Australian electricity policy: Armageddon or slow economic strangulation?

Yesterday the ALP is reported to be examining how it can shut down “ageing coal-fired stations”.  This is part of the policy to reach 50 per cent renewable energy by 2030 and the Greens claim Shorten is seeking an escape from the Party’s previous announcements.

Coalition government policy is for a Direct Action buy-out of emissions coupled with 33,000 gigawatt hours of electricity from “large scale renewable energy” (mainly wind) plus small scale units on rooftops.  At present, large scale renewables account for 12.75 per cent of electricity and the small scale units a little under 10 per cent.  Large scale renewables are to increase by another one third by 2020.  There is no limit to the small scale units.

Both large and small scale facilities are subsidised, which for wind is currently $79 per megawatt hour, a level that provides a price of around three times that which conventional power supplies receive.  In the case of rooftop solar the Commonwealth subsidy is less but there are also state government subsidies.  Roof top facilities’ subsidies are paid up-front which defrays the installation cost.

Essentially, at a time when real incomes are showing no growth, the “ageing coal-fired stations” are being replaced with windmills and solar panels that provide electricity at three to five times the cost of the plant they replace.

In itself that is a testimony to the idiocy and cupidity of politicians falling for snake-oil claims that renewable energy is free and basking in the funding these purveyors of poverty offer to election campaigns.  If we have half of electricity supplied by renewables (ALP policy) the wholesale electricity cost will be at least double current prices; if the Coalition government policy is for renewables to comprise only one quarter of electricity supply the additional cost is 50 per cent.

Australia has the cheapest coal in the world, which has been crucial to industry competitiveness and low prices to the household.  Both major political parties are intent on preventing us taking advantage of this natural wealth and undermining our living standards.

But there’s more!

First, wind, being low cost operationally, bids into the system at between zero and its own operational cost of about $10 per megawatt hour.  This depresses the spot price generally and adds to the travails of coal fired stations, already under pressure from hostile governments and banks fearful of activists.

With luck, we can get away with simply experiencing sub-potential living standards by seeing demand and supply matched with the closure of industries like smelting and steel that offer the highest labour productivity.

Secondly, renewable energy (other than hydro) is intrinsically unreliable. Supply can go from 100 per cent to zero in a few minutes and much renewable output is unavailable at night.

At existing shares of renewables this presents stability problems for the entire system and requires synchronous flexible generation (fast start gas) to fill the supply valleys when wind and solar are unavailable.  These need a premium price which has to be reflected in customer bills and require a vastly more complex system management and one fraught with risks of breakdown.

South Australia has been in the forefront of renewable generation and this has forced the closure of coal and gas plant.  With wind and solar sometimes supplying 60 per cent of supply, the state’s instability problems are critical.  They are papered over by politicians abandoning the national electricity market principles whereby the beneficiary pays for transmission.  Each new windfarm constrains earlier ones off the grid and, instead of new facilities paying for a stronger grid, the costs are smeared across inter-state users.  And, at the same time, because there is a national market for electricity, the premium costs of wind in South Australia are largely shared across all states.

Australia’s problems are being observed elsewhere.  Germany has now decided that it cannot allow renewables to reach much more than 40 per cent of electricity by 2025 which means a halving of new wind build.  In California, where wind has entailed very high energy prices, the balance for wind’s peaks comes from gas storage but the most important source for southern California, has been leaking and is now under repair sparking forecasts of some 14 days of scheduled blackouts this summer.

Australia’s national energy market started life with relatively few political oversights but has evolved into one of political control.  The contrast between it and the self-managing telecommunications system is stark.  The rationale for energy intervention is largely politico-environmental with overlays of administered prices to prevent the effects being readily visible.

After ten years of this, the system is now in a precarious state as well as no longer providing the low cost supply that was ushered in with the deregulations and privatisations 20 years ago.

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33 Responses to Australian electricity policy: Armageddon or slow economic strangulation?

  1. Quig

    How can any rational adult consider these policies seriously? They want to “fight climate change”, save the environment for our grandchildren? Those are reason to behave in such an irrational manner?

    Any low carbon energy plan that does not have a significant (30%-60%) nuclear component is a complete waste of time.

    In the interim, the tax paying electorate has, without every having been asked, been coerced into paying for wind and solar power from which they derive absolutely no benefit (unless they are part of the chain that receives the subsidies for the whole tax grabbing renewable industrial/political kleptocracy). To (probably) misquote Warren Buffet: “The only reason to build windmills is for the tax credit.” And W/B. and his buddies are the only benificiaries of that lurk. (http://www.realclearenergy.org/charticles/2014/05/09/wind_collapses_without_tax_subsidy.html)

    Not to prolong this rant, but the entire premise on which renewables are promoted is highly debatable. There is certainly no proven evidence that warrants such ruinous actions.

