Post-mortem of the Australian electricity Industry

All thinking people actually know what has gone wrong in the Australian electricity industry: a doubling of wholesale market prices, diminished reliability, investment being policy – directed into fashionable but high cost avenues – wind, solar batteries, pumped storage.

Unwilling or unable to accept this, like a car careering down the wrong side of a motorway, state and federal governments have set up inquiry after inquiry to provide insights and cheaper ways of forging the future they wish to see.

It is difficult to find market reviewers that are politically acceptable to the alliance of climate worriers and subsidy seekers.  Almost all – none more so than Finkel – are either too much a part of the established renewable chorus or were elevated to influence because they would soon adopt Politically Correct views favouring renewables as a means of shifting the electricity supply away from sources that emit carbon dioxide.

Handpicking the inquiry undertakers means the same erroneous autopsy is conducted finding that:

  • The future is assured and it does not include fossil fuels or nuclear.
  • Renewable energy is already or about to become the lowest cost supply.
  • The ancient coal based generators are about to close anyway and nobody would invest in a new one.
  • Additional fixes will resolve the reliability shortcomings of intermittent supply.
  • Problems of high wholesale prices at present are as a result of gas being exported to foreigners rather than used locally.
  • Most of the cost increase is associated with inefficient network businesses increasing costs.
  • Other problems are associated with inadequate competition in the retail markets caused by competition driving up costs or, in the wholesale market, caused by lack of competition driving up costs.

In supporting a report of Australian Council of Learned Academies (ACOLA), issued today and prepared in cooperation with his Office of the Chief Scientist, Finkel argues that we can have 50 per cent renewable energy and reliability if we spend $11 billion on batteries.  Frydenberg had said that goal would cost $50 billion, though he will happily spend something close to that in reaching and staying at 23.5 per cent.

The ACOLA report revisits the “winner picking’ opportunities that have so often been dangled before the community with renewables (who can forget Victoria’s seed money generously provided by Premier Bracks to create a world beating windmill blade facility that vanished without trace? Apparently everyone can).  It does not say how much extra cost results from the forced displacement of fossil fuels by exotic renewables would add to this – probably, like Finkel, the report’s authors think it would be cheaper to go renewables.

Within the bureaucracy, decent analysis is conducted by the Australian Energy Market Commission (AEMC) which undertakes and publishes annual estimates of costs and what is driving them.  Their low key painstaking analysis does not suit the book and governments look to alternative data mining to reinforce their own prejudices that the problem, if it is other than transient, is caused by market imperfections, monopoly , lack of monopoly and political indecisiveness in not proffering subsidies to wind/solar with sufficient enthusiasm.

The ACCC provided an unlikely source of credible analysis in an inquiry commissioned in March by the Treasurer.  I covered the interim report, released in September here.  It shows that, in real terms, residential bills for those without rooftop solar rose 34 per cent between 2007/8 and 2015/16 (those with rooftop solar subsidised by other consumers saw a price increase of only 29 per cent).  It estimated about one quarter of the increase was directly caused by environmental programs.  In the period examined wholesale electricity had actually lowered real costs.  They would have done so even more if the wholesale price had no started to climb in 2015/16 on their way to more than doubling in 2016/17.

The ACCC does partially deflate some furphies like the price surge was created by the retailers and by bidding strategies.

This increase in real wholesale prices (or, prior to 2016, their failure to fall sufficiently as a result of increasing renewables penetration) is not assigned in the ACCC report to environmental causes of the price increase.  The ACCC data is to be extended for the final report in June 2018 to incorporate 2016/17 data.  Once released it should become clear that it is environmentalism that has created the disaster in the electricity supply system.  Sadly, the pent-up denialism of those enamoured with renewables or enriched by their subsidies is unlikely to subside and this will likely have an enduring impact, absent a return to government of Tony Abbott.

As a result, the uncomfortable facts of deindustrialisation and high household costs will stubbornly remain.  The muted grumblings of industries forced out of the market are easy to handle – firms, after all, take the political environment as given and quietly adapt.  Less easy to accommodate is voters’ recognition of the clear evidence of surging household costs.  But fables will be forged and lies about the future costs will continue to be told.  Hence, it is by no means certain that we shall see a return to the low cost electricity supply system that politics has destroyed.

