Energy policy insanity: can Frydenberg reverse the course?

  • In May of this year, South Australian Treasurer Tom Koutsantonis was somewhat remorseful over the closure of the Port Augusta coal fired power station He said

It is a sad day for our state to see such an important investment close but it’s an old coal-fired power generator that was past its day and unfortunately for whatever reason no one is going to reinvest in a coal fire generated power station, no one’s going to upgrade the plant.

That power station closure came a few years after the closure of the state’s other coal fired generator, the Playford power station.  Together the two power stations had a capacity of 780 Megawatts, which was only 15 per cent of the state’s capacity or 12 per cent including rooftop (600 MW) and the interconnectors (680, soon to be 920, MW).

Those power stations might not have been the lowest cost in Australia but they did provide reliable supply at an unvarying cost which is one third that of the wind capacity that has replaced them.

Renewable subsidies require consumers to buy wind energy at three times the price of coal and subsidise rooftop solar at twice the coal price.  In South Australia, wind accounts for 38 per cent of supply and solar another 7 per cent.

The South Australian Government’s distress about the power stations’ closures featured their job losses.  The Treasurer said he wasn’t concerned about baseload power in South Australia, with the Victorian interconnect providing capacity that “far exceeds” what the Port Augusta power station could provide.

Last week came a triple whammy, not totally unpredictable.  A cold snap drove up demand.  This was associated with unusually windy conditions that stopped the windmills from operating.  And the main interconnect from Victoria was down in preparation for its capacity being increased.  In addition, a number of major user firms – including BHP, Nystar and Arrium – had decided to buy electricity on the spot market rather than contracting.  Absence of contracts provided a signal to Engie, the owner of Pelican Point, the second largest power station, to divert its contracted gas elsewhere.

Suddenly prices, normally in the $50-100 per Megawatt hour range, were souring into the thousands of dollars.  The firms which were uncontracted looked like they would need to temporarily close and the government was in panic mode.  Blame was hurled, ludicrously, at privatisation and at the Commonwealth for providing subsidies to wind developments.  This latter call is a bit rich since the state has made a feature of its wind resources and it was only in November last year that the Premier attending the Paris Climate Change conference paraded the prospect of the state becoming 100 per cent “low carbon” electricity which he said would be good for jobs.

Deficiencies in the transmission grid were also demonised.  A contributory cause of the price surge was the outage of the main Heywood link but this stemmed from that link being upgraded.  And the link is being upgraded at a cost to consumers in Victoria and South Australia so that the already subsidised wind generators can get a better price.

With a bit of jawboning and more congenial wind the prices have now come off the boil.

Next month, once the beefed-up Heywood link is fully operational the risks of high price events will recede for a time.  But this only papers over the cracks.  It smears the costs of wind more broadly and allows South Australia better to take advantage of the reliable low cost coal generated electricity in Victoria.

Subsidised wind will continue to put pressure on the economic viability of South Australia’s gas plants which will require yet another consumer-financed increase in transmission – one for which  the Premier has said he will provide $500,000 for a feasibility study.

And from the other end, the pressures that forced the closure of the South Australian coal power stations (and provide too great a political risk for new coal power stations) are at work in Victoria.  Minister Lily D’Ambrosia has said that the aim is for Victoria to get to 25 per cent renewables by 2020 up from 12 per cent currently.  Labor federally is looking to get to 50 per cent renewables by 2030.  Reliability aside, all this means substituting coal based electricity that costs $40 per megawatt hour with renewables that cost $120.

This afternoon Mr Turnbull gave Josh Frydenberg an “expanded” environment and energy portfolio, which includes energy security, renewable energy targets and clean energy development and financing”.  Can he restore some sanity to the nation’s energy policy?

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53 Responses to Energy policy insanity: can Frydenberg reverse the course?

  1. hzhouswife

    No, he’s a light-weight policy wonk.
    We need a hard scientist with excellent communication skills, we don’t elect this type sadly.

  2. thefrolickingmole

    and unfortunately for whatever reason

    Sack him now.
    He wont name the problem, he cant fix the problem.

  3. Habib

    Seeing as he’s a welded-on warmenista who probably still has extensive investments in assorted renewable boondoggles and futures, I highly doubt it.

  4. Robber Baron

    Josh might be a Turnbull rival, hence he’s put him in a tough and politically sensitive portfolio. There will always be a group that will oppose his decisions. Turnbull will destroy Josh’s career just as he did Abbott and Morrison. There can only be one shining star on Turnbull’s stage.

