Banks pretend to be virtue signalling while plundering electricity consumers

In the salad days prior to 2015, before governments’ destructive interventions undermined Australia’s stable low-cost electricity supply, electricity as a topic of general interest hardly figured. Any concerns about power blackouts just did not reach the front pages or the late-night news bulletins.

At that time the National Market had about 50,000 megawatts (MW) of capacity, about 80 per cent of which was coal with gas and hydro providing the balance; with the exception of wind/solar, which had already grown to around 1,000 MW, all the capacity was under human control or “despatchable”. The National Market now has about 45,000 MW of dispatchable capacity plus nearly 7,000 MW of wind and solar, with a further 45,000 MW wind and solar planned. No wind or solar facility would have been commercial without the subsidies they receive.

From the outset of the National Market, 20 years ago, there has always been a bit of a stand-off between generators and retailers over summer supplies and their prices.  The most marginal generators (usually gas) sought better rewards for remaining on-line as a contingency supply source.  The market manager, now called the Australian Energy Market Operator (AEMO), being more risk averse than the retailers, would usually step in acting as a reserve trader, to guarantee extra supplies. This Reliability and Emergency Reserve Trader (RERT) now contracts for about 1000 megawatts, on top of which are “demand response” contracts with major users.  In addition, the market manager has powers, which it increasingly uses, to direct generators to stay on line or to make themselves available when such actions would be unprofitable. In the last quarter this included forcing South Australian gas plants to be available 40 per cent of the time (with consumers providing special payments) to compensate for wind supply inadequacies.

There is also an array of forums, readiness briefings and working groups designed to avoid blackouts and shortage-induced extreme prices.

It is the increase in unreliable wind and solar that has driven this vastly increased central managerial control.  But renewable energy’s most detrimental effect has been forcing unsubsidised coal generation from the market.

It remains an open question whether the increasing wind supply will be responsible for power failures this year.  One thing certain is that the price of electricity will rise as a result of wind/solar displacing coal.  The annual effect is readily seen by examining the first 20 days wholesale prices over the past five years.  Here is the picture for NSW and Victoria.

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Ironically, we see sequential government reports informing us that wind is the cheapest source of new energy supply. The latest one from CSIRO, an agency bloated with excessive funding, is incurious about why, in view of this competitive advantage, wind needs continued subsidies.

The Commonwealth in an attempt to redress some of the damage caused by renewable energy subsidies has called for new proposals for dispatchable plant.  As reported in The Australian, Trevor St Baker’s ERM power has combined with Chinese capital in proposing new coal generators in Victoria and NSW. In accordance with advice from the ACCC, the Commonwealth would be underwriting some of the risk.  This means the government would be providing countervailing support to its regulatory subsidies for wind and solar, which created the market distortions price escalations in the first instance.

An alternative approach would be eliminating all subsidies immediately.  The opposition to this solution is formidable.  It includes a majority of politicians spooked by an apparent wish of voters to get rid of coal and replace it with renewables, inaccurately depicted as taking advantage of freely available wind and sun.  And it faces entrenched financial interests from those benefitting from the on-going renewable subsidies.  The beneficiaries of such regulatory theft bankroll activists like Getup! and, like Macquarie Group chief executive Shemara Wikramanayake, will join other bankers lobbying to defend their subsidy-dependent investments and do so while pretending to virtue-signal.

If those seeking the continuation of subsidies prevail, Australian electricity prices will remain among the highest in the world.  If such measures can be unravelled Australia will once again see the world’s lowest electricity prices with all this entails in terms of national prosperity.

 

 

 

 

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34 Responses to Banks pretend to be virtue signalling while plundering electricity consumers

  1. stackja

    If such measures can be unravelled Australia will once again see the world’s lowest electricity prices with all this entails in terms of national prosperity.

    Unraveling such measures will be fought by Greens’ funded lawyers?

  2. I admire your willingness to point out the stupidity of subsidies for ruinabaubles.

    I see no signs of the subsidies waning. More windmills continue to be built and prices continue to rise.
    The (likely) exodus of all industry from Australia is our best hope. We will be left with an oversupply and hopefully some price reductions.

