Can Australia regain the cheap electricity supply that politics has destroyed?

A piece of mine in the Spectator on-line addressed if and how the re-elected government might extract the nation from the parlous circumstances energy and climate policy measures have created for the nation.

After recounting all the enmities that Minister Angus Taylor had unearthed within the industry, I continued

With all these protagonists Taylor is clearly doing something right.  Chief among these is building upon Frydenberg’s attempt to restore legitimacy to coal by providing some form of government support.  This had become necessary because politics, having undermined the market, now needs to bolster coal in order to provide increasingly necessary firm power (which it can do far more cheaply than gas as a result of state policy driven regulatory induced shortages) and the risks to new investment by additional subsidies to renewables bringing further penalties on fossil fuel generators.

Taylor avoided the “C word” in re-legitimising coal, opting instead for the “F word” – calling for “firming” capacity.  But this subterfuge contributed to his losing control of the agenda.  His long list of 66 proposals included 10 involving coal, but he subcontracted short list’s preparation to his department, which having swallowed the kool aid of renewables, whittled down the targets to 12 only one of which included any reference to coal.

Since his re-appointment in a more extended portfolio, Minister Taylor has moved to clarify his position.  He has announced a reliability requirement on generators.  This is actually unnecessary since both retailers and generators have tremendous incentives to avoid exposure to very high prices.  However he has used these requirements to demand AGL’s NSW Liddell plant be kept in production or expanded. He has also signalled support for a new coal plant at Collinsville as well as for refurbishing Vales Point in NSW.

But, uncertain though the coal expansions are, he has many other problems in re-creating the low cost industry that previously prevailed, not the least being state governments refusing any retreat from green policies.  In addition, his refusal to end the subsidies to renewables on grounds that they are no longer costly is ill-advised and not borne out by the data.

For the wholesale market Mr Taylor is targeting a $70 per MWh price for 2022, which is hardly ambitious, being one third above the level that would prevail if coal had not been demonised and comparable to the baseload futures price.  While recognising the fundamental issue is state government opposition to new coal plant and to new gas developments, he has reiterated his intent to address phantom issues of “manipulation of wholesale markets, price gouging in the retail markets and derivatives market”.

Meanwhile, the regulators are confronting the damage to reliability that the displacement of coal has caused. The market operator, AEMO, is calling for new expenditures to offset the deleterious effects on grid reliability caused by household and other small-scale weather-dependent generating facilities and its forecast coming exit of coal plant.  Unfortunately, AEMO does not suggest those facilities causing the increased risk to the system should be required to incur the resultant costs.  Such an outcome may however be required as a result of reviews the AEMC, the rule-making body.

It may be possible for the policies being promoted to avoid a further reduction in the industry costs.  But even then, it must be inevitable that the new cost levels will mean the departure of the energy intensive industries like smelting that were originally attracted to Australia by low cost electricity.  And the cost uplift will further challenge the  competitiveness of most other industries that transform basic mineral and agricultural resources.

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35 Responses to Can Australia regain the cheap electricity supply that politics has destroyed?

  1. Iva Right

    More window dressing but little else. Weak and indecisive.

  2. Percy Popinjay

    Can Australia regain the cheap electricity supply that politics has destroyed?

    No.

  3. mem

    It would seem that the oil and gas industries have a financial interest in keeping the renewables rolling out if these two articles are reflective of the reality:
    https://notrickszone.com/2019/05/30/big-oil-now-promotes-renewable-energy-wind-solar-spur-growth-in-fossil-fuel-energy-generation/
    https://oilandgasclimateinitiative.com/our-members/

    I would be interested in your thoughts Terry.

  4. 132andBush

    Ditch Paris
    Ditch renewable subsidies.
    Tell 🥬 voters to fuck off.
    Problem solved.

    It really would be that simple.

  5. Entropy

    Percy Popinjay
    #3031546, posted on June 1, 2019 at 9:45 am
    Can Australia regain the cheap electricity supply that politics has destroyed?

