Is renewable energy competitive?

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.

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40 Responses to Is renewable energy competitive?

  1. stackja

    Renewable subsided by taxpayers are ‘competitive’. But no substitute for coal.

  2. MACK

    Where are the politicians campaigning for lower electricity, gas, housing and transport costs? Looks like a gap in the market.

  3. wal1957

    Anybody ever heard of “Baseload” power?
    Renewables cannot guarantee baseload at this stage, perhaps not for decades? The technology is just not available at this stage.
    Without guaranteed baseload power, you can lock in as a certainty that blackouts will become the norm.
    Welcome Australia to a third world economy… All the greenies will love it!

  4. Bruce of Newcastle

    Is renewable energy competitive?

    No.

    Green Energy Crash: Vestas Shares Dive 17% On Concerns Over US Subsidy Cuts (yesterday)

    The wind industry has been unsettled by parts of the US House of Representatives’ proposal on tax reform that could make renewable energy projects significantly more expensive.

    Marika Fredriksson, Vestas’ chief financial officer, told the Financial Times that uncertainty over the future of the so-called production tax credit led the Danish group to trim its guidance for the year. Its underlying operating profit margin this year should be 12-13 per cent, down from a range of 12-14 per cent.

    6,000 jobs to go at Siemens-Gamesa as power division faces similar cuts (also yesterday)

    Siemens Gamesa plans to cut as many as 6,000 jobs worldwide with sales expected to dip by around a fifth in 2018. Meanwhile Siemens is trying to curtail the need for a similar cut to its overall power division.

    If the cut is carried through, it would amount to more than 20 per cent of the wind power company’s total workforce of around 26,000.

    Wind turbine makers have been facing growing competition, putting pressure on pricing and inventory values and raising expectations for more takeovers to build scale.

    New Solar Developments Dry Up (last week)

    The latest quarter is still provisional, and may rise slightly, but investment in new solar does appear to have seriously stalled.

    So much for solar being one of the cheapest sources of power around!

    It is telling that as soon as subsidies are removed these industries fall over faster than a wind turbine in a hurricane. They exist only so long as their fangs are inserted into our veins.

  5. JC

    Alan

    Are you able to elaborate on this please.

    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).

    There is some industry jargon that is hard to understand.

  6. Tim Neilson

    The Goldwind/Origin and AGL/PARF deals are easily explicable.

    They aren’t real electricity contracts at all, they’re like a sale and lease back.

    The economics of either deal would have made the same sense if the price of the asset and the price of the electricity were both 200% of what they are, 50% of what they are, or any other percentage of what they are.

    (OK, not quite, since there will be costs for the purchaser other than the purchase price – but essentially the purchase price will be far and away the biggest lever in the Excel spreadsheet dictating what the electricity price needs to be.)

    The deals tell us nothing about what the electricity price in a genuine market actually would be.

  7. cohenite

    As long as there is NO interconnector between South Australia with any fossil back up in another state OR any back-up fossil in South Australia then they can go for it. But that won’t happen. There will be gas plants and diesel generators backing this up.

    Alan does a good job with the relative financials between renewables and fossils except that wind does not work for 40% of the time and solar does not work for 50% of the time. Batteries and pump hydro cannot work because you LOSE up to 25% of the energy being stored in the process of storing the energy.

    Look at this site after about 9pm tonight and check how much wind and solar is working. Bear in mind there is 6500MW of solar and 4500MW of installed wind:

    http://reneweconomy.com.au/nem-watch/

    People who support renewables are delusional OR deliberately intending to wreck our economy.

  8. manalive

    wal1957 at 4:53 pm:

    Renewables cannot guarantee baseload at this stage, perhaps not for decades? The technology is just not available at this stage …

    So-called renewables can never guarantee base-load for a modern functioning economy at a realistic cost — never ever.
    The whole idea is utterly preposterous, not unless of course it will be possible in future to change the daily rotation of the Earth or control natural barometric pressure fluctuations.
    And there is no Moore’s Law for batteries.