  5. Habib

    BTW I’m referring to the disease, not the symptom.

  6. Kool Aid Kid

    Can’t see why this is Frydenberg’s problem. SA has had limitations on power generation at competitive cost forever, which is why the Victorian connection works. Base load should never be a problem and the peaks can be managed adequately with gas, which it has access to in the Vic connection. Looks to me that the SA Govt needs to sack someone for really bad planning with its interconnect upgrade timing – in winter!
    It’s been a very long time since anyone wanted to build significant power generation in SA, which is big relative peaks and low relative base load as I recall.

  7. RobK

    Federal government overseeing state business. Unnecessary duplication. Keep to core business.

  8. Mater

    All they need do is itemise the additional ‘renewable’ expenses on people’s electricity bill (A la, the GST) and it would cease to be a politically sensitive issue.

  9. Delta

    This afternoon Mr Turnbull gave Josh Frydenberg an “expanded” environment and energy portfolio, which includes energy security, renewable energy targets and clean energy development and financing”. Can he restore some sanity to the nation’s energy policy?

    No hope.

  10. NormaP

    Josh supported Abbott. Hence he has been set up to fail.

  11. min

    I agree with Robber Baron , , Turnbull has put Josh there to set him up to fail. In fact I warned Josh of this happening but tell me what could he do say no?
    The greens made life difficult for him during the campaign now they will hassle him no end.

  12. Econocrat

    The Secretary of Environment, Dr Gordon de Brouwer, is a avowed member of the climate cult who designed the Home Insulation Scheme for Gillard.

    Be afraid, be very afraid.

  13. This afternoon Mr Turnbull gave Josh Frydenberg an “expanded” environment and energy portfolio, which includes energy security, renewable energy targets and clean energy development and financing”. Can he restore some sanity to the nation’s energy policy?

    I’d say no.

    Also, this wasn’t on the list of Potentially Great Potentialities.™

    Not looking good so far. Still, there’s at least 400 days to go for the requisite miracles to occur.

  14. Roger

    This afternoon Mr Turnbull gave Josh Frydenberg an “expanded” environment and energy portfolio, which includes energy security, renewable energy targets and clean energy development and financing”. Can he restore some sanity to the nation’s energy policy?

    Most particularly to energy security…presently our boffins appear to only factor in one conflict at a time disrupting our gasoline and diesel supplies. The potential for simultaneous crises in the ME & the South China sea disrupting supply is not something they appear willing or able to contemplate.

  15. Nerblnob

    All governments are in this bind.

    They want to kill the golden goose of “fossil-fuel” power for ideological reasons, but they still want the eggs and feathers for practical reasons.

  16. Gab

    This afternoon Mr Turnbull gave Josh Frydenberg an “expanded” environment and energy portfolio, which includes energy security, renewable energy targets and clean energy development and financing”. Can he restore some sanity to the nation’s energy policy?

    Not while turnbull is in charge.

  17. Atoms for Peace

    Care factor zero for SA; you broke it, you own.

  18. Daithí of Cossack

    Can he restore some sanity to the nation’s energy policy?

    NO because Turnbull’s son is mixed up with these alternate power companies.

    Do a bit of research!

  19. Art Vandelay

    This afternoon Mr Turnbull gave Josh Frydenberg an “expanded” environment and energy portfolio, which includes energy security, renewable energy targets and clean energy development and financing”. Can he restore some sanity to the nation’s energy policy?

    No way. Don’t forget his role in the ridiculous policy of expanding the GST to low value imports (a policy that will result in a net cost to taxpayers) to appease Gerry Harvey.

  20. Nerblnob

    You can guarantee that the Greenies have been already beavering away on a “mythbuster” to show that the notion of “renewables” and anti-coal ideology causing these problems is a myth, before the myth has even emerged.

    In fact they’ll escalate, and deny that there’s even a problem.

  21. Adelagado

    Frydenburg is a know-all who gets it wrong too often. He wanted to put a GST on imported items, in spite of research that said it would cost more than it raises.

  22. Adelagado

    Sorry, my previous post should have said Frydenburg wanted to put a GST on imported items ‘under $1000’.

  23. Roger

    Right on cue…news reports tonight of Saudi fears of the inevitability of a major attack on their oil infrastructure from ISIS just as China signals it will flex its muscle in the South China sea.

  24. Snoopy

    Econocrat
    #2093569, posted on July 18, 2016 at 6:08 pm
    The Secretary of Environment, Dr Gordon de Brouwer, is a avowed member of the climate cult who designed the Home Insulation Scheme for Gillard.

