Predictable NBN errors replicated in renewable energy sector

Today in The Australian

The problem with the National Broadband Network was always very simple. The project’s goals were worthy: to provide a new, albeit extremely costly, high-speed network, earn a reasonable return on taxpayers’ investment and charge readily affordable prices.

About Henry Ergas

Henry Ergas AO is a columnist for The Australian. From 2009 to 2015 he was Senior Economic Adviser to Deloitte Australia and from 2009 to 2017 was Professor of Infrastructure Economics at the University of Wollongong’s SMART Infrastructure Facility. He joined SMART and Deloitte after working as a consultant economist at NECG, CRA International and Concept Economics. Prior to that, he was an economist at the OECD in Paris from the late 1970s until the early 1990s. At the OECD, he headed the Secretary-General’s Task Force on Structural Adjustment (1984-1987), which concentrated on improving the efficiency of government policies in a wide range of areas, and was subsequently Counsellor for Structural Policy in the Economics Department. He has taught at a range of universities, undertaken a number of government inquiries and served as a Lay Member of the New Zealand High Court. In 2016, he was made an Officer in the Order of Australia.
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37 Responses to Predictable NBN errors replicated in renewable energy sector

  1. RobK

    Well said Henry, though I fear it will fall on deaf ears. Especially the electricity argument because for many the RET is working as intended; to decimate coal at any cost. The NBN is I suspect just a bad accounting exercise by nationalists having a wet dream.

  2. OldOzzie

    Good Article Henry

    your second last paragraph sums it up

    Fiddling at the edges cannot undo this mess. Rather, what is needed is a drastic change in course. And there is no mystery about the steps that should be taken.

    The proponents of renewables claim they are cost-competitive. Fine: now that renewable generators have pocketed $15bn in subsidies, let them stand on their own two feet.

    And while we’re at it, let’s ensure those generators pay the full costs they impose on the network, including in terms of backup generation, rather than hoisting them on to consumers.

    Moreover, that requirement should not just apply to new ­sources of renewable generation, as the Finkel report argues, but to existing ones, too: if they can’t afford those costs, we are better off if they shut down.

    As for reducing emissions, if that is the government’s goal, it should pursue it by paying no more for abatement than the price at which it can purchase it overseas, which is a fraction of the amount taxpayers and consumers currently shoulder.

    And emissions reductions should be secured wherever their costs are lowest, rather than imposing a disproportionate burden on our power sector.

    Merely to list those measures is to highlight how unlikely they are to happen. Indeed, Labor is determined to go in the opposite direction, with its target of 50 per cent renewables by 2030 (which implies quadrupling the share of wind and solar in just 12 years) certain to push the system beyond the point of collapse.

    Perhaps that is what Australians want: Third World outcomes with First World costs. But if it isn’t, we need to abandon the illusion that constraints can be ignored and happiness purchased with wishes.

    Until we do, the destruction wreaked on energy and telecommunications will be merely a teaser for the disasters that lie ahead.

  3. Entropy

    Current energy and telecommunications policy is immoral. That narcissistic wankers on $200k plus salaries blithely impose these costs on people with incomes one fifth of theirs disgusts me.
    Rabz doctrine will one day not be a joke.

  4. Herodotus

    The ruinables boosters don’t want their schemes to have to contend on a level playing field any more than the gay marriage boosters want a people’s vote.

  5. John Constantine

    Their RET is simple Climate Justice, where the resources of the poorer proles of Australia [ being condemned as a racist, Anglosphere colonial settler outpost] are sent to the hellholes of the world, where it can be looted at leisure by the despots,oligarchs and Kleptocrat Klass of these hellholes.

    Climate Justice is now an international convention, as the great transnational decision making bodies have been branch stacked to reflect the majority vote of the cartel of crony despots, dictators and demagogues that crush the majority of humanity under their totalitarian regimes.

    Their NBN is just the way that Australias crony quisling class can control communications and media, then Crush and denial and dissent with the full power of the State.

