Finkel recommendations would complete the economic destruction caused by current renewable energy policies

I have a piece in the Herald Sun this morning on the appalling Finkel report.  Below is an extract and here is an anaylsis of Finkel that I prepared for On Nation’s Malcolm Roberts.

Regulations currently force consumers to accept an ever growing share of subsidised renewable energy – largely wind farms and rooftop solar – within their electricity supply.  Subsidised renewables comprise 9 per cent of supply; this is to grow to 16 per cent plus 4 per cent rooftop solar by 2020.

The damage caused by these regulations is now clear.

Renewable energy subsidies force existing coal fired generators to operate unprofitably so they progressively close.

This reduces reliability as seen in South Australia’s blackout last year following the closure of its last coal power station.

It also raises prices – Hazelwood’s recent closure has seen electricity prices, which had previously been under $40 per MWh, jump to a new level of $100 per MWh.

The Finkel review learned nothing from these disastrous outcomes, which have transformed Australia’s electricity from the cheapest in the world to among the dearest.  Instead of seeking to reduce the nation’s vulnerability to high cost, low reliability wind and solar, the report calls for a fourfold increase in subsidised renewables by 2030.

Many reports over the past 30 years have proclaimed we are on the cusp of an era when renewables’ costs will fall below those of coal.  This allows supporters of renewable energy to fantasise that the substitution of wind for coal based electricity will see prices gradually fall.

Finkel is hooked onto this illusion and says his proposals will mean wholesale electricity prices falling to one third of their present levels of $100 per MWh.

But the report’s confidence in this is insufficient for it to recommend the removal of the supposedly unnecessary renewable energy subsidies!  And Energy Minister, Josh Frydenberg, has shown that, even with token reliability back-up, renewables require an electricity price of $108 per MWh.

The Finkel high cost, low reliability regime would see the economy deindustrialised as energy intensive businesses close.

What we need is cheap baseload electricity and our fabulous coal reserves are the route to this.  According to the Finkel report, new replacement coal generators would require prices at $80 per MWH.

The real figure is little more than half this.  But such has been the experience of government arbitrary taxes and regulations on coal fuelled electricity generation, that investors in new Australian power stations would require government assurances against expropriation, like those provided for major road developments.

The alternative is higher prices and much lower living standards.

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82 Responses to Finkel recommendations would complete the economic destruction caused by current renewable energy policies

  1. A Lurker

    Treason laws should apply to those who are willfully destroying our nation, society and economy.

  2. mundi

    Would it be legal for a state to cut from the eastern grid and do there own thing? Or does the constitution allow the feds to regulate electricity distribution nationally?

  3. H B Bear

    The complete corruption and distortion of the electricity market makes the billions poured into the black hole of the car manufacturers seem like an economic golden age.

    Any subsidies paid to intermittent electricity generators should be in the form of open government payments so consumers and taxpayers can see exactly how much free wind power costs and not buried in artificial RECs and wholesale prices. As soon as these costs were visible the scam would be over within a single electoral cycle.

  4. Zyconoclast

    I think energy generation belongs to the States.
    A state could go it alone. Just like WA is doing now.

    At the moment the States are no better than the Commonwealth.
    They are seduced by the global warming nonesence and the destruction of the Australian economy
    or have financial interests in unreliable power generation.

  5. Zyconoclast

    As soon as these costs were visible the scam would be over within a single electoral cycle.

    It will take more than an electoral cycle to fix.

    It would probably take 10 years to get through the courts before even one coal power station could be built. Who knew that judges have the best ideas on engineering projects?

    We will still be paying for wind/solar generators for decades to come whether they supply power or not.

  6. john constantine

    De-industrialisation of the racist settler societies and the export of their stolen wealth to the left’s voting support block countries is exactly the aim of Climate Justice.

    Why would they stop, when it is all working perfectly?.

    De-industrialisation is our strength, Comrades.

  7. EvilElvis

    Good man, Alan. Keep fighting the good fight.

  8. a happy little debunker

    Would it be legal for a state to cut from the…

    Tasmania is connected to the NEM, however Tasmanians do not have any choice of service supplier.

    Currently Tassie is facing legislated increases of between -3% & 2%, this year, in power costs (depending on your status as a small business or a private householder).

    Whilst these types of increases will not last, the state government has moved to try to limit some future price shock (@ 15% per annum max).

