ACCC offers no answers to government created energy crisis

Appointed as head of the ACCC by Rudd Gillard, Rod Sims has a long association with the ALP going back to the Whitlam years. His re-appointment by the Coalition is unsurprising given the callow nature of conservatives and the fact that many have interventionist sympathies that accord with those of the leftist intelligentsia that Sims represents.

In his speech to the Press Club Sims addresses two points that have been warmly embraced by like-minded people within the media.

The first covers the gas crisis. Sims, though tiptoeing around the wanton political destruction of state government bans, notes that the firms that undertook massive capital investments could not have expected to face a shield-wall of obduracy on the part of politicians with custody over our economic welfare banning the exploration for gas. Only Queensland, where the ALP has kept Coalition openness largely in place, has a relatively open policy.

However he favours a “nudge” approach, which he says the producers have followed, whereby they support the local market as much as possible (even if this is contrary to their commercial interests). He also says, offering a big hint “I am not disclosing the detail of what is in the ACCC’s report to the Treasurer on gas supply and demand. That will be made public shortly.” In other words he will advise the Commonwealth to force firms to break overseas contracts to redress the damage that state governments and environmentalists have created in starving the nation of new gas supplies. Naturally, like all such leftists he will advise on such actions that are pregnant with implications about the reliability of the nation’s export contracts, with a heavy heart.

In the case of electricity his speech addresses two aspects that have driven up prices: network charges and generation/retail costs.

In the case of network charges that are regulated,, like any self-interested bureaucrat, he’d prefer his agency’s decisions were not reviewable by another. He may be right but he is the wrong person to be making such judgements.

In the case of other costs (accounting for 60 per cent of the recent price increases) he lumps them together but in side briefings with sympathetic journalists like Paul Kelly he spelled out the breakdown as being caused by 24 per cent retail margins, 19 per cent generator price increases and 16 per cent green schemes. These are fantasy totals that obscure rather than enlighten policy.

Why,, given the fact that there are three major retailers and two dozen others (some, like Engie and Snowy, major businesses) competing for the retail market, have prices increased? The inference is that retail margins are too high but how is that possible when there is so much competition? (Even though, in passing, the ACCC has somewhat constrained that competition by banning some marketing techniques). The answer is that the retail costs have risen as a result of the regulatory policies (dominated by but not exclusively green schemes). In trying to disaggregate these costs, the portion attributed purely to retail needs to be heavily qualified, something the AEMC does but others seeking direct controls, like the Victorian regulator, avoid paying attention to.

Similarly attributing the cost increases to higher generator prices obscures the true cause of these, namely that subsidised renewable policies have driven out of the market, as they are intended to, the low cost fossil supplies. The latter until recently received a $40 per MWh price for their electricity and were forced into costly stop-start operations by the preference given to wind which receives a $80 per MWh subsidy in addition to the market price.

Now generators have been forced to close, less competition has doubled the market price.

Sims analysis fails to recognise these causal effects and his solutions, though highly palatable to those looking for culprits other than green subsidies, will be equally deficient.

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33 Responses to ACCC offers no answers to government created energy crisis

  1. Zyconoclast

    Sims analysis fails to recognise theses causal effects and his solutions, though highly palatable to those looking for culprits other than green subsidies, will be equally deficient.

    He didn’t fail.
    It was deliberate.
    The plebs don’t need to know.
    Pay up or sit in the dark.

  2. H B Bear

    Any analysis that fails to split out the explicit costs of the MRET is just propaganda.

  3. JohnA

    Zyconoclast #2503784, posted on September 21, 2017, at 4:56 pm


    He didn’t fail.
    It was deliberate.
    The plebs don’t need to know.
    Pay up or sit in the dark.

    No, it’s

    “Pay up AND sit in the dark.”

  4. Viva

    Having survived the violent demo in Thessalonika we now find that our hotel in Athens is smack dab in the middle of Anarchy Central. Apparently students and cops stage regular pitched battles in the streets around the hotel. Every inch of the surrounding derelict looking buildings are covered in graffiti. At least the hotel is right next door to the arcaeological museum and has views of the Parthenon which is why we chose it. Not to worry – I love a little napalm (oops tear gas) in the morning.

  5. BoyfromTottenham

    More people should know that the LRET consists of an effective 168% subsidy for all ‘renewables’ generators. Do the maths – the LRET gives them a subsidy of $85 for every MWh they sell to the retailers, in addition to the $50 / MWh they get for selling all their non-dispatchable electricity to retailers on the wholesale spot market. The base load (coal/gas) generators get only the $50/MWh or so from the same wholesale spot market, and have to idle their generators if total supply (base load + renewables) is greater than total demand. Only a Marxist could have thought this racket up! And our LNP pollies are OK with this economic treachery? They sure won’t get my vote at the next federal election.