  9. hzhousewife

    Just now SA is 90% gas (per NEMWATCH) – tiny wind, solar about to go to sleep……..

  10. Neil

    So-called renewables can never guarantee base-load for a modern functioning economy at a realistic cost — never ever.

    Hydro can. NZ gets 90% of its electricity from hydro but for some reasons the Greens are against the only renewable that actually works

  11. RobK

    There’s still the cost of developing and managing a completely re-specified
    Grid, along with the storage, buffering, complex monitoring and control.
    The next problem to arise is over supply from renewballs, even with copious amounts of expensive storage to fill, there will be long periods of high energy weather and low energy weather over a period of days to weeks. When all storage is full and there’s over supply, renewballs will be dropped off……unsaleable. The contract as described may be a liability and the real, or useable, capacity factor of both wind and solar will diminish even more.

  12. manalive

    … not unless of course it will be possible in future to change the daily rotation of the Earth or control natural barometric pressure fluctuations …

    … And major changes to topography and annual precipitation.

  13. Henry2

    Bruce of Newcastle

    I want to run an idea past you and very glad to be told how it wouldn’t work if that is the case.

    If we were to can the French Subs and buy some ‘off the lot’ Nukes in their place, would it be possible to plug the nukes into power generation mode when they weren’t on manouvres?

    I do recognise that this would be stop gap but if we dont build something sensible soon we will be a lost case if not already.

  14. RobK

    The contract as described, to me, means the owner is assured a price for all energy produced (no risk), the seller agrees to buy all the energy, inclusive of certificates which have an unknown value (as far as we can tell). If the claimed figures are true, the need for certificates falls away…….except there’s the issue of enabling infrastructure (batteries+gear+lines etc), squeeze a few more certificates to be sure coal is dead and buried.

  15. gabrianga

    Hydro can. NZ gets 90% of its electricity from hydro but for some reasons the Greens are against the only renewable that actually works

    They just won’t give a DAM ?

  16. mundi

    All you have to know is this:

    The find farms that are selling their power for under $60/kwhr have all been built by government, with the private sector only chipping in <25%. This was done under the condition they sell the power back at a cheap rate. This is why the contracts are all private.

    In other words this is a straight up scam that has been perpetrated so the left and can start claiming that wind power is cheaper. Its cheap because the entire construction cost has been written off, and the 'owner' is really only the maintainer.

  17. John Constantine

    Infigen was the old babcock and brown wind partners.

    Now renamed, after the bankrupt bannock and brown merchant bank had stripped all the front end loaded profit certificates out of it, and floated the operate and maintain part of the business complete with the tail end decommissioning liabilities.

  18. classical_hero

    Let’s not forget about the environmental damage that the intermitents are causing due to the minerals needed for them. We’re saving the future by destroying the present.

  19. Nighthawk the Elder

    John Constantine, if memory serves me right, Babcock and Brown bought the now blown up Northern power station off NRG in the mid 2000’s. They didn’t have a a clue how to run it properly and proceeded to run it into the ground, before it was flogged off again to Alinta. Probably for a song as B&B went belly up.
    I visited Northern a few year back just before B&B got their hands on it. A reasonably well kept and tidy little station that had potentially a long future ahead of it. Even with limited remaining coal from Leigh Creek, there were other possible fields to keep supplying the coal.
    It’s an absolute shame what is happening to our national energy industry. This will come back and hurt.

  20. Roger

    Where are the politicians campaigning for lower electricity …costs? Looks like a gap in the market.

    PHON in QLD are; just saw their ad on TV. Will be very effective.

  21. RobK

    I notice the bar graph illustrating comparative costs of production doesn’t detail wind and storage which would be comparing more similar usefulness. It will be in the same league a solar with storage cost-wise.
    I’m guessing that at a certain point, with Future Fund and QIC involved in AGL’s affairs the feeling will be that we are in too deep now to turn back. Unfortunately, ultimately I feel that there’s going to be a high price to pay,
    Not just expensive energy but a vast amount of wasted sunk capital, wasted coal resource and a flimsy, complex, temperamental distribution grid.