    But even in Tassie – where 93% of our power was generated by large scale Hydro (pre-carbon tax) we are still bound by the ever increasing & costly renewable target, as large scale Hydro doesn’t count!

  9. struth

    Thamk you Alan.
    Always love your work.

    This is written very clearly and it’s straight to the heart of the matter.

    Some of the less loony on the left may even be able to grasp what you are saying.

  10. H B Bear

    The scam would be over immediately. Fixing a couple of decades of corrupted markets would take longer. The regulatory risk in this area so is now so great I cannot see a new coal plant being built without a government take-or-pay contact for the life of the plant. Commercial banks wouldn’t touch it without one.

  11. Roger

    The alternative is higher prices and much lower living standards.

    And an exodus/retirement of the productive class along with a sharp drop in immigration, bringing the whole Ponzi scheme fueling “economic growth” undone.

    Hello Venestralia.

  12. OK, so if coal is providing 70% of the electricity and it is so cheap, why are prices so high?

    The answer hasn’t got anything to do with renewables.

    It is gas-fired generation that makes up the balance of power required and they charge high prices and those same high prices also get paid to the “cheaper” coal units too. It is the methodology used in the market that has allowed the big incumbents (including government owned) fleece us in broad daylight.

    We must all start thinking 21st century solutions for the future rather than trying to preserve 20th century models that are failing. Get yourselves up-to-date, you too Alan Moran.

  13. RobK

    Thanks Alan,
    Your report for Roberts is well written, I hope he can do some good with it. We are foolish to turn our backs on our resources, especially for our own use. Ideally government should encourage all forms of economic energy including nuclear and coal so that we optimize our resources. As you have pointed out a HELE coal plant has increased efficiency and lower emissions. Getting the energy policy right would go a long way to putting a firm base to economic prosperity.
    Thank you.

  14. DaveR

    Electricity suppliers like AGL are moving to the ideological position of selling power excluding all coal-derived input. What they will actually be selling is non-coal power plus a hefty RET subsidy.

    If a supplier can do that, why cant I buy coal-based power only? Even with the RET tax on top, it should be chaper than the AGL offering.

  15. Tim Neilson

    The regulatory risk in this area so is now so great I cannot see a new coal plant being built without a government take-or-pay contact for the life of the plant. Commercial banks wouldn’t touch it without one.

    True. But even with such a contract would any bank nowadays trust, e.g., the Setka government in CFMEUistan or the Termite government nationally to abide by it?

    a sharp drop in immigration

    A sharp drop in immigration of potential net contributors, certainly. Others may keep coming.

  16. Bruce of Newcastle

    And Energy Minister, Josh Frydenberg, has shown that, even with token reliability back-up, renewables require an electricity price of $108 per MWh.

    Since modern coal fired power is profitable at $40/MWh he is effectively imposing a carbon tax of $68/MWh on us after his own party repealed a $27/t carbon tax.

    I think the whole idea of the Finkel report was to provide pseudoscientific backing to what Turnbull has wanted to do ever since he was booted from the Liberal Party leadership over the ETS.

    In hindsight we now see that booting was entirely justified, and that Turnbull is destroying both Australia and his own party over a non-existent problem.

  17. Rob

    Victorians were told that the privatisation of their State Electricity Commission would lower power prices.
    Instead, this ill advised adventure – an extremely lucrative playground for a multitude of greedy self-serving rent-seekers – has precipitated the growing catastrophe now apparent in the entire market.
    The SEC provided a state-of-the-art, secure, reliable, and cheap supply of electricity for all Victorian users.
    It also paid a sturdy cash dividend to the Victorian government.
    With a professional and credible SEC still in place, there can be no doubt a sensible level of new “renewable” sources could have been introduced along with steady progress toward our inevitable nuclear powered future.

  18. John Comnenus

    Climate change policy is the rock upon which all non Left wing politicians founder. Josh Frydenberg is the latest idiot who wont stand up against his Department and his Leader by advocating for the voters’ interests.

    Trump might be the first Right side leader who is not going to founder on the rocks. I live in hope. If this climate scam isn’t destroyed soon it will destroy us.

    I will not vote for anyone who has a climate change policy. Climate change is a fraud, as we are seeing in the Mann case. It has obviously been a fraud for years. The reputation of science and our universities will be destroyed by the inevitable anger against their fraudulent claims all to get more and more funding to push far left agendas.

    I would like to see some scientists and university executives charged with fraud over climate change.