  2. Herodotus

    Climate change and renewables are the buses that bring along more useful idiots to the destruction party. Destruction of our society. It is under attack at every level.

  3. Bruce of Newcastle

    We’re seeing more and more what the consequences of a high percentage of renewable energy in the generation mix does.

    In the UK yesterday was news that parts of the Orkney Islands were without power when an interconnector fried itself, rather like Basslink. The authorities rushed to get fossil fuel generators over to the islands. Why is this notable? Well this proud headline sums it up:

    Orkney islands generate more than 100% electricity from renewables

    So they produced more than they needed on that day but were blacked out last week. Good luck if you were on a breathing machine at the time.

    Then today we have this news courtesy of Delingpole:

    Oh Look, It Turns Out Britain’s High, Greenie, EU-Mandated Energy Prices ARE The Reason Our Steel Industry Has Died

    Who knew that electric arc furnaces needed electricity? And that paying ridiculous prices for mandatory green energy would make you uncompetitive compared to the coal based electricity using Chinese?

    Funny that the pollies are now having to scramble to ‘save’ Whyalla and stop blackouts in Tasmania.

  4. We should in fact be like Germany now…and talk green even as we dig brown (except we’ve got more of the premium black). The Energiewende has taken another wende, but we’re not supposed to notice. Like we’re not supposed to notice Italian debt (watch that one!) or anything else that might besmirch the European ideal.

    And why wouldn’t Germany burn more coal, when the “market” makes sure the carbon price stays in the toilet for that very purpose? Who else would buy the drinks for all the Euro-deadbeats? And when you consider how much of EU renewable is actually incinerator fodder – and that those naughty German nukes are still in operation! – solar panels at 50+ degrees north never represented much of a solution. The real cost gets lost in those trades and transfers, but you can only play pass the parcel for so long.

    Qatari and Russian gas is nicer than coal, but only “clean” if you don’t mention the wars and the endless pipeline politics. Buying from Vlad and the Sheiks of Araby is even less straightforward than South Australia running up huge diesel bills while it buys coal power from Vic.

    Good on you for highlighting all this, Alan. It really would be easier to turn those unused desal plants into giant incinerators and just burn money.

  5. Stackja

    Herodotus – Left are well on their way to destroy Australia.
    MT is not showing leadership.

  6. entropy

    That any politician, willingly, regulates to raise the cost of energy for ordinary citizens is a depressing feature of modern politics. Essentially they are doing great harm in the name of good.

    How many single mothers have to forgo a pair of work shoes so her kids can eat in the light? How many little old ladies can no longer afford to properly heat their homes in winter, or air condition in summer? How many jobs are permanently in energy dependent industries? How many industrial towns will die as variable, high cost energy is the final nail in the coffin?

    The political class, heavily concentrated in tertiary industries, are too removed from the ordinary people to properly understand what they are doing to the ordinary working stiff.

  7. AP

    Shouldn’t we be looking to close down all those ageing wind turbines and ageing solar cells?

    The design life of a coal fired powwr station is 50 years or about 4x the life of a wind turbine and 2-3x the life of a solar panel. Do you think these people understand the whole concept of life cycle cost?

  8. incoherent rambler

    Who knew that electric arc furnaces needed electricity? And that paying ridiculous prices for mandatory green energy would make you uncompetitive compared to the coal based electricity using Chinese?

    Funny that the pollies are now having to scramble to ‘save’ Whyalla and stop blackouts in Tasmania.

    Sow … reap.

    A smallish business, where I am currently consulting. 14 full time employees. Monthly electricity bill – $15,000.

    Up from $8,000 per month, 18 months ago.

  9. handjive

    United Nations links affordable energy to quality of life

    “At the same time, today’s efficient coal-fueled electric generating plants also reduce carbon dioxide emission by up to 25 percent compared to older coal plants.
    Replacing a single, large coal plant with advanced 21st Century coal technology can reduce carbon dioxide emissions rates by the equivalent of taking a million cars off the road.

    Coal has the scale to create energy access, and coal used with advanced technologies also can deliver major environmental benefits.”

    Life expectancy, educational attainment, and lower poverty levels are all statistically connected to higher levels of electricity use. (see graph at foot of link)

  10. AP

    Wow, the morons at the UN needed a study to know that?

    I suppose they will soon tell us the revellations that the sky is blue and grass is green?

  11. Aussiepundit

    Armageddon or slow economic strangulation?

    Slow declines are almost always punctuated by crises on the way down.
    There will be a crunch point of some kind.
    Nobody can predict when it will happen, though.