  6. manalive

    Green energy schemes contribute only a small fraction to high power prices. That’s the hard reality for Tony Abbott.

    That’s the teaser to Kelly’s article for which I assume he is not responsible, but it is misleading.
    Towards the end Kelly writes:”… Sims argues prices are high, first, because of network rorts perpetuated mainly by state governments to boost revenue and weaken consumer protections; second, because wholesale price rises have been driven by the closure of coal-fired stations and market concentration; third, because gas generation is setting much of the wholesale price; and fourth, because of green schemes, the RET and solar deals …”.
    The closure of coal-fired stations, the increase reliance on artificially scarce gas, “green schemes” the RET and solar deals are all due to “green energy” policies.
    I don’t know if it is a reflection of his scattered reasoning processes or some deliberate attempt to obfuscate but I find Kelly’s articles mealy-mouthed, full of equivocations, irrelevancies, lacking in any coherent argument or point.

  7. cohenite

    The full quote from the article by Paul Kelly, a monumental idiot, is this:

    In his speech yesterday, ACCC boss Rod Sims backed a series of Turnbull government steps but offered chilling reality on what drives high power prices — network costs 41 per cent, retail costs 24 per cent, generation costs 19 per cent and green schemes 16 per cent. There is no silver bullet in declaring war on renewables.

    So only 16% is from green schemes like the RET and RECs such as the 26 million @ $85 a pop LRECs which renewable sites can offer and which fossils have to buy this year.

    But each of the other cost categories are perverted by renewables:

    1 Network costs such as poles and wires, and transformers and sub-stations etc have to be modified to accommodate the intermittent, surge nature of electricity from renewables. The grid itself has had to be vastly expanded because wind and solar plants are in far-flung locations. I don’t know what % of that 41% is directly attributable to having solar and wind hooked up to the grid but I am sure it is a large %. That might be something worth looking at Alan: how much expenditure on the grid has been necessary to connect to the renewables.

    2 Retail costs. AGL and the bald-headed bastard running it have worked this out beautifully. Wind and solar can issue LRECs based on either their installed capacity or what little electricity they actually produce, their capacity factor; I don’t know which and the fossils have to buy them. In addition when the renewables are producing the grid has to buy their output preferentially. With this source of ultimately tax-payer funded pool of funds the retailers have enormous slack to manipulate prices. Combined with the gas shortage and no investment in the coal power plants retail prices increase as supply drops off.

    3 Generation costs; I have no idea what this means. Hazelwood could produce at 1-2c per kilowatt hour. Mt Piper something similar. All the coal power plants could produce cheap reliable power because they sat on their source of energy, the coal mines. Mt Piper is going to lose its coal mine, Springvale Colliery due to green court action and Hazelwood was closed down due to government royalty increase. There is no point even comparing wind and solar generation cost because they do not produce grid compatible power.

    I firmly believe only a bird fart of crap has so far hit the fan, mainly in South Australia. If we have a hot summer whale poo is on the cards. Stock up on candles, tinned food and a generator.

  8. BoyfromTottenham

    cohenite – Welcome to the Australian Soviet. Now you just have to get used to being lied to!

  9. Rafe Champion

    Welcome to Fantasyland, a piece on the Conversation about the potential for storage of unreliable energy. Very upbeat!

    PHES, batteries and demand management are all likely to have prominent roles as the grid transitions to 50-100% renewable energy. Currently, about 3GW per year of wind and PV are being installed. If this continued until 2030 it would be enough to supply half of Australia’s electricity consumption. If this rate is doubled then Australia will reach 100% renewable electricity in about 2033.

    Fast-track development of a few excellent PHES sites can be completed in 2022 to balance the grid when Liddell and other coal-fired power stations close.

  10. H B Bear

    ”… Sims argues prices are high, first, because of network rorts perpetuated mainly by state governments to boost revenue and weaken consumer protections;

    Given network charges are set by exactly the same cardigan wearing bureaucrats as Sims himself, I would be interested in precisely what network rorts he is talking about. Network pricing is another one of those legal fictions that exist in monopoly pricing and regulation. There is a vast asymmetry between the network owners and the regulators that are charged with keeping them under some sort of control.

  11. Rafe Champion

    I don’t know if it is a reflection of his scattered reasoning processes or some deliberate attempt to obfuscate but I find Kelly’s articles mealy-mouthed, full of equivocations, irrelevancies, lacking in any coherent argument or point.