  19. RobK

    Dave,
    The RET and CET are hobbling coal to the benefit of intermittents and storage costs. Ontop of that we will need more “services” such as frequency control, beefed up transmission lines and increased layers of overseeing boards and panels. It’s a cockup. It’s all in Finkel’s report.
    Finkel recommends installation of synchronous condensers and short term storage for VREs for stability. Long term storage is separate and filled by new gas in the meantime. All this is paid for by hobbling coal. What happens when coal is gone? Cost goes up. No amount of bluesky technology will alter that. Oh, and there will be consumer incentives for load shedding etc….good luck. The RET and CET are evil.

  20. gowest

    De-industrialisation has already begun. Time to collect the damage account and make the REIT wreckers accountable.

  21. RobK

    P.S. for those who maybe unaware: a synchronous condenser is essentially a free spinning generator with no prime-mover. It can re-process electricity with poor power factor (high transmission loss) back into power that meets specifications. VRE’s play havoc with transmission grids once over about 15%.

  22. Dr Faustus

    In energy, as in pretty much everything else in the public domain, Australia is condemned to learn from experience. Once an idea enters the political arena it becomes immune to the clearly apparent laws of physics, the iron discipline of the market, common sense and contrary facts.

    This issue and the dismal outcomes we are now experiencing were wholly predictable 10+ years ago. I know this because they were predicted in precise detail in multiple industry fora – not the least being within the generation industry itself. Many bloggers here will also remember on-line discussions over the years in which the common sensible ‘citizen scientists’ pointed to the present debacle on the basis of simple, yet robust ‘back of an envelope’ calculations.

    None of this is unexpected then; other than to the politicians (and their staff) who expect a glistening advantage by interfering – on the basis of faith – with a system that has proved far too complicated for them to understand.

    Having bought in this far, a retreat from the game would be too costly for the political players and their enablers. Hence we see the likes of Turnbull trotting out Finkel to defend the indefensible. Sadly, Turnbull, Shorten and their like are going to make us experience the full monty.

    Canutes, the lot of them.

  23. Mon

    Josh made the statement that good clean coal was good for export. If it is good for export, how come Australia can not enjoy the same benefits as the country’s who import good clean coal.

  24. incoherent rambler

    [ Cupping my hands over the notebook exhaust fan to warm them before I type ]

    The impact on industry of power prices that are not internationally competitive has been significant. Next step is the rush of closures.

    The path to disaster is clear.

    If sanity returned to our legislators now, it would not stop the disaster headed our way. Fixing the mess would take a decade.

  25. RobK

    Dr Faustus,
    Yes, it was known decades ago. It’s been the cunning of tempting people with “cheap” solar and the like. It’s been a well orchestrated ruse. The crescendo has been the dumping of solar panels worldwide by China as she decides to go to coal and nuclear for baseload power.

  26. Peter Ward

    What is fascinating about Alan Moran and this article is some of the background to the issue. There was an article in The Oz, way back on 26th August 2014, which mentioned that Alan had been sacked from the IPA, as their climate change expert. As you know, the IPA is a conservative ‘think tank’ and Alan was considered too conservative even for them, despite rumours of the IPA having the numbers 666 as part of their logo (these rumours emerging from the NSW Greens Party).
    Tristan Edis, the author of the article, claimed that Moran was sacked because of a tweet criticising Islam had offended many in the community (he didn’t say which community, but I can hazard a guess). He also pointed out that Tony Abbot’s office had wanted to commission Alan to investigate the government’s RET, but had been replaced by businessman Dick Warburton.
    Even more fascinating was Tristan Edis’s mention of the divisions being created in the Liberal Party over the whole RET problem, with numerous members threatening to cross the floor over the issue, with Cory Bernardi and Nick Minchin leading the charge.
    It seems that things haven’t changed a great deal, other than the fact Turnbull hasn’t learned anything from it all, and that the divisiveness has reached critical overload.

  27. Peter Ward

    Further to my comment above, here is an interesting quote from the same article: “The Australian’s political columnist Paul Kelly, in his latest book, reveals that Turnbull’s support for a price on carbon became a pitched battle for the heart and soul of the Coalition. The federal director of the Liberal Party, Brian Loughnane, goes as far as to suggest that Turnbull’s pro emissions trading stance was creating a level of division within the party that would “spiral out of control into one of the worst crises in the history of the Liberal Party”. Nick Minchin claims that if Turnbull’s position had prevailed, a large proportion of Coalition senators would have ended up crossing the floor in the subsequent parliamentary vote, and led to “thousands upon thousands of resignations from the Liberal Party”.