  3. Turtle of WA

    Too many people have been brainwashed. We’re doomed.

  4. jupes

    It includes a majority of politicians spooked by an apparent wish of voters to get rid of coal and replace it with renewables, inaccurately depicted as taking advantage of freely available wind and sun.

    Of course the catch 22 is that the stupid voters only want to get rid of coal because the politicians have told them that will “save the planet”.

  5. Biota

    Was the light failure at the Gabba last week load shedding? It certainly seemed like it given the report that the problem was outside of the ground and involved nearby suburbs. There needs to be transparency about load shedding so people can see the the results of the road to ruinables. Or maybe there is?

  6. mem

    Thank you Alan. I was hoping that you would write a piece on this after reading various articles in the Australian about the various energy proposals. The head of Macquarie Group is pushing for increased investment in renewables after joining a new United Nations finance group on climate change. The group is lead by Michael Bloomberg (Bloomberg Finance,Bloomberg Renewabale Energy Finance etc) and includes other big players such as Goldman Sachs. Partnering between these players makes sense as they need to keep the AGW beat-up going as long as possible, the financiers to safeguard their investments and the UN to raise more international play money to make-up for the US contributions that were terminated by Trump. One does get the feeling of desperation in these measures, so perhaps some think the game will be up soon and what they are trying to do is offload the risk to other players and in the meantime grab as much money in subsidies as possible. https://www.bloomberg.com/company/announcements/bloomberg-announces-founding-members-new-climate-finance-leadership-initiative/

  7. Dr Fred Lenin

    Ever heard of bribery and corruption ,”that happens in other countries not here in Australia”? Heard that have you? Tumbrills ,guillotines and bloody heads in baskets springs to mind , the ultimate cure for arrogant naughty people . No recividism there .

  8. Eyrie

    If you have Macquarie shares, dump them. The loon in charge says climate change is her top priority. Clear evidence that a connection to reality is not her strong point.

  9. min

    Melbourne council is boasting that they have gone fully renewable on wind power . Is this possible?

  10. mem

    If you have Macquarie shares, dump them. The loon in charge says climate change is her top priority. Clear evidence that a connection to reality is not her strong point.

    The second report flowing from the Royal Commission into the banks is due to come out in the first week in Feb. No doubt this announcement was meant to virtue signal in advance in order to make-up for some scathing criticisms and word has it that Mac Bank is in the thick of it. It’s a pity that it has learned nothing because if it had done its due diligence, it would realize that the whole climate industry is built on hot air and likely to fall over at any time.

  11. wal1957

    An alternative approach would be eliminating all subsidies immediately

    Yes, that would be the correct approach. Why would the Govt. subsidise unreliables and then decide to underwrite coal? The taxpayer ends up paying again!

    Remove the bloody subsidies. Unreliables will then either sink or swim!

    It always amazes me how politicians embark on these hair brained schemes with absolutely no idea at what the eventual outcome will be! The mongrels had better not door knock during the election this year. I am sure that along with me there will be plenty of people who will rightly give the bludgers an earful!

  12. yackman

    re min above; this does not mean they are off-grid which would be genuine fully renewable

  13. yackman

    Re Mac Bank; saw the comments attributed to the MD. Renewable subsidy harvesting is only part of the MacBank income so still worth a bet to hold.

  14. mem

    Melbourne council is boasting that they have gone fully renewable on wind power . Is this possible?

    No. At this moment 5. 57 pm today, for the whole of Victoria, “wind and other” is producing only 377 whilst demand is 7197. This is being met by coal fired generators with support from interstate . Look at data dashboard https://www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Data-dashboard#nem-dispatch-overview

  15. DaveR

    It includes a majority of politicians spooked by an apparent wish of voters to get rid of coal and replace it with renewables, inaccurately depicted as taking advantage of freely available wind and sun.