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40 Responses to Post-mortem of the Australian electricity Industry

  1. stackja

    Fables and lies have become normal political practice. Do voters accept this?

  2. Bruce of Newcastle

    Finkel argues that we can have 50 per cent renewable energy and reliability if we spend $11 billion on batteries Frydenberg had said that goal would cost $50 billion

    Easy to see that Finkel doesn’t understand large scale industry.

    There aren’t enough battery plants in the world to produce eleven or fifty billion bucks worth of batteries.
    I’d believe the $50 billion number because supply and demand will force the price of lithium through the roof. It takes at least a decade to get mining and refining capacity up to speed, so there will be a shortage.

    Then you have to produce all those batteries again eight years later, because batteries don’t last very long, as any car owner can tell you.

    None of those batteries will produce a single watt of electricity. Indeed because of unavoidable losses they will consume about a tenth of the power put into them.

    And if batteries become the favoured technology we who are one of the smaller economies in the world will have to stand in line behind the Europeans and other countries as they build massive short-lived battery banks themselves.

    It’s madness.

  3. closeapproximation

    Too many brainwashed and subsidised to go back. Crytpo-marxists have won this round; social, personal and political cost of “denying” the pseudoscience remains fairly unabated.

  4. NB

    May be time soon to exercise the other half of my dual citizenship. I feel for the parliamentarians who no longer have that insurance.

  5. Myths, legends, and make-believe form the foundation for this ‘renewable’ insanity.
    1) Global warming……..there is no such thing if you define it as something that exists over decades.
    2) Climate change…….if you define it as being changes in the planet’s “climate’ it is nonsense. Climate is REGIONAL. In order to identify change it is necessary to measure it. Climate is measured by classification. Viewing the undulating changes in Koppen Geiger over a century show no significant net change.
    3) CO2 is related to atmospheric temperature. Apart from the fact that over millions of years the only correlation that exists is a tendency for temperature to LAG CO2 concentration by about 800 years. Non-condensing gases cannot affect the temperature of the atmosphere.
    4) Human activity affects atmospheric CO2………….Less than 2% of the CO2 on the planet exists in the atmosphere. Its concentration is due solely to Henry’s Law and the sea surface temperature. Human activities are a drop in the ocean.
    The current administration in the USA has chosen a “red team blue team approach. Unless and until Australia adopts a similar debate process these myths and fantasies will continue as long as witch hunts did in 17th century. It is identical mass hysteria.

  6. It is identical mass hysteria.

    Noyce addition.

    Keep at ’em Alan!

  7. John Constantine

    We must deindustrialise and live in shantytowns because of racism and colonialism.

    Mugabe outflanked Australian elites when he organised an African voting block in the united nations that could draft transnational conventions that would export industry from the west to the looting cartels as war reparations for settler culture thoughtcrimes.

    The outcomes of their united nations conventions are fully intended to topple all colonial settler outposts like Rhodesia was toppled, and create a worldwide Zimbabwe.

    It works for the ruling elites.

    What a brilliant idea Julie Bishop to sign up for this.

  8. New Chum

    There is a lot of talk of using batteries but does not seem to be any plans in place for disposal at the end of their life and debate needs to take place .

  9. anonandon

    I’m starting to get the sinking feeling as though we are in the unlucky position of witnessing the permanent decline of western civilisation and there is not a goddamn thing that can be done about it.

  10. .

    Enjoy the decline…

    Aaron Clarey has a book of that name!

  11. anonandon

    Dot, just did my due diligence and now I am listening to an Aaron Clarey podcast. Early indications are positive.

  12. Nerblnob

    ABC radio (well known for its engineering expertise) was on about batteries, not if or why, but when and how, this morning, interviewing some “engineer” who worked at a university. I.e, an academic.

    I can see why the public fall for it so easily in Australia. The propaganda is relentless.

  13. RobK

    At a certain point someone in power is going to have to realize this experiment is going too fast, the technologies too radical, untested, and way too expensive. We will have to upend the grid, the generators, the economy, at a pace which we can’t afford, especially when it is not a certainty the scheme will work. Infact at the rate proscribed it will not work. The best solution is no subsidies and multi-source generation including nukes. Let the technologies develop over time in competition.

