Energy Minister Josh Frydenberg is now on his way to the UN conference in Bonn to pay obeisance to a global warming fraternity strengthened by two new members (Nicaragua and Syria) to the loss of merely one (the USA). Renewable energy (other than Politically Incorrect hydro) is the UN’s posterchild.
Yesterday, two boilers from the last coal power station in South Australia were blown up. Apparently not in relation to the demolition, SA Premier Weatherill tweeted “coal is dead, long live renewables”.
And so it would appear. The industry lobby sheet RenewEconomy reports that a new proposed 700 MW wind/solar adds to the recently announced 1000 MW wind, pumped solar and battery plant that is said to be powering the Whyalla steelworks, will make South Australia 100 per cent renewable.
Elsewhere, confidence in the competitiveness of renewables has been bolstered by a Chinese firm, Goldwind, having purchased a 530 MW planned project at Stockyard Hill in Victoria for $110 million from Origin, which has agreed to buy, between 2019 and 2030, “all of the power generated by the wind farm and the associated Renewable Energy Certificates (RECs) for a ….. price of below $60/MWh.”
Similarly AGL sold for $22 million its stake in the 453 MW Coopers Gap wind farm in Queensland to an entity, PARF, in which it has one fifth ownership. The project is to cost $850 million. It is to sell back the energy to AGL at a price, including both electricity and associated renewable energy certificates of less than $60/MWh (real) for an initial five years with AGL having an option to extend this for the following five years at the same or lower price.
The actual contracts covering these two intermittent wind energy projects have not been made public. But if the electricity is being sold for $60 per MWh, even if a “firming” contract is required at a price estimated by Minister Frydenberg of $16 per MWh, ostensibly the price of $76 per MWh is below contracts presently on offer (the ASX has South Australia peak load contracts at $98 in September 2019 and $78 in March 2021; Queensland contracts are $73 and $69 respectively).
The great conundrum is where do the RET subsidies go? At present wind and solar get a subsidy from the consumer of $85 per MWh in addition to the pool price that is now around $90 per MWh (but was only $40 before the renewable policy forced the closure of Hazelwood). Futures prices of renewable certificates are no longer traded on the ASX but when a price was briefly public for 2022 it was $45 per MWh. Thus, if energy retailers are in fact getting electricity at $60 per MWh and this also entitles them to the renewable certificate value then they are buying for effectively $15 per MWh or $31 per MWh if they also need a firming contract. That is an astonishing, almost unbelievable, price.
The mainstream view of the renewable energy/CSIRO alliance is that renewables are not that cheap but still competitive with coal as illustrated below.
This puts wind at $60-118, solar at $78-140, gas at $74-90 and coal over $134.
By contrast, work commissioned by the Minerals Council puts new coal at under $50 per MWh.
The issue is further obscured when conflicting statements about the costs of renewables are reviewed. Subsidy farmer Simon Holmes a Court, writing in The Guardian said, “major renewables projects (including two wind farms totalling 980 MW) are now being contracted with an effective subsidy of $0″.
But addressing the government’s proposed post 2020 policy, Oliver Yates the Liberal Party member who until recently headed the government subsidised Clean Energy Finance Corporation said, “There is a real risk in this scheme that for (renewable energy) projects coming into the market after 2020, the price of RECs will fall to zero.” This, he called, “a real attack on ability to finance renewable energy projects.”
Moreover Holmes a Court also shared some of these doubts when he said that notwithstanding a zero subsidy for recently contracted renewable energy, “Far from no longer being needed, the renewable energy target provides the impetus for retailers to write long term purchase contracts, essential to securing project finance.”
Renewable subsidies are of such value to the recipients that they have incentives to spend a great deal in lobbying for their continuance. Infigen (formerly part of the notorious Enron) which is totally reliant on subsidies, has seen its market value, increase two and a half fold in the three years since it appeared that Tony Abbott might remove those subsidies. People speculating on renewable certificates have seen their price more than double in the same period.
All that wealth is at the expense of the consumer and of the health of an economy where low cost energy was, and should still be, at the heart of its international competitiveness.