    This is the popularly held belief of how politicians see things. The concept of shutting coal completely and moving fully to renewables has never been tested, let alone properly debated. In fact the likes of Greenpeace and FOE will do all they can to prevent debate on this topic. Examples of the crushing economic impact of Energiewende in Germany and growing troubles in the rest of Europe and Scandinavia indicate the move is folly.

    Maybe its time for a full on debate in Australia, rather than pollies jumping at (green) shadows?

  16. DaveR

    The other financial issue is which super funds have eagerly jumped on board each and every renewable project to come along? Its the industry funds of course, there to help their mates in government, mainly Victoria, South Australia (now gone) etc.

    If subsidies are pulled completely and renewable projects have to run on their own financial merits there sure will be an immediate effect on certain share prices and a noticeable separation of super fund performances.

    Maybe thats why some of the more vocal industry funds seem to be strongly supporting the status quo?

  17. BoyfromTottenham

    How is the LRET 100% subsidy of ‘renewables’ even legal? It is not a tax, or a subsidy, so what is it – a legislated theft of $billions annually from electricity consumers to pay hidden subsidies to wind and solar? To me this is just THEFT!

  18. Tel

    In the salad days prior to 2015, before governments’ destructive interventions undermined Australia’s stable low-cost electricity supply, electricity as a topic of general interest hardly figured.

    You must be kidding me.

    https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook44p/EnergyPrices

    Look at the chart, prices were already going nuts from 2009 onwards. Does this little quote ring a bell?

    This election is all about trust.

    Who do you trust to reduce power prices and gas prices?

    Trust the party that will abolish the carbon tax, not the one that inflicted it on you.

    Who do you trust to get debt and deficit under control?

    Trust the party that left you $50 billion in the bank, not the one that squandered your inheritance.

    Who do you trust to stop the boats?

    Trust the party that solved the problem not the one that started it up again.

    You all know who that was and when he said it I hope. Some time before 2015.

  19. RobK

    Thanks Alan, a good piece of work.
    There are many things that will trouble the electricity sector, especially the customers. Your statement:
    “The National Market now has about 45,000 MW of dispatchable capacity plus nearly 7,000 MW of wind and solar, with a further 45,000 MW wind and solar planned.“, is particularly troubling to me because it is indicative of the insideous nature of the RET and the glut or famine nature of RE. 45 GW of RE will sometimes actually generate 45GW but other times maybe 1 GW yet somehow baseload is required and coal continues to be selectively penalised by having to pay the RET certificates to the RE game. Presumably gas is expected to replace coal, so this is additional capex. Gas escapes the RET impost due to an arbitrary cut off in carbon intensity. At some point the RET will die because it has killed its host (as intended). We will need to invest in backup dispatchable and three fold the RE capex. So we can only hope gas turbines will see us through. These are dearer to operate than coal fired. Where is the RE industry going to get the RET subsidies from once coal is actually dead? What idiot thinks electricity will be cheaper. It really is insane. There’s a lot to be spent on enabling the grid as well. All this will ultimately be pretty much wasted. The sooner we drop the RET, the sooner we contain the wastage of cash.

  20. Roger

    Macquarie Group chief executive Shemara Wikramanayake, will join other bankers lobbying to defend their subsidy-dependent investments and do so while pretending to virtue-signal.

    Never mind the bankers, we expect rank hypocrisy from them, what about the politicians?

    Is there no inquisitive journalist willing to trawl through the parliamentary register of interests to identify which politicians have invested in renewables, directly or indirectly?

  21. Iampeter

    Don’t blame the banks. That is pure leftism.
    The banks are as much the victims in this as the rest of us.
    The plundering is being executed by the government, it started under Howard and remains unopposed today as conservatives still think the Howard government was the bestest.

    The reason that nothing can be repealed is because, how does one expect the movement that created this mess in the first place to suddenly do a 180 and start arguing against it, without first addressing their culpability?

  22. entropy

    As reported in The Australian, Trevor St Baker’s ERM power has combined with Chinese capital in proposing new coal generators in Victoria and NSW.

    the resistance would be incredible. Just like Adani, but with the bonus of being within almost Prius driving distance from Carlton and Ultimo wine bars.