    Be afraid, be very afraid.

    The de Brouwer surname is not unknown in South Africa. Just sayin’.

  25. Entropy

    hzhouswife
    #2093513, posted on July 18, 2016 at 5:38 pm
    No, he’s a light-weight policy wonk.
    We need a hard scientist with excellent communication skills, we don’t elect this type

    I don’t believe such a creature exists anyway. There is a reason they are hard scientists.

  26. iampeter

    Is it accurate to represent wind power as three times the cost when the subsidies that have been poured into these things can never be repaid as these things can’t really operate at a profit? I think if you look at it end-to-end its much more expensive than three times. I’m happy to be proven wrong on that by anyone more knowledge-able on the economics of it but I don’t think just looking at the user cost comparisons captures the true cost of alternative energy.

    Also here is a look at the opposing point of view for those of you interested:
    reneweconomy.com.au/2016/murdoch-coalition

    An amazing article that at a time of the regulators having pretty much put all the fossil fuel companies out of business in SA and with the predictable failure of a 100% wind/solar setup, they blame the lack of fossil fuel businesses and the regulators for not doing more. Also has a graph.

    In the end you ask: “Can he restore some sanity to the nation’s energy policy?” I think that the only way sanity can be restored to the nations energy policy is to abolish any and all environment and energy portfolio’s and get the government out of the energy and indeed all of the economy. Unless this happens we are going to see more and more states go the way of Tas and SA as the alternative energy sucks the country dry.

    We need to start having talks about actually disentangling the Government out of our industries, not half measures, department mergers, and green-lite versions of legislation.

  27. Bruce of Newcastle

    When Dan the CFMEU Man shuts down Latrobe poor Mr Koutsantonis will be totally screwed.

    Victoria to stop pumping out carbon dioxide by 2050, Premier Daniel Andrews promises

    Victoria will emit no carbon dioxide by 2050, if a target announced by Premier Daniel Andrews on Thursday is met.

    It would mean no more burning coal for power in the Latrobe Valley and a big shift in how business operates and people run their homes.

    Labor are bonkers. But maybe those unicorn farms will be ready in time.

  28. ella

    “Not while turnbull is in charge.”

    “In a nation run by swine, all pigs are upward-mobile and the rest of us are fucked until we can put our acts together: not necessarily to win, but mainly to keep from losing completely.”

    Hunter S Thompson.

  29. Stackja

    MT does not have Tony Abbott’s credentials on energy policy.

  30. Richard Bender

    Unfortunately, Alan, who the minister is in largely irrelevant. The point of putting energy and environment in the one portfolio is to subjugate energy policy to environmental policy. Having them in one portfolio also ensures no diversity of advice – it will always be the anti-cheap energy view that is presented. And this is not an unintended consequence, it is exactly what the PM wants.

  31. Tim Neilson

    an “expanded” environment and energy portfolio, which includes energy security, renewable energy targets and clean energy development and financing
    In other words a contradiction. You can’t have energy security and the other two (at least not without bankrupting the rest of Australia to SA/Tas levels within a few years). Yes, Frydenberg has been set up to fail, as a punishment for supporting Abbott666. He’ll be pushed to deliver “renewable energy targets and clean energy development and financing”, then when there’s a massive and sudden energy shortfall causing widespread catastrophe he’ll be the scapegoat for failure to deliver “energy security”.

  32. JohnA

    A contributory cause of the price surge was the outage of the main Heywood link but this stemmed from that link being upgraded. And the link is being upgraded at a cost to consumers in Victoria and South Australia so that the already subsidised wind generators can get a better price.

    Now why on earth would they want to have the link upgraded, if they want to become totally renewable?

    And especially seeing that Dan the CFMEU-man has already promised that the DPR of Victoriastan will be all renewables itself by 2050. That implies that he will become Dan the Immortal Dictator in order to see this stupid policy come true.

    Before you become immortal and stay in office forever, Mr Premier, I would like to escort you along Station Pier, and make sure you have a wonderful trip – at the end!

  33. Oh come on

    This was associated with unusually windy conditions that stopped the windmills from operating.

    You’d be heartless not to laugh. As useful as an air conditioner that stops working when the weather gets too hot. (Actually, that’s probably the future reality for the whole bloody country, although in such an instance it wouldn’t be the air conditioner’s fault that there isn’t enough power to run it when it’s needed most.)

  34. nerblnob

    It would mean no more burning coal for power in the Latrobe Valley and a big shift in how business operates and people run their homes.

    A big shift downwards.