  28. RobK

    Peter,
    Yes, there must be powerful forces in play. I’d still like to know what Gore said to Palmer over dinner. That seems to have sealed us to the RET path with other enablers now still at the helm. It all seems somewhat sinister.

  29. john constantine

    Climate Justice also demands that the backlog of the postponed deaths of Australias frail, elderly racists be cleared.

    These people are only alive to vote Tory [and old labor] because unsustainable and unjust cheap and reliable electricity has been made available to them.

    Cultural Marxism and Moral Relativism inform us that because the wealth of the tribal peoples of the world was stolen by the racist settler cultures, those that benefited from this racist theft must be hounded into their graves by Climate Justice.

    Clear the backlog of postponed deaths with Climate Justice, Comrades

  30. RobK

    John,
    You’ve certainly picked up on the sinister bit.

  31. gabrianga

    Sounds like a document Malcolm’s former employees,Goldman Sachs, would support 100% ?

  32. Peter Ward

    RobK, my understanding was that Al baby simply told Palmer that he was a fine figure of a man: that was enough for him to back the RET, and scuttle Tony, Cory and Nick Minchin. Palmer’s decision to opt for Laparoscopic band surgery was subsequent to a staffer informing him Gore had only been kidding about the buffoon’s waist line.
    (Fake news).

  33. RobK

    Ha! It’s as good a tale as any….still sad but.

  34. Another old bloke

    From page one, chapter one of Thomas Sowell’s Economic Facts and Fallacies:

    Fallacies are not simply crazy ideas. They are usually both plausible and logical – but with something missing. Their plausibility gains them political support. Only after that political support is strong enough to cause fallacious ideas to become government policies and programs are the missing or ignored factors likely to lead to “unintended consequences,” a phrase often heard in the wake of economic and social policy disasters.

    At the head of the chapter, Sowell quotes Henry Rosovsky: Never underestimate the difficulty of changing false beliefs by facts.

    It’s as though Sowell and Rosovsky both had our current RET catastrophe in mind.

    Interestingly, the Victorian free market ideologue, Senator Scott Ryan and his good friend Kelly O’Dwyer have been utterly silent on the creation of the artificial market which sustains the RETs and the consequent destruction of the stable, reliable and cheap electricity market we once enjoyed.

    Turnbull crossed the floor to vote for Rudd’s ETS, so he has nowhere to hide on this issue. At least we all now know that his reputation as always being “the smartest guy in the room” was a big fat furphy

  35. incoherent rambler

    “the smartest guy in the room” – only when he taking a dump.

  36. IDefender of the faith

    Moran clearly does not understand the dynamics. First, Hazelwood was shut because its owner did not want to invest in refitting an old plant. Second, Australia has experienced a rapid and unnecessary contraction in domestic gas supply as a result of very poor planning by those who built excess supply from Australia into APAC gas markets (now subject to downward price pressure as the US adds to oversupply). Donestuc gas costs have tripled, creating serious cost effects in a power market that has seen its base load demand shrink and peak loads rise. RET subsidies are redundant. Two questions Moran should ask: how long in this environment can state and fed govt continue to subsidise enormous base load power consumers like tomago, Gladstone and Portland alumina smelters? Second: given the large volume of accessible conventional gas sitting untapped why is supply not meeting the current gap?

  37. Faye

    If the GST is clearly itemised, why can’t the renewables charge to me also be shown.
    Received my Origin bill for period from 1 April to 3 July 2017 showing the old and new charges.
    Old Charges:
    Peak Usage 24.20 c/kWh
    Controlled Load Off-Peak 1 11.70 c/kWh
    Supply Charge Controlled Load 1 12.50 c/Day
    Supply Charge 136.00 c/Day

    New Charges:
    Peak Usage 28.47 c/kWh
    Controlled Load Off-Peak 1 15.10 c/kWh
    Supply Charge Controlled Load 1 13.50 c/Day
    Supply Charge 141.01 c/Day

    I want to know what is the % and dollar cost for anything! to do with renewables (does the forced extra cost put on coal come into this too?) Like the GST, this cost item should be mandatory.