    Possibly two factors are in play here. One is Paul Kelly’s divided loyalty between the ALP and his capacity to give a straight feed which results in heavily biased pieces in the runup to elections and spasmodic attempts to provide balanced reporting between times.

    The other is the inherent complication of the system and the direct and indirect effect of the regulations and subsidies which I can follow when I read pieces by Alan but details go missing when I try to explain the story to other people notably my ALP voting friends.

    What is required is a high powered PR effort ranging from comics to youtube displays complete with visual effects, animation and musical backing to put the pieces of the puzzle together in a form that I and mug punters in the street can get a good grip on what is happening and who is to blame.

    People are going to become very receptive to the message as the prices go up and staggering businesses and clubs go to the wall, not to mention family budgets.

  12. RobK

    “The closure of coal-fired stations, the increase reliance on artificially scarce gas, “green schemes” the RET and solar deals are all due to “green energy” policies.
    That’s certainly the way I see it. No subsidies. No political interference. No problems.

  13. herodotus

    Here’s David Uren’s fantasy piece about why coal fired power is no longer the go. Too hot for comments to be allowed at the Oz.

    There’s a lot of dreaming about new coal-fired power plants. Given that Australia is the world’s second-largest supplier of quality black thermal coal, shipping about 90 per cent of what we mine to Japan, South Korea, China and elsewhere, surely we could use a bit more of it ourselves?
    Queensland Liberal National Party leader Tim Nicholls says he would back a private sector proposal if successful at the next election, while Queensland senator and former resources minister Matt Canavan says the $5 billion Northern Australia Infrastructure Facility could be used to finance one in the north of the state.
    The Minerals Council of Australia has urged a new plant be based on Victoria’s abundant, ­albeit high-emission, brown coal reserves, while the NSW Minerals Council wants government support for one in its home state.
    Malcolm Turnbull is not promoting these proposals but has said he’d lend a willing ear to any sound business case. (haha! business case!) Meanwhile, there is trench warfare within the Coalition over demands that any revision of energy policy should provide for new coal-fired power.
    The fact there has not been a go-ahead for any new coal-fired power station in Australia for 15 years tells us there is a problem. Either the demand is not there, the numbers don’t stack up or the risks are too great.
    The most obvious problem is regulatory risk. Australia’s climate policy has been in a near constant state of flux ever since the Howard government proposed a carbon emissions trading scheme (oh yes, blame Howard for starting it, not the media!) a decade ago. Labor ramped up the renewable energy target in 2009 and then vacillated over emissions schemes and carbon taxes with big swings in target prices. The Coalition abolished carbon taxes but endorsed Paris commitments and new renewable energy targets. It is now considering the call from Chief Scientist Alan Finkel for electricity retailers to be forced to purchase a minimum share of their power from low-emissions sources. (without a good reason to do so)
    Meanwhile, state governments are imposing their own ­regulations, with Victoria, Queensland, South Australia and the ACT all setting their own renewable energy targets. (Labor idiots)
    Victoria’s Labor government is happy to entertain proposals for deploying its brown coal reserves but says they may generate no more than 450kg of carbon dioxide for every megawatt hour of electricity, which is less than half of the most efficient coal plants in the world. (what about their raising of the coal tax? aka royalities)
    The kind of high-efficiency, low-emissions plant that is being talked about requires scale — it would need to deliver a minimum of 1500-2000MW to justify an investment that would reach about $4 billion. It has to be bankable. (don’t talk about it, just do more budget coal, or nuclear)
    The only way such a project could proceed would be with a government contract. But following the cancellation of the East-West Link project in Victoria and the Freight Link project in Western Australia after changes of government, infrastructure ­developers have learned there is no such thing as an iron-clad government commitment. (nor any solution to the media/left/green juggernaut)
    A new coal-fired power station would take at least seven years to get from investment go-ahead to start of production, ­assuming there are no court-­imposed delays from environmental challenges. An operator would then want a 50-year life for the asset. (legislate against environmental challenges- you know it makes sense)
    There have been 21 federal elections in the past 50 years. One can only speculate on how many carbon policies might emerge from the next 21 parliaments, but the parties to the Paris Agreement are talking about further deep emissions cuts beyond 2030. (good reason to detach from those idiots too)
    The NSW, Victorian, ACT and South Australian governments are already aiming at zero emissions by 2050. (they used to say kiss your arse goodbye in the cold war period if there was to be a nuclear war – now it’s good advice in the “zero emissions mad age”) Any new coal-fired power station could be regulated out of action halfway through its expected life. (seeing what’s happened so far, this is true)
    Given it’s only a dream, what if the regulatory obstacles could be overcome? The numbers are difficult because the rising use of ­intermittent renewable energy undermines the economics of big baseload coal plants. (No, it’s the artificial penalties that do that) The renew­ables are always first to market when they are working, because their marginal costs are zero. (Goebbels would be proud of this statement) Other generators have to accept what is left, making their operating level far more volatile than in the past. Investors do not know how deep the penetration of ­renewables will be, so they face a large market risk. (or, the pollies, reacting to propaganda, have stuffed it)
    The market is also changing as Australia’s energy-intensive man­u­facturing disappears and advances in solar technology are expected to make households less dependent on an integrated grid. (solar at night is actually not that good, and batteries are not what they are said to be) Demand overall is contracting. (mad prices will do that for anything)
    Then there are practical problems. You wouldn’t put a coal-fired power station in north Queensland. The 190MW coal-fired power station at Collinsville was closed in 2012 because of lack of demand and the region already has about twice as much installed capacity as its evening peak ­demand. You wouldn’t think of supplying the southern states from north Queensland because the power losses in transmission lines are too great and the interconnectors between the Queensland and NSW grids are too small.
    The greatest need for extra dispatchable capacity is in South Australia but it only has limited quantities of accessible brown coal. Difficulty in securing supply was a factor in the decision to close the Northern Power Station in Port Augusta last year. (but a ready availability of dynamite?)
    Victoria has abundant coal ­reserves (and they too have closed a huge power station) and, unlike north Queensland, faces tight energy supplies. But even putting aside the state government’s emissions policy, there is something self-­defeating about basing a massive investment in low emissions technology on high emissions brown coal (that’s only a problem if you’ve drunk the emission cool-aid) . It’s been done — a 2000MW plant was commissioned in Germany five years ago — but the ­investment hurdle is high. (the population is rapidly encountering their own personal investment hurdle)
    NSW’s high-quality black coal reserves would be the best base for a new coal-fired power station. Despite providing about three-quarters of Australia’s thermal coal exports, any new coal power project in the state would have trouble securing supply. The ­existing NSW coal generators struggle to obtain the coal they need to meet demand peaks, with most mine output contracted to Asian buyers and the rail network operating at full capacity. (this is an assertion that needs further examination – it’s not about a shortage of coal, it’s about the prevailing political/scientific – using the latter word loosely – “climate”)
    Hostility (read feral activism) to coal development in NSW spans both the left “Lock the Gate” movement and significant sections of the Nationals, including Deputy Prime Minister Barnaby Joyce.
    Extending the life of existing coal-fired generators is the most obvious stopgap solution, while the new reliability obligation being placed on renewable projects may result in some extra gas-fired power. We are much more likely to see high electricity prices and continued energy policy chaos into the indefinite future than we are to be switching on any new coal-fired power stations.