    It isn’t the cost of victory, it is the glory of the triumph of getting your enemy to pay for the cost of your victory.
    Comrades.

  6. Craig Mc

    I’d like Henry’s take on the affect of spot-pricing on base-load generation.

    My take is that if Engie were able to make money out of Hazelwood, they’d still be doing it. After all, they originally bought it expecting it to run until 2036.

    Until coal-fired power stations can respond quickly to spot-pricing they’re going to be left holding the bag of base-load power where returns are often lowest. When you can never generate below 40% capacity you’ll sometimes be generating power at a loss, and if it takes several hours to ramp up you’ll miss the good prices. Andrew’s coal royalty gouging doesn’t help either.

    Are we heading for an Enron/California scenario? I hate to say it (especially here), but maybe privatisation of generation isn’t all it’s cracked up to be. NSW and Qld look to be the only states with reliable power this summer.

  7. Garry

    Personally I am of the opinion that we will need to destroy what is left of our industry and drive the cost of energy above what the average punter can endure. Much the same as we must allow immigration and the reliance by much of the community on welfare to destroy our social fabric before the silent majority stirs. They will eventually stir but by then the damage may have become terminal!

  8. John Constantine

    It isn’t privatisation when the State retains the ability to destroy the private property, and it isn’t a free market when the State orders that one provider gets first use over other providers and it isn’t a long term viable decision to spend real money to be a slave to ideology when that ideology outright says it intends to drive you out of the market as soon as it can get away with it.

  9. Leo G

    “… the errors involved in the NBN are being repeated in energy, and on an even grander scale.

    There too, governments have ignored trade-offs, not recognising that it is simply impossible to have all three of a massive rise in the share of renewables, reliable power supplies and affordable electricity charges.

    And there, too, the outcomes are exactly as I (and many others) predicted: network reliability has deteriorated dramatically, with four recent incidents of involuntary load-shedding and many more near misses; as the wholesale market becomes ever more unstable, price spikes are increasingly frequent; the baseload investment needed for network security has withered away; and adjusting for inflation, household electricity bills have risen by more than 60 per cent in a decade, causing widespread hardship.”

    Is Henry suggesting that a massive rise in the share of renewables is a worthy cause, provided power supplies remain reliable and electricity charges affordable? Surely, the most worthy level of renewables is that with the lowest electricity cost (as opposed to price or charges) and highest reliability- that is, close to no renewables. Very close.

  10. egg_

    narcissistic wankers on $200k plus salaries blithely impose these costs on people with incomes one fifth of theirs

    Yup, without strong leadership, the KRudds of this world will ‘rule the ruins’ c/- Latho.

  11. Chris M

    Philosophically opposed to paid subscriptions of any amount to the loathsome MSM. But thanks for the snippets folks…

  12. Dr Fred Lenin

    Get the bloody politicians out of business ,they were never smart enough to make money in business in the first place ,they were useless at the law ,that’s why they are in politics . Why entrust billion dollar industries to incompetent fools ? That’s what is happening here ..

  13. H B Bear

    Craig Mc – privatisation of coal generation assets isn’t the problem (except insofar as governments can run uneconomic assets longer than the private sector if they want to). The problem is that (high cost) renewable electricity must be taken ahead of other forms of generation if it is available. Coal generators can have sales displaced in parts of the demand curve where they should be the only supplier. When you have high fixed costs (including fuel to a large extent) that can flip you from being economic to uneconomic.

  14. HGS

    Ergas is wrong from the second sentence. There was and is nothing worthy about the NBN goals or about the renewable energy goals.

  15. manalive

    “… the destruction wreaked on energy and telecommunications will be merely a teaser for the disasters that lie ahead …”.