  12. incoherent rambler

    Life expectancy, educational attainment, and lower poverty levels are all statistically connected to higher levels of electricity use.

    Make that energy use or power availability.

    As I have said before: “Human advancement is linked to cheap, available energy for all.”

    Do they not teach history anymore?

  13. Hydra

    Do they not teach history anymore?

    Um, no.

    Even the kids at my mum’s primary school in Latrobe Valley have been brainwashed into the renewable energy way of life – and most of their parents work in the brown coal mines/stations..They all write letters to the Greens and power stations asking them to consider shutting down.

    Never mind that if the power stations shut down we would a) have no electricity and b) the Latrobe Valley won’t exist.

  14. Zippy The Younger

    Armageddon or slow economic strangulation?

    Densorama, it’s thick as thieves.

  15. Rasputin

    Firstly you are wrong about hydro being the only green supply which is reliable! Just look at Tasmania at the moment for proof of over zealous green power production. Doesn’t work too well without water!
    Next consider that the networks need to be independently maintained and look at the huge increases in those charges compared to the power itself and this can only get worse.
    Lastly if the renewable hardware can’t even pay for its initial existence without huge subsidies from low cost profitable operations (while they still survive) just wait until the subsidies double up for new build and maintenance of the clapped out turbines!
    The really depressing bit is that the whole world seems to have been infected with this shit so where to go to get free of greenie dickheads??

  16. Snoopy

    Ageing coal-fired power stations should quality for heritage protection.

  17. John L

    Supply can go from 100 per cent to zero in a few minutes and much renewable output is unavailable at night.

    No problem. Spain has solved this problem a long time ago. They only have to shine powerful spotlights on solar panels and viola – generated electricity at night!
    The Tasmanian problem could also be easily solved. Tasmanian problem is not that they cannot generate electricity from theirs hydro- generators. Their problem is that they run out of water (hydro, aqua). The minor details, that you need agua to run hydro-generators could easily be overlooked when you planning for fully renewable future,
    Once again, this problem could be easily solved. We could gather all politicians around the country, federal, state, local government, on the bank of a dam and let them piss in the dam. We can call it a “National Pissup”, or “Australia Piss in the Wind”. In no time dams would be full and, viola, renewable is flowing again. We could even call it a scientific breakthrough first developed in Australia. We could patent the idea and sell it for squillion dollars around the power hungry world.
    Another solution cold be to install powerful pumps somewhere on the foreshore, build a pipeline and fill the dams with sea water. Initially, the pumps will be run on diesel generated power, and when the cable from Victoria is repaired (sometime in 2020/30), then we can use power from Victoria to run the pumps.

    On the serious note, the lack of generation or no generation is only one problem. The excessive generation or oversupply into the grid is the bigger problem. Power transmission grid is design operate on a set votage (between 415 volt and 275 kV) and 60 kH. Conventional generators are designed to generate power at a set voltage and frequency. Wind turbines could not be controlled as the generation depends on the velocity of the wind and can generate no power or excessive power at a variable frequency. This causes a havoc with power transition in Germany, with frequent explosions or fire at substations or power lines and subsequent outages.

  18. JohnA

    About the basic proposition that wind and solar energy are “free” and “freely available”.

    1. Coal, water for hydro and gas are also free as in we do not pay God for the existence of the resource (Ps 24:1 for the Biblically inclined).
    2. The Keynesian formula E=P=Y (allowing for all his totalitarian thinking) at least tells us that the economic costs we measure are ONLY associated with the work of collecting, transforming, moving and using the resources – whether it’s grain crops, coal, iron ore or sunlight.

    Therefore the argument “wind and solar energy are free” is moot in this debate.

    So we must move on to the economic questions of how much effort it takes to gather the energy into usable form.

    If the CAGW people are right and the planet is accumulating more heat energy than we need, then why not just recycle the heat, eh?

    After all, it is just as free as wind and solar, it is already here (somewhere) and yet even those erudite idiots must realise that the big problem is gathering it all together into a storable and usable form.

  19. handjive

    “Wow, the morons at the UN needed a study to know that?”

    The morons are in control:

    Australia to sign Paris agreement on climate change
    http://www.abc.net.au/news/2016-04-07/australia-to-sign-paris-agreement-on-climate-change/7305446?section=environment

    ‘Unprecedented’ UN global data gathering to add huge amounts of information for governments to collect
    http://www.foxnews.com/world/2016/03/14/unprecedented-un-global-data-gathering-to-add-huge-amounts-information-for-governments-to-collect.html

    Clean Up the UN
    The United Nations’ internal investigations office has uncovered serious lapses and due-diligence failures in the world body’s interaction with organizations tied to an alleged bribery scheme involving a former U.N. General Assembly president.

