Wind industry lobbyists Pitt and Sherry, and their journal, RenewEconomy, jubilantly produced the following table as proof that wind energy lowers prices. They pointed out that in May wind enjoyed its biggest ever month, with 8.5 per cent of the National Electricity Market supply and argued that this had led to prices falling. They also claimed that the table, as it shows a lower price differential between South Australia and other states in May compared to March, demonstrates that wind drives down the price of electricity.
Here is the table for May and for March. (April is not shown but was relatively windless).
Wind can, as the lobbyists maintain, in fact have a short term depressing effect on price – imagine what happens to the overall price of hamburgers if the government comes along with subsidised product that doubles the available quantities. But eventually the price has to be reflected in the costs. These are $120 per MWh for wind compared with $40 per MWh for coal. And that does not include the premium costs wind must incur in transmission and in back-up required as a result of its inherent unreliability.
This subsidy is one key statistic that is not incorporated in the above table. Through the Renewable Energy Target, the government forces the consumer to pay over $80 per MWh as a subsidy to wind farms. So, if wind were to earn the average pool price it would still get more in subsidies than it earns from willing customers.
But that is only part of the story. As the table demonstrates, wind generation only earns 66 per cent of the average pool price in South Australia. That is because wind is unreliable and subject to natural supply not consumer demand so that it tends to be available at times when it is, relatively speaking, not needed. In May, when wind was responsible for half of South Australian output it therefore earned only $50 per MWh (and the remaining plant earned $100 per MWh – wait for the calls for an end to this discrimination!) South Australian wind generators in May of this year where therefore earning $50 per MWh from the market plus another $82 from an enforced subsidy. That is the equivalent of an external tariff of 164 per cent!
Only in the palmy days of the pre-Keating tariff cuts did we see industries, like motor cars, with such a level of assistance. In those days the rationale was that Australian motor car manufacturing was an infant industry which pretty soon would stand on its own feet if it could get a temporary leg-up.
Wind cannot even make the spurious claims of being an infant industry Though there have been attempts by governments to double down on the wind subsidies by also subsidising windmill manufacturing plants these have been just another waste of money. And, although tariff subsidies of old were a clear drag on the economy, those subsidies and their price-lifting effects tended overwhelmingly to be on consumer goods. Electricity is also a production input and the bedrock of all economic activities and Australia is sacrificing what should be the world’s cheapest supply on the altar of vacuous green idealism massaged by cold eyed rent-seekers.