    Henry Ergas’ final sentence is a dire warning, the Energy Return on Energy Invested ratio (ERoEI) makes solar, wind (cost adjusted for intermittency) and most biofuels totally unable to sustain a modern society as we know it.
    The alternatives are to ditch ‘ruinables’ entirely and go for nuclear or forget the whole schemozzle and do nothing, let the market resolve energy supply and demand equation — there is no ‘sensible centre’ course.

  16. Nathan

    Bronwyn Bishop had a cracking quote on Paul Murray Live a few weeks back. It went along the lines of “if you want to create a famine, put Governement in charge of farming and wait”. Applied equally to the NBN and now energy market sectors.

  17. H B Bear

    Nice to see Bronnie joining the dots after decades as part of the problem. I guess $5,000 helicopter rides, six figure salaries and life pensions must salve those feelings of hypocrisy when you try to sleep at night.

  18. egg_

    The problem is that (high cost) renewable electricity must be taken ahead of other forms of generation if it is available. Coal generators can have sales displaced in parts of the demand curve where they should be the only supplier.

    I.e. renewballs are a parasitic model perpetrated by rent seekers.
    Who’d’ve thunk it?

  19. Craig Mc

    I’d like Henry’s take on the affect of spot-pricing on base-load generation.

    effect. I condemn myself.

  20. Mother Lode

    No point telling warmest renewables don’t need subsidies.

    They believe coal and gas are subsidised.

    They think it levels the playing field.

  21. Botswana O'Hooligan

    The local federal member for Oxley, Milton Dick is a labor man and has sent a mail out for people to attend a meeting about the terrible NBN service in his electorate. The sheer temerity of the man is that he blames it all on the Liberal party in general and Malcolm Turnbull in particular. Turnbull could have fixed it but didn’t and Conroy and Rudd should have been tarred and feathered and they weren’t, and so should we taxpayers for allowing them all to get away with it.

  22. Myrddin Seren

    manalive

    Henry Ergas’ final sentence is a dire warning, the Energy Return on Energy Invested ratio (ERoEI) makes solar, wind (cost adjusted for intermittency) and most biofuels totally unable to sustain a modern society as we know it.

    I think you will find this is in fact the endgame of misanthropic Green energy policies – not merely an unfortunate and ‘unforeseen’ consequence.

  23. Peter

    “The problem with the National Broadband Network was always very simple’

    Yes – ignorance or denial of economics and ignorance or denial of science.

  24. Oldozzie

    As Judith Sloan stated in The Australia today

    Tony Abbott’s RET, emissions policies made energy policy a farce

    So, what has happened since the RET was renegotiated in 2015? The wholesale price of electricity has doubled from $60 a megawatt hour to $120. With the closure of the Northern and Hazelwood coal-fired power stations, high-priced gas is increasingly the marginal fuel that is setting the price.

    Needless to say, the remaining coal-fired power stations are making thumping profits — the Queensland government-owned plants are swimming in dough as they game the system to return obscene dividends to the state government — as are the renewable energy players.

    To those who argue the solution to our energy problems is the clean energy target, my response is: you have to be joking. The CET is just the RET by another name.

    And even if the emissions intensity benchmark is nominally set to include clean coal — note that 1600 clean coal electricity plants are being built around the world — the key parameter is the emissions reduction target.

    Let’s face it: energy policy is a farce in this country. It makes other countries look like paragons of common sense. The US is swimming in cheap shale gas and has reduced its emissions without any intrusive government dictates, aside from some loony and ineffective measures by some of the states.

    Germany is building a large brown-coal-fired electricity power plant and has deferred the withdrawal of brown coal to a later date. Denmark has gone cold on wind power, having recently cancelled a large offshore project. Britain is building a new nuclear power plant.

    By contrast, Australia seems hellbent on sending all our energy-intensive industry broke as well as imposing ever higher energy bills on households. There has to be a better way.