    Shutting down coal-fired power stations will mean fewer electric rail lines are possible, to name just one of the effects that will hit the insane coal-haters particularly where it hurts.

  35. Habib;

    Seeing as he’s a welded-on warmenista who probably still has extensive investments in assorted renewable boondoggles and futures, I highly doubt it.

    You’re probably quite right.
    The average Australian politician has the mindset of a barbarian who would melt down Michelangelos “David” for the brass screws holding the arms on.

  36. Combine Dave

    Seeing as he’s a welded-on warmenista who probably still has extensive investments in assorted renewable boondoggles and futures, I highly doubt it.

    Sounds like Frydenberg has the potential to be a ‘great’ Warminista Minister in the same way that Turnbull is a great PM.

  37. Combine Dave

    He’ll be pushed to deliver “renewable energy targets and clean energy development and financing”, then when there’s a massive and sudden energy shortfall causing widespread catastrophe he’ll be the scapegoat for failure to deliver “energy security”.

    Much like the hapless Morrison and Turnbull’s super tax grab.

  38. rickw

    Can he restore some sanity to the nation’s energy policy?

    No, because the basis of Government needing an energy policy is insanity in itself.

    Government energy policy is fundamentally them messing around in something that they understand very little about, demonstrated by the regular and spectacular unintended consequences of their policy.

  39. Crossie

    I agree with Robber Baron , , Turnbull has put Josh there to set him up to fail. In fact I warned Josh of this happening but tell me what could he do say no?

    Yes, he should have said no but ambition is a great driver. He will have to resign later anyway if he wants a leadership position in future. Association with Malcolm is a black mark against his name he will live to regret, just look how Scott Morrison’s political stocks have declined.

  40. I am with those who think that SA’s problems are not for solving by the Commonwealth.

  41. Robbo

    “This afternoon Mr Turnbull gave Josh Frydenberg an “expanded” environment and energy portfolio, which includes energy security, renewable energy targets and clean energy development and financing”. Can he restore some sanity to the nation’s energy policy?”

    Restore some sanity you ask. Well first you need to have sanity in the composition of the parliaments throughout Australia. That, as we have just seen earlier this month is a very difficult, probably impossible, task. The primary vote for the two major political parties fell dramatically with most of the disenchanted voters supporting a variety of weirdo wacky candidates with little knowledge or interest in matters such as energy. On top of all that Turnbull decided to give the management of this important area to a bloke with few credentials to inspire confidence.
    While South Australia continues to bludge off Victoria, as does Tasmania, there is no incentive for intelligent reform.

  42. Doug Hurst

    I am an optimist and hope energy and the environment have been put in the one portfolio to ensure energy supplies are not threatened by Green lies about jobs, saving the GBR, stopping warming etc. Turnbull is not a dictator who gets everything he wants. He now has more common sense Nationals to deal with and the Greens are weaker in the Senate.

  43. Bushkid

    Of course he can restore sanity to the nations energy policy – but will he?

  44. old bloke

    Not looking good so far. Still, there’s at least 400 days to go for the requisite miracles to occur.

    Philippa, excuse my ignorance, but what is supposed to happen in 400 days?

  45. Another old bloke

    Yes, Philippa, the 400 days reference was way too cryptic. Please explain.

  46. Old Ozzie

    No, not with Malcolm Traitorous Turdbull behind him ready to leak and white-ant him

  47. motherhubbardsdog

    The logical end to this obsession with “renewable” energy is that any company or individual requiring reliable energy supply will be off grid. The grid will collapse due to its inability to cope with intermittent generation.

  48. motherhubbardsdog

    Victoria will emit no carbon dioxide by 2050, if a target announced by Premier Daniel Andrews on Thursday is met.

    All animal life will have been eliminated from the DPR of Victoria, apparently. Only vegetables allowed.

  49. Roger

    …just look how Scott Morrison’s political stocks have declined.

    Scott who?

  50. Ripper

    old bloke
    #2094257, posted on July 19, 2016 at 11:32 am

    Not looking good so far. Still, there’s at least 400 days to go for the requisite miracles to occur.

    Philippa, excuse my ignorance, but what is supposed to happen in 400 days?

    http://catallaxyfiles.com/2016/07/12/guest-post-philippa-martyr-the-potential-greatness-deadline/

  51. old bloke

    Thanks Ripper, I was worried that Philippa had joined the Planet X crowd.

  52. wreckage

    Plant life also emits CO2 and methane. Victoria must be planning to nuke themselves and leave only a wonderful, clean, zero emissions wasteland of fused glass.

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