    If they are seriously considering building real power sources, and going through the lefty howler monkey pain, why not to go for broke with nukes?

  23. Confused Old Misfit

    why not to go for broke with nukes?

    Why not indeed?
    The politicians are scared of the green reaction on enviro grounds and the expense from the rest of the electorate.

  24. egg_

    😊😊😊😊

    Iampeter
    #2913632, posted on January 21, 2019 at 9:01 pm
    Don’t blame the banks. That is pure leftism.

    Come on – whose parody sock is this?
    Own up!

  25. Nighthawk the Elder

    The extent of these subsidies need to be put up in lights, not hidden away. Everyone knows they exist, but the average punter would not know how much of their bills are subsidising the ruinables.

  26. Herodotus

    majority of politicians spooked by an apparent wish of voters to get rid of coal ….

    It’s a failure of common sense and a victory for propaganda. It’s not just the pollies who are at fault but in equal parts also the media and those who pose as scientists but make outrageous claims.

    Politics is broken because the flow of information to the pollies and voters has been tainted.

  27. Alan Moran

    Tel,
    The rot did indeed set in before 2015,. though prices have greatly increased since then. In NSW wholesale prices ranged, trending upwards, between $23-58 per MWh 2001-2015 and were $35 in 2015; they are now $88. For Victoria a similar pattern is evident and prices that were $30 in 2015 arew now $90

  28. David

    Who pays for all this stuff to be replaced when time comes or will we be left with no power because they will take the money then run dumb Australia

  29. Dr Fred Lenin

    So whats new? Bankers have always been greedy bastards , I mean take for instance Shylock in the zmerchant of Venice , he wanted the money or else ! He went to court to get it or something in lieu.

  30. old bloke

    In the last quarter this included forcing South Australian gas plants to be available 40 per cent of the time (with consumers providing special payments) to compensate for wind supply inadequacies.

    Surely people can see just how ridiculous the situation is. South Australia has to subsidize its gas plant so that it can compete with the subsidized wind farms.

  31. mem

    As reported in The Australian, Trevor St Baker’s ERM power has combined with Chinese capital in proposing new coal generators in Victoria and NSW.

    I note that pumped hydro for Snowy 2 is still on the table and that Trevor St. Baker is also floating the idea of pumped hydro in South Australia as well as a coal power generator. My understanding is that pumped hydro operates like a battery storage and uses nearly as much power to pump water up as it generates. Thus to get return on investment electricity prices have to go up to be viable or the system subsidized. And yet again the consumer will be paying for the folly of wrecking the system.

  32. Kneel

    “… how does one expect the movement that created this mess in the first place to suddenly do a 180 and start arguing against it…”

    I can’t speak for anyone else, but you know what? Any politician that said “Well, we asked the advice of experts, then did what they said. It didn’t work, so we are going to remove everything we put in place and try a different approach” would get my vote in a second. Why? Because WHAT are the issues we face? Either: 1) been around for yonks, no-one has a guarenteed fix yet or 2) never been seen before, no-one knows how to fix it. So yeah, these things will be difficult and I expect it will take a while before you get it right – just stay anchored in reality, speak the truth, AND TRY TO FIX THINGS that’s all I ask. If you get it wrong, there’s no shame UNLESS you fail to un-do fixes that don’t work. That’s it. Do that, you’l lget my vote – for life!

  33. Mem – are you completely bereft of any common sense? Pumped hydro requires a lot more power than it can ever generate. You need surplus power at a lower rate through the night which can be translated into immediate power for when it is required at “peak” rates. It is simple but this is the major problem people like you spout absolute rubbish and are not taken to task. I blame the politicians, power companies and banks. Now if ever a special excess profits tax was needed then this is it! Double your profits and we will double your tax bill.

  34. mem

    Mem – are you completely bereft of any common sense?
    Err, I think you need to re-read my post. I think I am saying the same thing as you!

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