  25. Rafe Champion

    As we approach Xmas, lets put out a call to Greens and ALP supporters and Liberals who support the RET to turn off their power on Xmas day, better still xmas to New Year in sympathy with all the people who are having their power cut off or suffering in other ways from the power prices.
    Challenge your politically correct friends:)

  26. Fulcrum

    I think we should reserve judgement on the NBN as transissions on a massive scale are never a walk in the park.
    It would be hepful to get some statistics in terms of volumes and failure rates before people spin off from anecdotes.
    One thing does seem clear, there should be more people picking up and dealing with complaints.

  27. incoherent rambler

    Dear Henry & Judith,

    Nothing much has changed to prompt these publications in the (UTWL) newspaper.
    CAGW has been a farce since the 1990s and government energy policies and burdens have hammered industry since the Howard era.
    Why the sudden rush of enlightenment?
    Did you have to see the destruction of industry before you were prepared to accept the basic physics and arithmetic?
    Energy taxes are a business killer and they cause the poor great discomfort.
    All energy taxes (RET, excise …) must be abolished.

    Start the chant and lead the press gallery sheep with “NO ENERGY TAXES!”.

    yours incoherently

    Rambler.

  28. stackja

    No real cost benefit analysis was ever made of ‘renewables’ or the NBN.

  29. John Constantine

    Their left truly feel in their hearts that fossil fuels are subsidised, and that the blood price of the subsidy is Racism.

    Only when all the colonial western settler cultures have been stripped of their fossil fuel advantages as Climate Justice imposed War Reparations, and are run on social justice ruinable,s can they then truly begin to self-critique their racism in any meaningful way.

  30. incoherent rambler

    Pasting from the open thread:

    cohenite
    #2466485, posted on August 12, 2017 at 12:29 pm

    Rush into renewables without a sensible plan is no way to operate

    Renewables do not work for a plethora of reasons: intermittent, not synchronous with grid frequencies, unreliable, EROEI < 1, dependent on subsidies, grotesquely expensive and inefficient. But the real reason why we are being inflicted with them is alarmism. Alarmism is dead in the water; as a theory it has failed at every level. So with the underpinning reason and justification for renewables not existing there is no imperative for them at all.

    Unfortunately our imbecilic pollies and media have moved on from alarmism not being proved without considering it at all and it is now simply which are the best renewables and combinations of them.

    Henry, reason conquered the false alarm decades ago.
    Ask the question; “If there is no reason for alarm wrt coal/oil/gas, why do we need ruinables?”

  31. Neil

    Their left truly feel in their hearts that fossil fuels are subsidised

    They also fail to take into account the money we get from exporting coal and natural gas.

  32. Peted

    Suspending judgement on the NBN would be great if it wasn’t a massive renationalisation building over existing functional infrastructure at higher costs to consumers and no ability for customers to opt in to higher quality infrastructure, or to pay for fast tracking.

    Central planning nightmare.

  33. stackja

    Peted
    #2466569, posted on August 12, 2017 at 1:36 pm

    PMG redux.

  34. H B Bear

    PMG redux.

    Yep. Took decades to get rid of it and KRuddy bought it right back.

    The failure of The Father of Middle Class Welfare to break up the wholesale and retail sides of Telstra before selling the retail arm could have prevented this whole mess. Just another failure to add to a very long list.

  35. Dr Fred Lenin

    I was told when I was very young,”politicians”couldn’t runa craphouse . Kirner inVic proved it so ,they had a warehouse full of environmentally pure toilet paper ,ordered at great cost which was too big to fit the dispensers in government owned toilets . Their intellectual capabilities have not improved since then as a matter of fact they may even have diminished .witness the krud mob ,the giliard gang and now the ruddbull shower . If a stupidity graph were drawn it would look like Mann s hockey stick” ,only it would be true ,not a tissue of bloody lies like manns crap .
    Fancy basing an economy on manns bullshit ? WANKERS !

  36. Pingback: Predictable NBN errors replicated in renewable energy sector | Catallaxy Files | Cranky Old Crow

  37. Craig Mc

    I meant to link this video before.

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