    No.

    The average person on the street has absolutely no idea how completely and utterly embedded climate change costs have been into just about any policy, from energy, land use to curriculum over the last 15 years.

  6. Dr Fred Lenin

    Vote every siting member of parliament last on th ballot paper ,then do what 123andBush said ,that ould be a start sweep politics ot the door .

  7. Entropy

    The reason mem is that they are energy companies first and foremost. Sure they have a lot of investment in oil etc, but they also have a lot in renewables too. And the easiest path to profit for any big corporate is to get the government to rig the market for you.
    Soo: subsidies for renewables; guaranteed profit for renewables; subsidised construction; not having to pay for the widely distributed supply network; inflated returns for conventional energy through firming requirements; manipulation of certificates; a whole ticket clipping division; able to readily manipulate Conventional supply at various times to maximise price (hence close Liddel); and then as prices get higher and higher, easier to build in margin.

  8. Bill

    The feds have a large lever that they could use to get the States to come on board for coal power get off their greenwash rubbish. It is called the GST carve up. Just turn down the tap to drip and the states will howl and howl but they will fall into line. And remind the inner city latte sippers, that without reliable power on tap they are going to have to use their legs to get into their apartments rather than a lift which of course does not operate without power. Ditto the trains etc.

  9. RobK

    A link i came across yesterday:
    https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/0809/LiquidFuel#_Toc216843791
    From the intro:

    Introduction

    Australia has an estimated six per cent of the world’s recoverable resources of black coal, and also accounts for about six per cent of current world coal production.[1]Much of this is exported: indeed, Australia is the world’s biggest coal exporter. In resources, it ranks sixth behind the USA (31 per cent), Russia (21 per cent), China (13 per cent), India (eight per cent) and South Africa (seven per cent).[2] It is estimated that at current rates of production, Australia has enough black coal to last about 180 years.[3]Black coal represents about half of Australia’s total coal reserves: it also has about 25 per cent of the world’s recoverable resources of brown coal.[4] On the other hand, Australia is a net importer of crude oil and refined oil products, with domestic production of crude oil and liquefied petroleum gas (LPG) meeting only about 53 per cent of domestic consumption.[5] These factors, together with a desire for increased domestic energy security, and protection from economic instabilities affecting global oil prices and supply, lead to the question of whether Australia should consider developing a coal-derived transport fuel industry to meet domestic demands.

    This paper provides information on production of liquid fuel from coal and its potential as an alternative to petroleum-based transport fuels in Australia.

    In the body of it is mentioned:

    The process of coal gasification can also be used to manufacture other high value commercial chemical products such as urea—used as a fertiliser—and alternative liquid fuels such as methanol. Cogeneration of electricity with CTL in a combined facility is another option that may add value. The potentially high returns generated from these products may provide the impetus for accelerated development and deployment of CCS technology. Whether there are sufficient incentives for investment in CCS will largely depend on the impact on the market of the proposed emissions trading scheme and other schemes for the encouragement of clean coal technology and alternative energy sources.[15]

    According to the International Energy Agency (IEA), CTL conversion is viable at oil prices above around US$40/barrel.[16] Studies in the US suggest liquid fuel production from coal in combination with electricity production would be competitive with fuel from oil at oil prices between US$27 and US$45 per barrel, including the costs of incorporating CCS.[17]

    The high capital costs, however, present an impediment to investors. As shown in figure 2, coal-to-liquids plants are significantly more costly to build than conventional oil refineries, though cheaper than investment costs for some other alternative fuel sources. The figure shows the estimated range of capital investment cost for construction of facilities for fuel production from various unconventional sources compared to a conventional oil refinery.