  38. RobK

    IDefender,
    Coal fired electricity is around $40-50/MWh, gas around $60-90. If you’d read Alan’s report, he describes all that in detail.
    The reduction of any baseload is deindustialization as much as anything else. Ultimately baseload is perturbed by very high VREs but in a delightfully random fashion. In the past the bulk consumers have had a discount but their bulk purchase has facilitated the infrastructure of the grid, when that leaves, household consumers and residual commerce will be left to carry the can.

  39. RobK

    Hazelwood shut because it’s old and the RET means it could only bid into the market at its $40cost plus the $80 RET certificate. If you canned the RET now (which is advisable, as you say it is redundant), there will be no new VREs to speak of being installed…..betcha.

  40. Bruce of Newcastle

    Two questions Moran should ask: how long in this environment can state and fed govt continue to subsidise enormous base load power consumers like tomago, Gladstone and Portland alumina smelters?

    So you want to export those export industries and well-paying jobs to China then?
    Where they’ll pay maybe $30/MWh for coal fired power from one of the 1000 or so new power stations that China has constructed.
    Then we buy that aluminium back from them, ship it over using fuel oil driven ships, and use it?

  41. AlanR

    You lost me at Malcolm Roberts.

  42. RobK

    ID,
    You are conflating dispatchable electricity and non-dispatchable electricity. For renewballs to effectively masquerade as dispatchable they need storage. Renewballs on their own are an inferior form and worth very little economically, don’t get confused.
    Gas-powered electricity comes in two forms: open circuit, which is a basic gas fired jet turbine, it’s cheap to buy, quick to run up but expensive to run. It is what’s being prescribed to make up for the intermittent renewballs. They will need to run all the time picking up the variable slack. Closed circuit gas is essentially a gas jet turbine with a steam turbine to scavenge the heat which the other wastes. They are dearer to build and only a small portion of output can run up quickly. Both forms are much dearer than coal.

  43. Irreversible

    RobK: if you look at the consumption, smelters provided no underpinning of consumer demand at all. They typically take the full commitment of even the larger units such as LY in Vic and they typically have no provision for load shedding so require matching large scale reserve. I think Gladstone power was all committed to Comalco. Consumers have already been belted by the overinvestment in transmission. Kennett provided the only insight into the subsidy with his govt’s audit, assessing the Portland subsidy at somewhere like $6billion. The real risk of today’s debate is that everyone wants to promote a particular fuel rather than a secure, reliable and least cost energy supply. We are already losing industry as a result of the gas cock up. But there’s no sign that anyone in Canberra (or elsewhere) will take a lead.

  44. RobK

    Faye,
    The Finkel report does a fair job of describing the bidding in the energy market, it’s a bit convoluted and I suggest you read that section of the report. In a nut shell: bidders bid to sell on 5 minute blocks, the highest price bidder in a 30 min set sets the price for all bidders. Renewballs come in low (they get the $80 odd RET anyway) so they are sure to off load their product. Coal has to bid knowing it has to add $80 odd because the RET. So there isnt a clear loading for renewballs as such. The proposed CET is slightly different in that the retailer has to find the certificates(I.e. go and buy some renewballs subsidies) so under that scheme it maybe a bit easier to be transparent but I doubt that is the goal.

  45. RobK

    Irreversible,
    I’m in WA and I’m not familiar with the report you refered to, but typically smelters and other big consumers can shed a certain amount of load, at least for a while and that is in their supply agreement. It is problematic to replace those customers with gas fired electricity. I’m wary of a report that says bulk energy at a discount is a subsidy. They are not the same so context is important. If as you say, anyone built a power station solely for a smelter and ran it at a loss..they have rocks in their heads but the report would need to be carefully read. I’m not believing the premise that entire power stations run at a loss to smelters, if so by all means address that but renewballs aren’t going to do it.

  46. Dr Fred Lenin

    Lurker ,it will tske a long time to restore sanity in politics .as to your good suggestion ,hanging a few thousand traitors would definately make a difference “pour encourager led autres ” would . make ,start at the top of coursev it hard for the u.n.communist recruiters . Start at the top but hang the minions first making the others watch till its their turn .

  47. RobK

    Irrev,
    Over investment in transmission lines will be an enabling function for renewballs. There will be greater losses and massive surges on the main conductors. It’s effectively a mask on further expenditures required on the grid; defrayed go look like some stimulus spending and a major sweetener for the distributors to get onboard with 10% returns guaranteed. It fits in nicely with the overall ruse.