  14. herodotus

    Your comment is awaiting moderation. \
    Get fucked the lot of you in management.

  15. RobK

    Rafe,
    Welcome to Fantasyland, a piece on the Conversation about the potential for storage of unreliable energy.”
    ….by 2030 much of the existing wind and solar will need replacement.
    There will be a massive mismatch discovered regarding the amount of renewballs required to securely pump sufficient energy into storage.
    I read the comments on the ABC article about PHES Sites and most fail to realize that baseload and a small peaking power of gas and pumped hydro which cycle consistently on a daily basis is hugely different to renewballs trying to recharge ad hoc whilst supplying load. There will be random times of surplus and shortage, even with heavy, expensive redundancy. Dreamers, all of them.

  16. RobK

    All the while we are experimenting with this “transition” our savings and what competitive advantages we had are being flushed down the toilet. It is indeed a high priced monumental risk. If less effort was spent forcing this situation, the transition would occur of it’s own fruition in good time if it has any legs at all.

  17. cohenite

    Dreamers, all of them.

    No; wankers, bastards, smug, condescending arseholes, cognitive dissonants and vanity driven, virtue signalling dickheads and hypocrites.

  18. herodotus

    OK, apologies for the outburst above, but as you can see I put quite a bit off effort into the comment.

  19. herodotus

    Or, on reflection, as you cannot see, since it is still in moderation …

  20. Bruce

    Any electrical engineers out there who can expand on exactly how much of this pixie-dust electrickery is REALLY fed into the national grid?

    I mean, REALLY fed into the grid.

    Unless the putative sources are FULLY synchronous and PURE sine-wave, so that they do not cause evil things to happen due to wonky waveforms, AND have an output impedance equal to or lower than the “grid”, if my electrical theory is still current, so to speak, it can’t happen.