  14. Nerblnob

    Coal is king and not running out anytime soon.
    Subsidies to wind and solar stifle the emergence of genuine competing technologies.

    Subsidies include penalties and interference to impede hydrocarbons.

  15. .

    #2559137, posted on November 20, 2017 at 11:47 am
    Dot, just did my due diligence and now I am listening to an Aaron Clarey podcast. Early indications are positive.

    Ah, Reconnaissance, Man!

  16. Kneel

    “Subsidies to wind and solar stifle the emergence of genuine competing technologies.”

    None of this will change until the lights go out and the pitchforks come out.
    Then watch the pollies sacrifice the “green” enablers – “The experts told us it would work! We are getting new experts – the ‘fringe’ ones who sais it could never work. They’ll tell us how to fix it. And we will. Never fear.”
    In financial news, popcorn futures are climbing…

  17. .

    Just check out the research being done in nuclear. It is already a proven technology anyway.

    Why we’d go from possible megawatt capacity reactors the size of a small fridge, back to hectare sized intermittent solar power is just lunacy. Nuclear is seriously tens of thousands to tens of billions times more energy dense than solar. Only multiple hydroelectric and cogeneration of forestry biowaste makes any sense from a renew balls perspective. Plus we have thousands of years of king coal, oil and gas. (Not to mention thorium, lithium, tritium on top of uranium).

    When space exploration, being VASMIR, EM Drive or more exotically propelled etc is ubiquitous, we’re not going to use stupid shit like “solar sails”.

  18. Aynsley Kellow

    The ACCC report showed quite clearly that the real increase in electricity prices coincided with the R-G-R governments and thereafter stabilised in real terms.

    The stupidity of all this is that if the policy settings had not discouraged investment in HELE coal, we might have seen the old plant replaced as it was retired. Had we done so and increased efficiency from 33% (the global average according to the IEA, but someone could work out the exact figure for Australia) to state-of-the-art 45% plus, we would have reduced GHG emissions by 24% for the sector (2% reduction for every 1% efficiency gain). All with reliable electricity!

    Instead, we have seen have seen a discourse where solar, wind and batteries seemingly have no problems, are cheaper than coal when you ignore capacity factor or use the levelled cost of energy (ignoring the costs of back-up), and there are no such things as bird/bat strikes, wind turbine fires and accidents, life-cycle impacts from emissions of NF3 and SF6 during manufacture of PV panels, etc. (PV on a life-cycle basis os worse than coal in Germany, though it is a bit sunnier here – but, hey, they’re made in China).

    And let’s not forget the contribution of renewables to transmission costs: wind and large-scale PV have low capacity factors, and so that goes for transmission systems as well. Much higher costs per unit of electricity than conventional generation.

    Batteries are fine, but as others have noted, last less than 10 years, are difficult if not impossible to recycle, and have a tendency to explode and catch fire. (Most insurance companies recommend external installation).

    It has been quite an achievement by our policy-makers!

  19. John Constantine

    Their julie bishop treats the united nations votes of the Pacific Islands as ‘flyover forgettery stuff’, lady skeletor willl not waste a minute she could spend swanning about London, Paris and New York to slum it with Islanders.

    The Chinese Communist party moves in to the vacuum, spends their bribe money, makes a massive profit on natural resource looting, then has a pacific island nation voting block to use in the united nations, where they can vote to have the west de-electrify, deindustrialise and buy the solar panels thet lock in our economic genocide direct from China.

    What a brilliant idea, julie bishop.

  20. W Hogg

    If only A666 had not abolished the WBCT, Hazelwood wouldn’t have closed and power prices would not have jumped 55%. But Hazelwood didn’t close because of carbon policy – coal is uncompetitive with renewables (which need massive subsidies) and the plant was falling down but would have been kept open if only it had a massive carbon tax added to the RET penalties. And prices didn’t jump because of closure of coal – coal is the most expensive producer. And SA is now producing massively cheap electricity, because of the superior leadership of the DPRSA grubiment, because Tesla battery (which isn’t operating yet).

    This isn’t /sarc – half the country actually believes this mindless and contradictory rubbish.