  22. Bruce of Newcastle

    If we were to can the French Subs and buy some ‘off the lot’ Nukes in their place, would it be possible to plug the nukes into power generation mode when they weren’t on manouvres?

    Henry – Almost certainly yes, but sub power plants aren’t very big as generators go.

    I say so because I’ve told a story here at the Cat once or twice before. In early nineties after the fall of the Soviet Union I was in the office of the company tech director. He handed me a fax – it was from a Russian sub yard offering to sell us an actual nuclear reactor. They’d worked out that the electricity we used for metal recovery was about the same as the output of their reactors. As you might expect there wasn’t much of a market for Soviet nuclear subs in the years just after the CCCP collapsed. So they were out touting for other business.

    We had a good laugh. Can you imagine the hysterical reaction if an Australian company tried to stick a nuclear reactor off the coast and run a power line to their plant? The Greens would go bat-crazy in the most epic way imaginable. The politics were completely out the window of course, but the Russian guys didn’t know that.

  23. Bruce of Newcastle

    Henry – Btw please don’t mention this story to any pollie in a communication. I don’t have any evidence to put with the story whatsoever, the company went bankrupt many years ago and I don’t even know if the tech director guy is still alive.

  24. Henry2

    Bruce you know as well as I that pollies arent worth the price of the ticket, so why would I?

    They said last night on the radio that some dual wind solar concoction was going to be able to power the fabled 200k homes, If we take that with a grain of salt, how many homes could a sub power (albeit with far greater reliability)?

  25. RobK

    Henry2,
    From Wikipedia: Virginia class submarine;
    Propulsion: S9G reactor 40,000 shp (30 MW)

    Say about 20-30 thousand houses.

  26. Rob MW

    If it wasn’t so serious this gigantic incompetent fuck-up would nearly be funny. The only cure seems to be the installation of a Trumpiangen-set.

  27. RobK

    Henry2,
    Some might well calculate the reactor could power say 60k (little) houses.

  28. Steve trickler.

    No electricity! What does that mean when it comes to civilzation?

    Everything around you stops. No water pressure. No gas to your home. No light. Your last moment on the loo comes back to haunt you. No filling up you car with gas. You ain’t going nowhere. Good luck buying food at the supermarket in the dark.

    A blackout for 24 hours and a modern city ( civilization) grinds to a halt. CHAOS!

    And we still have arseholes pushing power plans ( solar and wind ) that will never keep a city functioning 24/7.

    It’s a blight on humanity. It’s evil.

    I want Melinda May to meet them and beat them all up. ( :



  29. NB

    Normally blowing up vital infrastructure is seen as an act of war. But the social justice earth warriors are the kind of government South Australians prefer.
    All those affluent times, how 20C. Now virtue signalling is done with sticks of dynamite.
    The next premier of SA will be Max – Mad Max.

  30. Bruce of Newcastle

    Henry – My electricity bill arrived yesterday, it helpfully says a 4 person household uses about 22 kWh each day on average. That Russian OK-650 reactor which I linked is rated at 190 MW. If we assume it could produce 150 MW of electricity that would be enough for 150,000 x 24 / 22 = 163,000 homes.

  31. Alan Moran

    JC
    The wind farms’ electricity is being sold for $60 per MWh. Frydenberg reckons this needs a further payment because of teh inherent unreliability of wind. He put this at $16 (though this would need to be increased as the share of wind in the market increases). That means the wind power is being sold for $76 per MWh

    But wind also get the RET subsidy which is presently $85 per MWh but according to the only published data available was $45 per MWh in forward contracts at 2022.

    If $45 is the prevailing RET in 2022 then the energy is being sold to Origin, AGL at an astounding $31 ($76-$45). This is in contrast to the 2021 forward price for electricity of $78 (SA) and $69 (Qld).