    The 21-page confidential report by the U.N. Office of Internal Oversight Services’ (OIOS), reviewed by Reuters, outlines the results of an audit ordered by Secretary-General Ban Ki-moon in response to charges against John Ashe, General Assembly president in 2013-2014, and six other people.

    http://www.the-american-interest.com/2016/04/04/clean-up-the-un/

  20. handjive

    Coal, wind and the sun are all free until you try to harvest them.

  21. Mayan

    Our coal power stations are ageing. There are more efficient systems available, but the obsession with anything-but-coal means we have less efficient coal fueled power stations.

    Instead of pouring money into research on carbon dioxide sequestration and other follies, we might care to note that we have plenty of thorium.

  22. John L

    Coal, the wind and the sun are all free until you try to harvest them.

    Just asks the farmers.

  23. Hydra

    Carbon dioxide sequestration on a required scale is impossible. Hazelwood already has one of the largest sequestration facilities on the planet and it takes like 0.001% of all emissions (50 tonnes per day).

  24. John L

    Carbon dioxide sequestration on a required scale is impossible. Hazelwood already has one of the largest sequestration facilities on the planet and it takes like 0.001% of all emissions (50 tonnes per day).

    Wrong! Sequestration is possible. Just plant more trees. Or agricultural crops. We may be able to feed the hungry in the world!

  25. Hydra

    Well true John. I meant man-made sequestration but that solution is indeed one.

  26. Mayan

    @John

    We may be able to feed the hungry in the world!

    There is already more than enough food to feed the world.

    What causes starvation is government, whether by wars, shutting down trade, subsidising inedible cash crops, diverting edible crops to other purposes (the ethanol industry), deliberately starving undesirables, and so forth.

  27. Harry

    If the greens were serious about global warming being the biggest threat to the world they’d be recommending nuclear power to replace coal and gas.

    Other than that, there is no guaranteed supply of electricity without significant CO2 emissions.
    (Unless they force the aristocracy onto an array of bicycle-powered generators)

  28. John L

    There is already more than enough food to feed the world.

    Try to convince the starving people in Afrika and elsewhere.

  29. IRFM

    A great story A Moran with excellent comments by Hydra. While attending a funeral yesterday the discussion got around to the recent closure of the Anglesea Power Station. Part of the steps to closure were caused by the ‘green’ members of the community agitating for such an event. On a smaller scale this mirrors the actions of those seeking closure of the Latrobe Valley suite of power stations. The consequences of the Anglesea Power station closure include the removal of a source of water from the mine that kept the wetlands at Anglesea wet. With no more water then there are no wetlands and Anglesea has lost one of its major tourist attractions. And the other ‘benefit’ is that the Anglesea community are now suffering constant disruptions to their power supply that the old coal fired power station could ameliorate. You might well ask where is the clean and green community on all of this. Strangely silent.

  30. Remember to check NemWatch – just now 10.30am EST only ~650MW wind power across the wide brown land. Tasmania getting very little help from wind.
    http://reneweconomy.com.au/nem-watch

  31. nerblnob

    Supposedly the biggest CO2 emission reduction achievable in the shortest time for Australia would be by upgrading those “ageing” (presumably every other energy source is getting younger) coal fired power stations.

    If that is true, I guess it still wouldn’t be acceptable to the anti fossil fuel idiots that seem to have more control over policy in Australia than anywhere else

  32. rich

    it still wouldn’t be acceptable to the anti fossil fuel idiots that seem to have more control over policy in Australia than anywhere else… If the greens were serious about global warming being the biggest threat to the world they’d be recommending nuclear power to replace coal and gas.

    Augmenting coal or nuclear energy is against the religion of gaia

    Even dams are against the religion of gaia

    Neither of those anti-gaia options gives the greens control of the energy supply or forces everyone to become an honorary green by wearing a hairshirt and joining a village commune

    Reason and logic loses. You lose.

    You might well ask where is the clean and green community on all of this. Strangely silent.

    They make proclamations… you, little person, you live with them.

  33. Squirrel

    “Yesterday the ALP is reported to be examining how it can shut down “ageing coal-fired stations”. This is part of the policy to reach 50 per cent renewable energy by 2030 and the Greens claim Shorten is seeking an escape from the Party’s previous announcements.”

    Let’s hope the Greens are correct in this case. Unless there are truly revolutionary break-throughs in the cost of renewable generation and storage, the people whose votes determine election outcomes in this country are not going to be amused – when we move from the “look at me, aren’t I wonderful, because I’ve got rooftop solar” stage to the “it’s midnight, it’s still 30 degrees, and the effing power is off” (because there’s no sun and no wind and the “dirty, old” power stations have been shut down) stage, it won’t be quite so fashionable to be green.

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