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.