  48. m

    Friend who worked as an analyst for dept of defence says Finkelhas just supplied recipes using low emissions, reliability and cost effectiveness to put in sausage machine to see which one is best. Nothing with emissions low enough for the greenies will be cost effective

  49. Tim Neilson

    The real risk of today’s debate is that everyone wants to promote a particular fuel rather than a secure, reliable and least cost energy supply.

    With one exception. Some people have done the relatively easy analysis of production, reliability and price and concluded that coal is the most secure, reliable and least cost – so there’s no dichotomy between promoting that “particular fuel” (at least by advocating getting rid of the regulatory nobbling it’s subjected to now) and promoting security reliability and cost-efficiency.

  50. greggg

    One Finkel recommendation that should be implemented is the requirement that wind farms should pay for their own backup to ensure dispatchable electricity. If they have to make their electricity output as reliable as output from fossil fuel generators, that will cost them heaps and stop new wind farms being built.

  51. manalive

    It’s interesting to get to read Alan Moran’s piece without interruption.
    He tried to make these arguments in an ‘interview’ with Andrew Bolt, I downloaded the podcast.
    Alan was constantly interrupted, he was hardly able to finish one sentence.
    In the 11 minute ‘interview’ Alan was able to get in a total of 5 minutes in 22 snatches of disjointed words and phrases.

  52. RobK

    Greggg,
    Finkel’s recommendation is for short term storage (for a matter of minutes), enough time for backup power go run up. It’s an extra cost to improve stability but it still requires dispatchable back up.

  53. IDefender of the faith

    RobK: there appears to be considerable uncertainty over the estimates of capital cost of new coal generators, which is one reason the investors are playing hard to get. (The other being regulator risk). Bruce of Newcastle: the subsidies for smelters are a cost to other industries. If paid as a gift they would sustain three times more people on the evident salary costs of a typical smelter. Heavy load consumer subsidies are a massive distortion.

  54. John Bayley

    Nah…the future is in mega batteries!
    So says Tom The Greek, the SA Treasurer, and the mega-crony capitalist Elon Musk.
    https://au.finance.yahoo.com/news/sa-govt-announce-battery-supplier-004202296.html
    So it must be true! /sarc

  55. Faye

    “Renewballs come in low (they get the $80 odd RET anyway) so they are sure to off load their product. Coal has to bid knowing it has to add $80 odd because the RET.” So there isn’t a clear loading for renewballs as such.”
    If the marketing of energy was straightforward without enabling the renewables shysters and penalising the coal industry and with every competitor on a level playing field, then renewables would be too dear and wouldn’t survive and coal would be back to its right price. To burden a nation’s people with such fraud for a non-problem is criminal and immoral.
    “…so under that scheme (CET) it maybe a bit easier to be transparent but I doubt that is the goal.”
    I am sick of being had. If a conman was out there doing what these people do (politicians&renewables mob) he would go to gaol.
    It would be possible to work out the extra cost involved and provide it on our bills even if it was a ball park figure. You could start with the history of the prices encompassing the beginning of the intervention and growth of the renewables to see a pattern. Taking into account that normal costs go up over time, any major divergence with the intervention of renewables must indicate how much they are skewing the market.

  56. RobK

    I’D,
    There are some 1600 HELE coal fired power stations scheduled to be built in the next few years around the world. The costs are generally well known. The main variables are regulatory and IR.
    Heavy load consumers generally get a big discount but still pay over the production cost of generation. Again, very often a discount is masqueraded as a subsidy. If Pollies genuinely give a subsidy, that is a political matter.

  57. Tel

    You guys are saying that RET adds 8c per kWh directly to Australian electricity and it’s NOT counted in the AEMO wholesale rates… did I get that right. So when you consider there will be transmission loss on top of that and retail markup probably the Green tax is adding perhaps 12c to 15c to the price of the final retail electricity price in Australia.

    This seems a lot higher than some of the earlier estimates. Can anyone provide a full breakdown here?

  58. RobK

    Faye,
    You could start with the history of the prices encompassing the beginning of the intervention and growth of the renewables to see a pattern. Taking into account that normal costs go up over time, any major divergence with the intervention of renewables must indicate how much they are skewing the market.”
    That’s exactly what Alan Moran’s report does. He comes up with a figure but I don’t recall it off hand. I think it’s around $800 or so a year average. Have a read of Alan’s report.

