Electricity supply continues its dismal march

I have a piece in the Spectator today that draws together some recent developments in energy policy being developed in the half dozen or so agencies that control what is ostensibly, and was in earlier days, a market with supply largely from private enterprise.  I also did a session on the issue with Chris Kenny.

The destruction of the once highly efficient electricity supply industry by government and bureaucratic oversight is, of course, well known.  This, the most vital Australian industry, continues to hurtle towards Armageddon, courtesy of government subsidies to the intrinsically uncompetitive renewables.   And the besieged Energy and Environment Minister, Angus Taylor, is in Paris defending the semi EU-type policy Australia has adopted while trying to avoid going the full Greta.

This week we had three publications from agencies that are piloting us towards the economic oblivion politicians have determined upon.

The Australian Energy Market Commission (AEMC) has released its price forecast for the next few years.  Halleluiah!  Prices to households are falling 10 per cent the year after next after ramping up 30 per cent (250 per cent for wholesale prices) since the 2017 forced closure of Hazelwood.  The generosity of subsidies is such that firms have piled into the renewable supply so enthusiastically that prices are likely to come off their peaks after next year.

But if anyone think this will be a new trend, the Department of Energy and Environment (DOEE) inadvertently offers a wake-up call.  In compiling its apology for Australian actions to meet the Paris Agreement’s 2030 report, DOEE plans for the exotic wind and solar renewables (alongside more batteries and Snowy 2 to buttress their intrinsic unreliability) to raise their market share from a projected 20 per cent in 2020 to 40 per cent by 2030.  To break even, renewables require $100 plus per MWh compared with $40-50 for coal, so high future energy prices must remain.

Completing the trifecta, the Australian Energy Market Operator (AEMO), announced how it is racing around the country spending money to buy insurance in terms of supply that might not be available and demand reductions to prevent blackouts this summer.  AEMO is an inveterate promoter of renewables and urger for new transmission lines (financed by mandatory charges on the consumer) to connect them to markets put out its summer awareness report.   This activity and the costs it entails would be unnecessary had we left supply to the market.  But the system has been so defiled by regulatory measures that it can no longer operate on auto-pilot.

All these plans, all these political interventions in pursuit of low emissions and subsidies!  Few catallaxy readers would be surprised that the outcome is the replacement of the previous world class electricity supply system with today’s unreliable high cost supply.

 

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24 Responses to Electricity supply continues its dismal march

  1. Rafe Champion

    Yes but look at the example of Ireland, why can’t we keep up with them, or maybe we are closing the gap?

    Ireland’s landmark Fossil Fuel Divestment Bill passed the Seanad, or upper house, on Thursday, putting the Emerald Isle on track to become the first country in the world to divest from fossil fuel-related funds.

    The bill—which requires the Ireland Strategic Investment Fund to sell off about €318 million ($361 million) investments in coal, oil, gas and peat assets over a five year period—now heads to President Michael D. Higgins for signature, where it will likely become law by the end of the year, according to the Irish Times.

    Alice-Mary Higgins, an Independent Senator and the president’s daughter, was jubilant about the bill’s “swift passage” in the Seanad.

  2. Nob

    So Ireland is selling its shares in coal, oil, gas and peat?
    At best market value?
    Who to?

    Another small country “world leader” in picking off the low-hanging fruit of “leaderships nobody else wants”.

    Now they just need to ban air travel and fossil-powered marine traffic and their isolation, I mean “leadership”, will be complete!

  3. Nob

    Will also solve Irish backstop problem as no fossil-powered vehicles will be allowed across the border .
    Just dump it at the donkey-cart depot.

    Win win.

  4. Russell

    Yes, I know the important focus of electricity prices should be on unreliable “redoable” energy’s contribution to recent price hikes.
    But let’s be clear that nearly 50% of the cost of electricity that most punters pay is for network usage charges. No – not the daily service charge – Retailers actually scale up your energy to calculate a total charge that is supposed to recover the network charges. That’s almost as much as your energy component. It all happens because we use “accumulation” energy metering which is rather dumb but cheap way to meter the majority of the consumers.
    No one ever remembers that in the late noughties the Oz network companies spent a motza on their networks after they collected a beating about poor reliability earlier in that decade. These over-the-top upgrades, often called “goldplating”, were necessary but every network company in Oz was then competing for limited contractor resources to spend this extra money allowed by the regulators. So these upgrades were super extra costly and lots of contractors made a killing out of this goldmine.
    However, the effects of this huge overspend slowly washes out of the pricing model after about 10 years. Yep – that is about now. So most of the price reductions anticipated by these latest bureaucrats have been expected and well known by every State and Federal government. They are just plucking up the courage to start talking about it. And with the hope that some other RE crock doesn’t actually cause some increase in prices that neutralise this expected price fall. Very “courageous” …

  5. Professor Fred Lenin

    A little story , an Australian manufacturer whose products use lots of electricity in production ,is moving its operstions to a Third Wprld country where there is cheap reliable electricity 24/7. The electricity is generated by a coal fired power station which burns Australian coal ,mined by a Chinese government owned company and carried there by Panama registered ships with Indian crews and European officers .
    The Australian Uniparty at work .

  6. JB of Sydney/Shanghai

    . That’s not it. This is, from Brickworks:

    We never thought that after 108 years of making bricks in Australia, we would now need to investigate manufacturing overseas.

    Following repeated warnings from industry over many years, it is now obvious that government has failed to develop an effective policy to address domestic energy supply.

    Frustratingly, some governments seem intent on exacerbating the issue, even if that means the lights will go out in houses and factories across the country.

    Exporting our gas is not just putting at risk the jobs of 2000 to 3000 brick makers in Australia, but also the more than 25,000 bricklayers that rely on an uninterrupted supply of products, not to mention the flow on effect in relation to housing supply.