    If the 2022 RET is worthless then renewable sourced electricity is competitive and the RET is unnecessary. My view is that is faintly possible only if the price of electricity is around $100 per MWh, which wold entail no new coal and gas at high prices.

  32. OneWorldGovernment

    Alan Moran
    #2549512, posted on November 11, 2017 at 8:44 am

    I want to beat the living sh*t out of the thieves who call themselves politicians.

    Scrap all excise.

    Scrap all “universities”.

  33. RobK

    Alan Moran
    #2549512, posted on November 11, 2017 at 8:44 am

    I agree that an average wholesale price of $100/MWh is entirely possible. I also think it likely that a 50% rise in distribution cost isn’t out of the question to cover grid expenditure, load adjustments, more intense management and a decreasing volume from clients with subsidized solar and buffering storage. I expect that if the full cost is passed on, electricity bills will rise by 50% or more within 5 years. In the mean time, as coal power diminishes, replaced by open cycle gas because it’s cheap on capex and can follow intermittent supply, the effects of a reducing RET are going to hit the diminishing coal generators increasingly hard. The costs of a trans notional gas pipeline may have to be factored in.

  34. RobK

    I note the intent in the Finkel report was to give gas a relatively free ride in relation to the RET/CET. This is a practicality as an enabling technology to provide backup to a sea of renewballs. I don’t believe such a complex and contrived system, which can only be brought about by government forcing, will ever provide the scope and security of baseload coal/nukes. The point of no return is near. The prognosis isn’t good.

  35. RobK

    The most devious part of the RET scheme is that it is intended that it will persist long enough to kill coal and establish the first wave of short-term renewballs with subsidies parasited from coal. It is hoped, on a wing and a prayer, that the replacement cycle of the short lived renewballs will be more competitively priced…there’s no guarantee (infact it’s unlikely) and no turning back without a lot of pain. It’s been a high risk call with no real purpose and huge negative impact on the economy and culture for generations to come.

  36. EvilElvis

    The plebs are retarded, it’s that simple.

    They think a solar panel on the roof of a house is power that is baseload. The same dimwits who will or have lost jobs as their employers can not afford the real, reliable, 3 phase, constant, synchronous baseload power that drives the country, not just their iPhone charger.

  37. Kim Howard

    Bruce of Newcastle
    #2549472, posted on November 11, 2017 at 6:36 am

    Henry – My electricity bill arrived yesterday, it helpfully says a 4 person household uses about 22 kWh each day on average. That Russian OK-650 reactor which I linked is rated at 190 MW. If we assume it could produce 150 MW of electricity that would be enough for 150,000 x 24 / 22 = 163,000 homes.

    Wow
    who could have known that 4 persons use 2200 watts per day a common modern day electric kettle uses 2000 watts per hour .
    One horsepower 750 watts per hour .
    Obfuscation every where .
    Take it from there Bon .
    Respect your work

  38. RobK

    Kim,
    That’s 22,000 watts times one hour. So your kettle runs for ten hours to equal BoN average daily consumption. Pretty normal for a mostly electric household. Some of the figures used by renewballs people assume non-electric heating, no a/c…then the figure used is around 12 kWh per day to make it appear more useful. Also it is arrived at by dividing the anticipated annual average of say wind farm by the daily average of the household. This is deceptive. The nuclear, sub for instance could theoretically power the houses 24/7.

  39. RobK

    Oops, kettle is on for 11 hours to use 22kWh.

  40. Gengis

    Am I missing something here. It does not really matter what price renewables go DOWN to with or without the RET. The question is What do consumers get when the wind blows low and the sky is cloudy. Demand 80-90% of total capacity, renewable production 20% of capacity. Let Wetherall let SA go to 100% renewables plus his gas back up generators and the rest of Eastern Australia destroy the Haywood Interconnector.
    By the way I hope the gas used for the SA gas power station is not coming from the Yolla Gas field in Bass Straight as it is 20% CO2 – woops, you should not be told that in case you see right through the cynical exploitation of the gullible public.

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