    (Disclaimer: I mainly work with electronics, specifically high-end audio, and if a single-phase powered device pulls more than ten amps, I don’t want to have much to do with it.)

    That’s why I got my sparky to fit a fifteen Amp outlet (and the appropriate cabling and circuit breakers) in my garage so I could reliably run my welder.

    The local rule here is that the electricity “authorities” will not allow the installation of three-phase supplies to domestic premises unless the “homeowner” is planning to install a serious air-conditioning system. Such things are HUGE consumers of juice, and basically money for jam for the “suppliers”.

  21. cohenite

    Bruce

    #2503986, posted on September 21, 2017 at 8:06 pm

    Any electrical engineers out there who can expand on exactly how much of this pixie-dust electrickery is REALLY fed into the national grid?

    I mean, REALLY fed into the grid.

    Yes and as well how much power is lost transferring power to a battery and discharging from the battery.

  22. hzhousewife

    Herodotus, thank you for your fine effort above. I don’t pretend to absorb the tech details of what you say, but the fact that you techies ( Bruce of N, Cohenite, RobK, Bruce, Rafe etc etc) keep posting and are clearly not able to understand the logic of govt choices makes me realise the seriousness of all this.
    I can’t get over the fact that the govt seems to think they can overcome the laws of physics.
    As a by-the-way, have early solar panels begun to turn up at the local tip yet, or are they outlasting the estimation of the lifespans. And do we have 20 year old wind blades yet, and what are we going to do with them?

  23. RobK

    Hz,
    I have some solar panels here on my farm (off grid) that are 20 years old. They are still producing at about 75%. The backing material is discolored. I have lost one panel in a storm when it became detached from the frame because the aluminum had fatigued. I recently purchased 3kW of second hand panels from an installer. I asked why these panels, just ten years old, were replaced. The answer was “upgrades”due to lucrative feed-in tariffs contracts ending, so new panels, new contracts. Used panels are 2-3 watts for a dollar. I.e. I paid $1k for 3kW of panels. In 1997 I paid $10k for 1kW.(see eBay under used solar panels, there’s heaps available, no RET of course).
    The only wind turbine retirement I’m familiar with is Esperance in WA where as far as I’m aware they are on their third round on turbines since the early 80s.

  24. hzhousewife

    Sounds like second-hand panels are pretty easy to get hold of, and very cheap. What kind of storage do you have, Robk ? Thank you for describing your situation btw.

  25. egg_

    how much of this pixie-dust electrickery is REALLY fed into the national grid?

    I mean, REALLY fed into the grid.

    IME only a fraction, but we only had 1 kW of BP Solar panels and a Bosch inverter at Sydney Olympic Village – Energy Australia paid us much less per kWh than they charged us at the time – the power meter indicated that at times we were exporting power, but the main advantage was that at times the whole house was essentially running on solar and we were using little if any Mains.

    From my reading of inverter output performance, those who’ve measured the Mains on Oscilloscopes say that it doesn’t look that “clean”, either (IIRC some included CRO screenshots) – the important thing would be that the inverter remains synchronous with the Mains, so that IT isn’t damaged by a potential difference itself.

  26. RobK

    Hz,
    I have a twenty foot sea container fitted with 80kWh of flooded NiCad cells. There are four parallel banks of 100 cells to make a nominal 120vdc.
    Then a 10kW inverter, 3kW fixed solar, 3kW wind turbine. A 10kW & 35kW genset for backup and shearing. A 1kW tracking solar panel & pump for stock & domestic water held in 7 x 50 kl tanks around the farm.

  27. Defender of the faith

    Moran again ignores the fact that the Gladstone exporters contracted for more gas than they can supply. The effect has been to wreck domestic supply. It is dubious to argue that fracking bans in nsw and victoria had an effect on that reality when the exporters largely relied on Queensland for their assumptions. Fact is that their assumptions were wrong.
    Moran also ignores again the effect of infrastructure pricing on power prices. And again he takes no account of the largely predictable effect of plant retirement.
    Australia is suffering a shocking energy market train wreck because too many like Moran are ideologically driven, favouring one form or another. Plus of course the gas market has been famed big time.

  28. EvilElvis

    Infrastructure spending goes both ways Defender. It’s about time the parasitic renewables copped the brunt of any infrastructure upgrades due to their addition to the network.
    How has Gladstone ruined domestic supply?

  29. Irreversible

    Evil: Gladstone has diverted conventional gas in huge volumes from the network. They did that because they screwed up their fracking in Qld.

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