    Its conclusion includes:

    Future prospects

    Studies on the economic costs and benefits of CTL, accounting for the increasing influences of emissions-limiting policy measures, suggest that the CTL industry is likely to be restricted to niche markets except where it receives substantial government support. Referring to a recent publication reviewing the CTL industry,[29] the IEA’s Clean Coal Centre stated:

    Because of the high costs involved, and the environmental implications, CTL processes will only be used in the long term where there is substantial government support for strategic reasons, and also where the extra CO2 produced can be effectively sequestered. The environmental benefits arising from the production of cleaner fuels are significant, but governments are unlikely to require their use. The view expressed by the IEA in World Energy Outlook 2006 is that CTL production is likely to remain a niche activity during the period up to 2030, and the review carried out in this study confirms this.[30]

    The environmental concerns stem from the much higher energy-intensity of liquid fuel production from coal compared to conventional fuels, resulting in much larger CO2emissions if CCS is not employed (150–175 per cent higher). It has been reported that of the approximately 30 large-scale CTL plants under construction or in the final planning stages around the world, only one (in Australia) intends to include CCS.[31] As noted earlier, CCS has not yet been deployed at commercial scale and it is not yet considered to be economically viable.

    Forget the CCS, we can do a lot with coal aside from baseload electricity, it can free us from depending on foreign liquid fuel. The fuel can burn cleaner than imported liquids. By-production can include baseload power. I would be surprised if China hasn’t gone down this path as it expects to increase coal production by 100 million tons this year.
    We are blessed with coal.

  10. Rafe Champion

    The short answer is no, the longer answer is maybe. An even longer answer is perhaps.
    It depends whether we can play our strengths better than the rent seekers and cultists play theirs.
    Our strengths are science and engineering, economics, the moral arguments against the human and environmental damage inflicted by the war on carbon and rising power prices.

  11. But even then, it must be inevitable that the new cost levels will mean the departure of the energy intensive industries like smelting that were originally attracted to Australia by low cost electricity. And the cost uplift will further challenge the competitiveness of most other industries that transform basic mineral and agricultural resources.

    Quite so.

    Insider information: they have been departing (or planning to) for some time.

    To get those industries back, being competitive won’t be enough. We will need to be a lot cheaper than our competitors.

  12. Terry

    “Can Australia regain the cheap electricity supply that politics has destroyed?”

    Yes, of course it can. Quickly and (relatively) cheaply.

    However, this presupposes that the political conditions that precipitated its current state have changed.

    They have not.

    We remain the hostages of the incompetent eco-zealots running energy policy, commanding those recalcitrant energy prices to “be low” and then blaming anyone and everyone but themselves and their policy failure when those prices peskily refuse to cooperate with their fantasy world view.

  13. Tim Neilson

    I’ve just come home from a Tax Institute conference (bear with me, this isn’t O/T).

    Professor Graeme Cooper of Sydney University said that Australia are “a bunch of boy scouts” in international tax reform. What he meant was that we’re so desperate to be given our merit badge by the international community that we’re destroying our international competitiveness by actually implementing all the platitudinous OECD directives that every other nation pays lip service to but totally ignores in practice.

    I needn’t belabour the analogy with “climate action”.

  14. The guts of it is that even if Australia were to offer electricity at 4c/Kw/hr, no one would trust us to keep that energy/price ratio beyond the next election. And rightly so.
    Look at Queenslamd – in a mad bloody panic, the Labor government is shrieking at the bureaucrats they were giving blowies to last week, to do what they were sabotaging previously.
    While Pony Girl is demanding the above, she’s -IIRC- talking about adding an infrastructure tax.
    This is economic madness.

  15. Nato

    My browser won’t show the article, but your opening self-quoted portion seems problematic.
    Government Support.
    Is the answer to too much government more government?
    Drink The Kool Aid.
    How about the legislative branch of government handballs to the
    Bureaucratic arm of government for protection from the consequences of redistributing taxpayer dollars?
    Angus Taylor needs some sweet consulting gigs after politics, too you know.

  16. CameronH

    Until we can get the Commonwealth Government out of the electricity industry and back to the way it was before the early 90s we will not get back to any sensible electricity policy.