  21. W Hogg

    There aren’t enough battery plants in the world to produce eleven or fifty billion bucks worth of batteries.

    Exactly Bruce, the Gigafactory can’t produce enough batteries for a Model3 squeezed out in such tiny volumes that they’re actually making the things BY HAND! And even if we wasted $50bn, consuming the world’s entire production of graphite and cobalt, to what end? We would be no better off. Power wouldn’t be as cheap as coal produced from existing plants located at existing mines. And there would be no change globally because even if they wanted to they couldn’t build an EV or hybrid, and couldn’t go off grid themselves as AUS’ 1/300 of the world’s population would be dominating the inputs to do so. It’s a ridiculous suggestion.

  22. BoyfromTottenham

    AK, I would love to feel that R-G-R caused all these problems with our power grid, but in reality the problems started much earlier, when otherwise sensible folk started listening to, then believing, and then promoting the CAGW fantasy coming out of the UN, IPCC and WMO, then their fellow-travelers in the Universities, phalanxes of left-wing ‘think tanks’and NGOs, and lastly the teachers and the curricula in our schools. IMO the CAGW scare is a massive and effective dis-information exercise being carried out on the citizens of the West to get them to voluntarily destroy the underpinnings of their own economies – cheap, reliable electricity based on an abundant local fuel. In comparison, the effort and cost of fighting the USSR in WW2 and the following massive propaganda campaigns of the Cold War era to promote Communism and undermine Western democracy and capitalism were trivial. The West fought for 4 decades against the USSR before it eventually imploded. We have a long way to go to defeat whatever or whoever is behind the global CAGW campaign, but we cannot afford for it to take anywhere near that long, because a large part of our base load generation infrastructure is nearing its end of life, and there is nothing that can replace it in the short term, potentially leading to a tipping point for our grid, and therefore most of our economy. The price of failure to address this issue is too awful for me to contemplate, but in my 7th decade I am not optimistic. Trump gives me some hope, but I fear that he is a decade or two too late.

  23. manalive

    If individuals want to be self-reliant and choose to install their own wind and solar systems with batteries I say good luck.
    It’s insane, it always was insane, to mandate so-called renewables nationally or statewide without the necessary proven, reliable and affordable storage technology — the cart before the horse.
    A study here conservatively estimates the cost of 100% renewables scenario and pumped hydro energy storage for Australia at ~$1 trillion based on only 97 days of wind and solar data, probably much more for reliability over longer periods.

  24. .

    If individuals want to be self-reliant and choose to install their own wind and solar systems with batteries I say good luck.

    Indeed, it would be better off for some (living more than 900 metres from a power line) a lot of the time.

    It just doesn’t add up for 11 million other households and millions of other businesses, not to mention state and private institutions.

    I can see costs around half a trillion alone for households, just off the cost of the alternative for remote places (900 m x $50 per metre for electrical cable), when going off grid breaks even in (initial) capital costs.

    45,000 AUD*11,000,000 = 495,000,000,000 AUD

  25. Chris M

    Just checked the current spot price in SA: $325 MW/h which is about the same as the retail price!

    What a pitiful nutcase of a country this has become.

  26. .

    Some of my relatives are wondering why their power prices are two and half grand this quarter instead of four or five hundred bucks.

    Well, does 325 AUD per MWh explain anything?

  27. OneWorldGovernment

    Thank you Alan for continuing to talk about this.

    Please understand that you may be telling us what we already know but it is mighty nice to read your articles.

    Much appreciated.

    I also appreciate Viv Forbes’ efforts as well

    I saw he got a posting in at American Thinker blog the other day.

    What gets me is what are the likes of Coles/Woolworths/Aldi going to do as this farce continues to spiral out of control.

    I grew up in an era and location where power was supplied by the 32V Ronaldson & Tippet and refrigeration was powered by kerosene and I can see that a lot of Australia are going to have to go back to those sorts of answers.

    It’s amazing for me to see that in my lifetime where I grew up we ‘gained’ mains electricity when I was 16 and 50 years later they are going to lose it.

  28. OneWorldGovernment

    Forgive me Alan,

    You are telling me things I didn’t know but what I was trying to say with my comment “Please understand that you may be telling us what we already know but it is mighty nice to read your articles.” that you are talking to people that understand what you are saying.