    One third of non-labour costs producing bricks is gas. One quarter of its profits gone (without price hikes) thanks to the recent surge in gas prices.

  7. Art Vandelay

    The Australian Energy Market Commission (AEMC) has released its price forecast for the next few years. Halleluiah! Prices to households are falling 10 per cent the year after next after ramping up 30 per cent (250 per cent for wholesale prices) since the 2017 forced closure of Hazelwood.

    Hasn’t the AEMC been forecasting declining prices due to extra supply from renewables for many years now? I recall Judith pointing out their poor track record when it came to price predictions in a column in the Australian some time ago.

  8. Beachcomber

    The destruction of the once highly efficient electricity supply industry by government and bureaucratic oversight is, of course, well known.

    But it’s not well known. Not if anyone is relying on the ABC-TASS media, or the schools and universities, or the government for information. According to them it is because of evil “privatisation” and too much reliance on ageing, outdated coal-fired power stations and not enough “renewables”. It’s all the fault of evil and old-fashioned coal and gas.
    The WA government is committed to fully “de-carbonise” the economy by 2050; literally setting this as “Year Zero”.

  9. wal1957

    Beachcomber @11:06 is absolutely correct.
    The general public have been fed the usual BS about the ‘unreliable, old, expensive, dirty’ coal-fired power stations being the cause of price rises and blackouts/shortage of supply.
    We can thank the totally unbiased ABC, SBS and most of the MSM for this.

  10. Herodotus

    The left-green boast might be a version of that famous Lenin quote. Today it would read: We will give them the knives to cut their own throats with.
    The BBC is going full alarmist and using the kids – Greta from Sweden and Daisy from Sydney.
    Greta read a speech that she couldn’t have written, while Daisy raged against Morrison for doing nothing while Sydneysiders choked and burned.
    To bolster their use of useful kidiots, the Beeb has been running a series called The Kids Are All Right. Fans of The Who will hear an echo there. The hypothesis is that teenagers have a valuable alternative set of perceptions and opinions. No they don’t, not when it comes to policies that will wreck western civilisation.
    To make matters even more bizarre, coverage of the UK election included a BBC reported saying how it was drilled into them that they must be unbiased, even handed, blah blah. Not taking sides is us! Yeah, right.

  11. Mark M

    If anyone should know how much renewable energy could be built before preventing any global warming from happening, it should be AEMO (with input from CSIRO, BoM)

    “SUMMER OPERATIONS REPORT 2019-20;

    “Annually, AEMO prepares a summer readiness plan, collaborating with generation and transmission network providers, federal and state governments, and key agencies to actively manage heightened risks to power system operations.”

    https://www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Security-and-reliability/Summer-operations-report

    Obviously Australia doesn’t have enough renewables to stop anything.
    Or this is a scam.

  12. Entropy

    Exporting our gas is not just putting at risk the jobs of 2000 to 3000 brick makers in Australia, but also the more than 25,000 bricklayers that rely on an uninterrupted supply of products, not to mention the flow on effect in relation to housing supply.

    One third of non-labour costs producing bricks is gas. One quarter of its profits gone (without price hikes) thanks to the recent surge in gas prices.

    Yes that’s the solution! Just because a small collection of businesses in Queensland spent many king’s ransoms developing a gas export market while state governments in other states actively destroyed any chance of domestic gas production, means we should punish those gas exporters.
    Meanwhile NSW and Victoria can pretend they are virtuous and attack Queensland while their industries die.

    You can get stuffed..

  13. Rafe Champion

    Mark M, thanks for the link!

    Energy use and productivity declining in Britain, how surprising, while Germany is sliding into recession. Fancy that, what could go wrong with increasing the cost of power?

    And more from the Global Warming Policy Forum.

  14. Chris M

    Whatever you are being charged never forget that electricity cost no more than 4 cents per kWh to generate.

  15. I_am_not_a_robot

    Rafe Champion 8:57 pm:

    Yes but look at the example of Ireland, why can’t we keep up with them, or maybe we are closing the gap?

    Gap? What gap?

  16. Tony Tea

    There was also an article in yesterday’s Royal Auto spruiking renewables and the distributed grid and talking down the run-down and aging coal generators.

  17. Kneel

    “…while Germany is sliding into recession.”

    Amusingly, or alarmingly, or predictably (or perhaps all three) is that German “green” jobs manufacturing renew-a-bubble wind turbines are to be off-shored, as energy is too expensive in Germany. Oh dear…

  18. Art Vanderlay,
    AEMC, perhaps stung by criticism of its poor forecasting does a back-cast of its forecast and the outcomes and seems to come out ok. This is not the case withthe various consultants, normally hired by the green lobby, who have massively underestimated the actual price increases that have taken place . I addressed this in several pieces including this one

  19. Whatever you are being charged never forget that electricity cost no more than 4 cents per kWh to generate.

    Hazelwood production cost was 3c-4c per kwh.

  20. Rayvic

    “Yes but look at the example of Ireland, why can’t we keep up with them, or maybe we are closing the gap?”

    Assumably, Ireland could hook up to the UK electricity grid during supply outages. But whose grid would Australia hook into during supply outages?

  21. Rayvic

    Russell, interesting observation on network charges.

    Some 5 years ago, the regulators reduced annual budgets allowed the network operators — Ausgrid blamed the consequent loss of 2000 staff for its inordinately slow network restoration (up to 7 days for some houses and businesses) after the recent wind-caused network damage around Gordon on Sydney’s North Shore.

  22. Hazelwood production cost was 3c-4c per kwh.

    Welcome to the great leap backwards, comrades!

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