  17. miltonf

    Exactly Canberra has muscled in on what used to be a state responsibility. The states actually did it quite well. How the hell were the Canberra shiny bums able to do this? Hilmer reforms maybe.

  18. BoyfromTottenham

    Surely Alan, killing the LRET should be at the top of the list – its hidden $4 billion per annum tax on domestic and SME electricity consumers and correspondingly massive subsidy to ‘renewable generators’ totally distorts our electricity market from top to bottom, driving bad investment decisions and slowly bankrupting our ESSENTIAL base load generators. I have asked many times, but nobody can tell me why this is a taboo subject. Is it because the troughers would sue the pants of the federal government if they tried, or is there some other reason?
    Please tell me if I am wrong here, but IMHO a simple way for the government to strangle this odious and insidious regime (presumably without being sued, because the LRET subsidy is not legislated as a ‘subsidy’, so taking it away does not cause a ‘loss of income’) would be to reduce the current $65.00/MWH penalty for retailers not buying LRET ‘clean energy certificates’ to the point where the ‘market’ value of them was zero.
    This simple measure would do several things at once: end the hidden subsidy to ‘renewable generators’; significantly reduce the cost of electricity to retailers and therefore to us poor suffering plebs; restore the profitability of the base load generators, and restore sanity and cost transparency to the whole electricity market in Australia.
    Once the manifold positive effects of this became visible and were seen to be universally positive (except for the inevitable whining by one minor group of troughers) one would hope that a sensible parliament would then vote to kill the whole scheme, at which most of the electorate would applaud loudly.

  19. mem

    BoyfromTottenham
    #3031858, posted on June 1, 2019 at 3:24 pm
    Surely Alan, killing the LRET should be at the top of the list – its hidden $4 billion per annum tax on domestic and SME electricity consumers and correspondingly massive subsidy to ‘renewable generators’ totally distorts our electricity market from top to bottom, driving bad investment decisions and slowly bankrupting our ESSENTIAL base load generators. I have asked many times, but nobody can tell me why this is a taboo subject. Is it because the troughers would sue the pants of the federal government if they tried, or is there some other reason?

    Top question. I don’t know the answer but it seems to me that there might be lots of reputations at risk if it was discovered that the troughers were part of the government or partnered with them, on both sides.
    Photios, Turnbull, Keneally, etc

  20. Karabar

    #3031858, posted on June 1, 2019 at 3:24 pm
    From this vantage point in mid 2019, it is not too difficult to determine how the scam has been designed, from that day in 2010 when Juliar announced that “the science is in. Climate change is real and we are causing it”. With the necessary political will, it will be reverse engineered some day, in much the same way that someone re-created the Pterskalski horse . Your solution is a good start down that track.

  21. if it was discovered that the troughers were part of the government or partnered with them

    One presumes the use of ‘IF’ was accidental.

  22. BoyfromTottenham

    inco et al, thanks for the feedback.
    My theory regarding the design of the scam is that, for decades, a LOT of UN/Deep Left / CAGW ‘fellow travellers’ (if not just ‘useful idiots’) were inserted and became submerged in all sectors of our society who are ever ready to help ‘the Cause’ whenever and wherever they can. Kinda like Trump’s hordes of ‘swamp dwellers’ that are determined to oust him.
    The smart ones in the NH part of this group were no doubt responsible for drafting the seemingly innocuous but actually incredibly cunning and economically damaging EU legislation that clearly (if as I did you can be bothered to read the hundreds of pages of the preceeding EU, UK and other remarkably similar legislation enacted in the West) was the genesis of the RET scheme that we got loaded with.
    Of course you can bet ‘London to a brick’ that countries like Russia, China, NK and all their other comrades have not even considered enacting this kind of legislation, for obvious reasons.
    My first post was an attempt to show how to euthenase this legislation by simply giving those who are tricked into paying for the ‘certificates’ an easy out by instead paying a much-reduced ‘penalty’ compared to the current A$65.00/MWH. And to indicate that this old dog can learn new tricks ocasionally!

