not going to be any political correction. Not on this one.

    See what happens in the WA election.

  31. john constantine

    The fastest way for their yarragrad to lift the percentage of social justice electricity, is to dynamite as much coal power as possible before any Trump arises in Australia.

    Dynamiting coal power also accelerates the deindustrialisation of victoria into a wymynsys friendly conland of safe,clean, debt funded office jobs where the right sort rake in piles of cash ‘helping and saving’ the planet and their client herds.

  32. hzhousewife

    BoltA has published a letter from a fact checker sorting out the green lies on his show. He realised he should have done better himself.

    One of the comments underneath said “The wind is free and delivers itself” !!!!!!!! In that case, all we need is a big umbrella !!pmsl

  33. Defender of the faith

    It is a perfect solution Alan. Because if you cut the power subsidies you immediately free up huge capacity since a variety of big users like Portland will close.

  34. Turtle of WA

    Free markets. Full stop.

  35. john constantine

    Deindustrialisation is the answer, and if that doesn’t work, their left will always have their Solyent Green solution.

  36. Dr Faustus

    Deindustrialisation is the answer…

    The program to create a soma-nation tended by agile, righthinking policy officers is well in hand.

  37. B Shaw

    “The wind is free and delivers itself” 🙂

  38. See what happens in the WA election.

    A bunch of the same fvckwit career politicians will win and form a government not very different from the one that exists now, and the one the preceded it, and so on. The only possible change is for the worse, not better.

    You were expecting something different? Sorry, it doesn’t work that way.

  39. B Shaw

    It was very important to withhold your votes, people. You had your chance.
    People said “Oh I couldn’t possibly not vote – oh how frightful! not in good conscience”
    Some of us bit the bullet.

  40. Dr Fred Lenin

    Forcecomrade andrews to support Hazelwood untill a newer more efficient station is built . Dam the Franklin and Mitchel rivers to supply power ad fresh water , convert desalination plants, to gas fired powerstations ,getalittle value out of thev useless things . Jail the criminalswho caused them to be built ,fifty yearswithout remission sounds about right and confiscation of family assets . Theres a start .’

  41. Lem

    Let the power grid fail, let the people revolt, let the politicians swing. Sometimes, people are so dumb they cannot imaging the outcomes of their stupidity without first suffering the consequences.

    This will work itself out in the usual way. Painfully.

  42. B Shaw
    #2298800, posted on February 16, 2017 at 7:55 pm

    +100 B Shaw.
    Unfortunately it’s too late now, and it will be at least a decade before the opportunity presents itself again. By then we’ll be like India, buying our kids a bureaucratic job that doesn’t actually pay anything, but provides an opportunity to bribe a living off others.

    And we’ll all have a genset in the back yard.

  43. Another reason to “Keep Hazelwood open” is that Victoria is the Lynchpin State generationwise – Whereas NSW is an importer of electricity. See the data –
    Keep Hazelwood open
    http://www.warwickhughes.com/blog/?p=5001

    go under the photo of Hazelwood for the link to my page – NSW is an Importer of Electricity

  44. Nerblnob

    Dr Fred Lenin
    #2298860, posted on February 16, 2017 at 8:46 pm
    Force comrade Andrews to support Hazelwood until …

    … until … until …

    Actually this campaign is already under way, with some left wing support, because it feeds into their “it was privatisation wot dun it” meme that is is bound to surface on FB and Twit any minute now.

    Privatisation, “Tory” govt .. anything but stupid wind turbines.

  45. Hey mister Nerblnob – if you Google – “Keep Hazelwood open” – there is already a FB page (not by me) and they have a twitter handle – @keephazelwoodopen
    my blog from above –
    stack of other pages
    I have not seen this “left wing support” tell me more

  46. Nerblnob

    the “left wing support” is coming because Andrews will have to do it and the unions will back him because it will be state ownership all over again.
    .
    I used to work in the LV back in the SECV day. I don’t live there anymore.
    Would’ve been better if they’d upgraded or built new at Hazlehead.

    Good luck with the campaign.

    You have to battle these arseholes:
    https://quitcoal.org.au/4-coal-plants-left-to-shut/

    https://witness.theguardian.com/assignment/555c781de4b0c086d6b712ec/1556996

  47. Realist

    BHP split off the coal business into a separate entity South 32 for the very political green reason of saying ” look no coal here!”

    Rio has done the same thing.

    They want a gibs me dat supply of credits and grants in return

  48. Lem;

    Let the power grid fail, let the people revolt, let the politicians swing. Sometimes, people are so dumb they cannot imaging the outcomes of their stupidity without first suffering the consequences.

    This will work itself out in the usual way. Painfully.

    Lem, you and I are on the same page, the same paragraph, and the same sentence.
    Sometimes we have to let the poor damn horse go.
    Australia is spending a fortune on systemic bandaids.
    Let the old girl lie down in the paddock and not get up again. Let her RIP.
    And let the learning of what’s important start again.

  49. JohnA

    Lem and Winston, allowing natural and logical consequences to have their full impact is a good general principle, but as with a lot of parenting principles, there has to be a risk assessment (to use the modern jargon).

    a) does the cure actually become terminal IOW will the subject die as a result?
    b) is the cure worse than the disease? Witness CAGW
    and
    c) will the subject actually learn the truth from having suffered the consequences? (In PDR Victoriastan, I am not sure – yet)

  50. Richard

    Can I throw this out there.
    Imagine if electricity was free to the consumer, how much would productivity increase. Would the steel mills double or triple or more. Would a manufacturing explode in this country. It’s not really something that you can waste easily, if you’re consuming it something is turning or boiling or drying and so on. If the goal was to increase productivity, and the difference between installing the new bigger machine to create more comes down to the cost of its electricity supply there something wrong. Maybe I’m wrong, however I do know many that won’t install the new bigger faster machine because of its power consumption.

  51. Imagine if electricity was free to the consumer,
    how much would productivity increase.

    That’s a truly novel idea, Richard.
    Thought provoking.

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