    Once again.

    Thank you.

  29. Dr Fred Lenin

    The great electricity industry we had was murdered by the career political maggots ,they should be charged with wilfull murder mans sent to jail for life plus twenty years . May I suggest an ultra hard labour camp ?

  30. Tator

    Dr Fred Lenin, ultra hard with windpowered airconditioning only, with no off switch so when the wind blows, it powers up, like in the middle of the night and when it is really hot, no wind no aircon. That’ll show them.

  31. cohenite

    A study here conservatively estimates the cost of 100% renewables scenario and pumped hydro energy storage for Australia at ~$1 trillion based on only 97 days of wind and solar data, probably much more for reliability over longer periods.

    Indeed Peter Lang and Martin Nicholson showed 100% renewables would cost $4 trillion based on a 60% reduction in demand (table 9):

  32. Nerblnob

    I was down in Morwell seeing friends the other week.

    Impact of Hazelwood closing is bad on local employment but somewhat disguised by the number working on decommissioning.

    Place is a demoralised shit hole now anyway, full of tree change mobility scooter fatties. It was really the go when they were building the Loy Yangs. Vibrant, diverse, multi cultural, all the buzzwords. Dirty too.

  33. Mater

    Another fly in the ointment.
    In winter, Victoria can not produce enough gas for domestic demand (and it is getting worse annually, due to falling production in both Gippsland and Port Campbell). To counter this, traditionally, gas was pumped to the IONA Underground storage facility in the Otways, during the low demand Summer months, ready for domestic winter heating and cooking use.
    This was always possible because coal upheld the Summer electricity demand, for all bar the most severe days (when peaking Gas Generation Plants kicked in for an hour or two).
    Justification to close Hazelwood included using the gas plants in a more constant role during the summer high electricity demand period. That is, constantly burning the gas instead of having it stored at IONA in preparation for Winter. Without these significant stores, there will be gas shortages in Winter, especially if severe. If people start using more electricity to heat, we have a propagating, revolving door problem.
    Shortages of Electricity in Summer
    Shortages of Gas in Winter

    “…it’s inherent virtue is the equal sharing of misery” – Winston Churchill

    The fact are here for all to read:

  34. Rob

    The report on energy storage by the Australian Council of Learned Academies (that’s a high falutin title – is it earned, gifted, justifiable, or self-proclaimed?) is fixated on batteries.
    In their delirium, these folks believe our electricity grid can be renewables based and backed up with (getting cheaper) batteries. That’s like saying “I can move my car with a thimbleful of petrol”.
    Is this what becoming “learned” does to one’s thought processes?
    Unfortunately, this report gives massive amounts of succour to the Greens, Labor, and the entire renewables industry
    One fool has already gone on television to claim that rooftop solar with batteries will soon be able to power Australia’s aluminium industry.
    When we experience a nighttime when all the batteries are flat and east coast Australia is becalmed, the reality will touch even the most ignorant among us. They will not be happy.
    What then?

  35. Aynsley Kellow

    I have now downloaded and commenced reading the ACOLA report. Given the use of very high GWP solvents used in PV panel manufacture (16,000 to 23,000 times CO2) I was drawn to the section 3.2.2 Lifecycle greenhouse gas emissions on p59.

    Sad to say, the report fails to even consider these.

  36. John Constantine

    How many million liters of diesel will it take to run the Victorian and south Australian economies on diesel gennies for a week?.

    Same wind conditions for both states in summer.

    Summer harvest period runs on diesel as well.

    All imported, all just in time.

    Requirements for all diesel users to build on farm diesel storage will boost the economy and employ hordes of regulators and inspectors and compliance departments.

  37. Jessie

    21 -40 % discount I note in the vehicular etc industry.
    Note waivers (that’s the tiny as-te-risk) requiring 3.0+chemist glasses and an intimate knowledge of the tariff system. Oh and an internet connection with electricity to supply same.

    Little wonder the suicide level is as it is. (see home tab)

  38. destroyer D69

    I understand that the battery cells in use for the electric cars and the Musk storage batteries are actually 3.7 volt 18650 Li-ion cells.Nothing special about them,just a LOT of them.

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