  23. I too have never had a good explanation about why there was never an attempt to defang the LRET by, for example putting the penalty price at near zero. The legacy is a serious and probably long standing undermining of fhe competitiveness of all firms esp those that are energy intensive. It may be the political contribution the subsidy seekers provide but that would not explain why some MPs have spoken out – even destroying Malcolm’s leadership twice.

    They have certainly been told by the bureaucracy that these things are set in concrete but that cannot be the total story.

  24. mem

    incoherent rambler
    #3031889, posted on June 1, 2019 at 4:31 pm

    One presumes the use of ‘IF’ was accidental.

    Sometimes “if” can mean “when‘ <strong. I’ve mostly been an advocate of the old saying the “The truth will always out”. But these days…

  25. 132andBush

    ^ That symbol in my above showed up as a green vegetable on my iPhone.
    I thought it appropriate.
    What looks like a blank sheet of paper fits nearly as well though.

  26. Ben

    Electricity companies like renewables because the prices for the standard power goes up.

  27. Mark A

    None
    #3032125, posted on June 1, 2019 at 8:53 pm

    No.

    Ditto.

  28. Tel

    We could hire Indians to come and build nuclear reactors.

    If we let them keep some of the Uranium they would share their heavy water technology with us … mostly it’s copied from Canadians anyhow.

  29. Bruce in WA

    Professor Graeme Cooper of Sydney University said that Australia are “a bunch of boy scouts” in international tax reform. What he meant was that we’re so desperate to be given our merit badge by the international community that we’re destroying our international competitiveness by actually implementing all the platitudinous OECD directives that every other nation pays lip service to but totally ignores in practice.

    Couldn’t agree more. Sick of hearing from former workmates and friends (well, the friends aren’t former) and even family about how China has said it is going green with RE, and India, and how wonderful Europe is — look at how they manage! When told that (a) what China and India say and actually do are two entirely different things (China has over 2000 coal-fired plants and plans for 1200 more; India has 600 and plans for another 400), and (b) France, for example, can afford to be ‘green’ — over 70% of its power is nuclear — I am called, for all intents and purposes, a deluded liar.

  30. Charles

    Angus Taylor outsourcing decision making to his department is one of those things you know will always end well. What a dope.

  31. Alan Moran:

    They have certainly been told by the bureaucracy that these things are set in concrete but that cannot be the total story.

    Then perhaps we need to purge the Bureaucracy until it remembers the simple fact that we are the masters and they are the servants.

  32. Chris M

    A smug lawyer said to me “you can’t say that!” And yet I just had. Poor grammar, I think what he meant was “you aught not say that” or simply “you shouldn’t say that”.

    Can Australia regain the cheap electricity supply that politics has destroyed?

    The answer is yes of course it can but will it? Probably not, at least in our lifetimes with no Trump in sight.

  33. Dr Fred Lenin

    Far as our industries leaving ,this is what that obama prick did to the USA in th globalist plot for world domination . This is one of the reasons Trump is vilified by the facists he is undoing the globalist plan ,8 years of destruion undone in a year ,hilarity was onboard to continue obamas action ,just wave a lot of OPM in those bastards face and they are yours to command ,thats how that mongrel nazi schwartz( soros ) operates ,hes the mongrel who bought the communists in getup so much for solidarity with the workers , .licking the ass of an inside trader hedge fund criminal nazi lover.

  34. Faye

    Reading the above is depressing and frustrating. PM Morrison is a nice guy but is he willing/capable of bringing back our simple cheap and reliable energy system.
    Will he continue on this path of insanity?
    Keep the renewables parasites comfortable with taxpayer subsidies whilst the tax payer dies of heat and cold or loses his job because his boss’ electricity bill is too high.
    Grow a make-believe industry that damages real industry and businesses.
    Ignore the wealth hidden underground instead of using it to give the citizens opportunities of wealth creation for themselves and the country.
    Our politicians had better take the path of commonsense and sanity because the great unwashed are fed up.

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