  59. RobK

    Tel,
    It’s not that straight forward. The bidding process complicates things and gas fired has a different RET loading to coal since it produces less CO2/MWh.
    See Finkel’s chapter on this for clarity (i can’t cut n paste from the pdf on my phone).
    Alan’s report also does a good breakdown of costs.

  60. Tim Neilson

    Australia is condemned to learn from experience

    I presume you’re using the expression figuratively Dr F.

    Lower primates can learn from experience. I’m not so sure about Australia’s politicians, social justice warriors, tree huggers, “journalists”, “public intellectuals” et. al. in our “elites”.

  61. TOM BIEGLER

    The crucial part of this piece is the tale of how gullible folk, even reasonably well-informed ones, have swallowed the essentially implausible claim put forward over decades that renewables are about to become very cheap. Of course it’s impossible to disprove that claim, and not everyone sees it as implausible, but surely the prudent course of action is to refuse to accept it until proven. There is simply too much at stake. Putting sun and wind at the heart of an electricity system is a high risk strategy. There will be tears.

  62. RobK

    Tel,
    and it’s NOT counted in the AEMO wholesale rates… did I get that right.”
    Yes, you have that bit right. Not only does coal pay it bit renewballs are credited it. So coal atrophies by paying for it’s own demise….which is why some generators were preferring to pay a fine rather than pay the competition who supply an inferior product, being non-dispatchable.

  63. RobK

    Tom,
    Some renewables are cheaper than new coal….but the have a useful life of twenty years or so and are non-dispatchable. Add in those costs and they have a long way to go. Lifetime ownership of battery storage is in the order of US$0.20/kWh or $200/MWh wholesale.

  64. RobK

    Tel,
    “and it’s NOT counted in the AEMO wholesale rates… did I get that right”
    Oops, I made an error there in saying yes. Under the proposed CET it would not show on the AEMO. I think it does under RET but is confounded by the bidding.
    As far as certainty goes both the RET & CET are subject to variation over time by market and regulation setting of the threshold.

  65. Rayvic

    “Treason laws should apply to those who are willfully destroying our nation, society and economy.”

    Agreed! Treason is what it is.

  66. Tel

    RobK I saw Alan’s report. He puts 10c per kWh down as the component of retail price going to “Poles and Wires” (see link at top of article, Figure 22) but what he misses in that is I’m actually paying on a per-day rate for “Poles and Wires” in my electricity bill. It’s about 78c per day last I checked. So I’m getting hit for that PLUS the 10c per kWh.

    Now just look at those skanks in Canberra with the lowest “Poles and Wires” charge (again Figure 22), but wait a moment, there’s no generators in Canberra, they use NSW infrastructure so they should be bloody well paying the NSW rates at least. Holy wealth transfer, Batman!

    Anyway, Alan doesn’t give a neat breakdown but in round figures the AEMO average price is about 5c per pWh, and the retail price is about 25c per kWh so in the middle we can have that 10c for “Poles and Wires” and the 8c for RET which leaves approx 2c per kWh profits (with the double dip on per-day network charge).

    25c = 5c (baseload generation) + 8c (RET overhead) + 10c (Network) + 2c (Profit)
    All prices per kWh.

    That’s all round figures. The retailers offer a small discount if you pay on time, etc. so that probably wipes out the 2c and they are running on the double-dip to cover the retail business. Anyway, I remember they sent around flyers back in the Liar’s Party days claiming much lower Green tax than that.

  67. Mr Black

    IF the people responsible for this were incinerated in a fire, I would gleefully roast marshmallows to the sound of their last screams. This is treason, the intentional destruction of a nations ability to function, the lowering of living standards as policy.

  68. RobK

    Tel,
    I have an engineering background. I live in WA, each jurisdiction seems to have their own take on billing. What happens over east with the AEMO after the bidding process is unknown to me. As an aside, I’ve been farming for the past twenty two years. The farm is off grid so I haven’t had a power bill as such in that time. I have given advice on a few solar projects upto 100kW and have a fair idea of the SW grid in WA but the whole process is different.

  69. RobK

    I was just reading the ABC article on the SA hornsdale windfarm which is to get the new Tesla battery. The wind farm is 315MW, the battery is 100MW(charge/discharge rate, I’m guessing) with a 129 MWh capacity.
    No price is given other than Elon saying if doesn’t finish it in 100 days, it’s free but will cost him over $50million (implies a lifetime ownership cost of about $130/MWh). The typical wind farm has a capacity factor of around 30% so the battery will charge in about an hour(on average) and last about an hour at full discharge rate. 50 mill doesn’t get you much these days. It will be interesting to see how long it lasts, which depends on how much it cycles. Once a day gives it about ten years all going well.

  70. Tel

    http://www.abc.net.au/news/2017-07-07/power-prices-off-the-chart/8687480

    Victoria price increase: 63% “highest on record”.

    Even more hilarious…

    “It’s all due to the Hazelwood closure, it’s all due due to high gas prices, it’s all due to intermittency, it’s all due to those greedy incumbent gentailers, it’s all due to the wind drought, the list goes on.”

    The list goes on but they just forgot to mention the RET and the mandated purchase of renewables. How about that?

  71. RobK

    It’s a wonder, Tel. All those reasons probably contributed. It’s a comprehensive balls up.

  72. RobK

    Curiously, all those reasons are inter-related. If we’d started to build new coal a decade ago, we’d be discussing something else now.

  73. Whalehunt Fun

    Finkel needs to be arrested, run through a show trial and executed in the court room by slow strangulation broadcast live on the ABC. While this would require legislation to remove Australia from various UN agreements regarding strangling of criminals, it would be well worth the effort. The entertainment alone justifies the effort, let alone the economic benefits ofa return to rational thinkingoncarbon dioxide emissions. The globalwarming scam promoting academics could be rounded up and used as fodder for mo ths of broadcast show trials and executions.

  74. dan

    Mr McArdle said there was a desperate need to increase the capacity for thinking around the greatly increased number of variables in power pricing.

    It’s not my area of expertise but maybe if we increased the capacity for generating electricity we might be better off?

  75. hzhousewife

    What day is DAY ONE of Mr Musk’s countdown, anyone know? Today, yesterday, or some time in the future.

  76. Don Wilkie

    Why did the Finkel Report not factor in the relatively short life of wind turbines and the huge cost of having to replace them regularly?

  77. RobK

    Hz,
    What day is DAY ONE of Mr Musk’s countdown, anyone know? “
    From the signing of the contract. It was not signed yesterday and I found no indication of when it might be.

  78. RobK

    Dan,
    “Mr McArdle said there was a desperate need to increase the capacity for thinking around the greatly increased number of variables in power pricing.”
    The vagaries of the weather don’t help. The competition for gas, which has other uses.
    When energy is based on coal, it’s a relatively known quantity at it’s highest potential use, especially for the lower grade stuff. I suspect nuclear would also be a fairly stable provider. If these stable forms dominate the rest would fall into line. As coal atrophies under RET or CET the experiment continues with pricing. The bidding system works best with only small variations from suppliers. So yes some big stable suppliers would settle things down.

  79. Leo G

    Over time, storage can help put downward pressure on prices because it can flatten out peak demand,” said Tony Wood, energy program director at the Grattan Institute.

    It looks like the Tesla battery system is to be used to transfer energy at times of low demand from the grid, a small proportion from windfarms, and return the energy when demand, and prices, are high.
    In which case, it can’t really be treated as a “renewable” source in the normal sense.
    In fact, I suggest, it could be used to improve the operation of coal-based generators in matching peak and off-peak demand, or to allow windfarms to aggravate that operational difficulty for the coal-based generators.
    Since it will be managed in association with a windfarm, guess which strategy will prevail?

  80. RobK

    Leo,
    I agree. I’ve often said to those saying when batteries become cheap enough solar will prevail: when batteries become that cheap baseload will prevail.
    With baseload you do need some peak power sources like gas, hydro etc. If batteries can ever do that economically, load shifting to smoothen the curve, then coal and nuclear can manage the job without other assistance. Currently batteries aren’t there yet at around $200/MWh cost of ownership.

  81. RobK

    From what I understood from the finkel report, storage will qualify for CET subsidies, so there’s room for gaming yet.

  82. Andrew

    It is the methodology used in the market that has allowed the big incumbents (including government owned) fleece us in broad daylight.

    Uh huh. They’re making such supernormal profits (including the govt owned ones) that they were happy to close the plants in DPRSA and the VSSR, dynamite them and pay $100m in remediation costs to avoid continuing to thieves supernormal returns by inflating the wholesale cost of power. And the govt owned instrumentalities were making so much money off baseload coal that they were happy to watch a power station being bulldozed rather than step in and operate it with a zero cost base.

    Sounds like mOron has another sock puppet.

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