The mirage of lower renewable energy driven electricity prices

Josh Frydenberg claimed the last week in Parliament was a poor one for the opposition and the triumph for the government. He made mention of the Opposition’s inability to get Peter Dutton and its failure to deliver its preferred outcomes regarding Manus Island detainees.

He also mentioned as a success the government’s energy policy proposals.  One such proposal, the “Prohibiting Market Misconduct Bill 2018”, was clearly not a success for the government. The proposal was referred to the Senate for investigation and cannot emerge from that process until the least April of next year.

Wrapped in the normal cautious verbiage about “last resort” measures, the Bill is a desperate attempt to see electricity prices reduced before the next election. To do so it forces retailers to reduce their prices and generators to ensure they operate their businesses “fairly”.  With thirty odd retailers around the nation and dozens of differently owned generators, the electricity market is just about the least susceptible to the monopoly activities against which these measures were targeted. The provisions would allow the government to have the ACCC examine suspect behaviour which could result in fines of $10 million or divestiture.  Divestiture is clearly aimed at AGL’s Liddell Power Station.

Among the media outlets criticising the bill was the AFR. Ben Potter assailed it as ‘socialist’. The AFR had previously not opposed the carbon tax, renewable subsidies or the NEG all of which involved the expropriation of fossil fuel generator investments.  It could be that such epithets are reserved for actions against industries that do not meet the PC test!

The government’s nightmare is that its promised fall in prices will not materialise.  And such fears are justified.  Notwithstanding the chimeric bonanza of ever cheapening supplies of wind and solar, wholesale prices remain at double those that prevailed prior to the impact of subsidised renewables destroying the competitive market that had been developed.

And there was no sign of Australia’s supposed solar induced competitive advantage officials and lobbyists alike had promised (in fact Australia enjoys no such advantage except in the remote interior).

In addition to these wholesale costs, the market manager feels obliged to incur other costs for frequency control and system strength to compensate for the inadequacies of renewable energy in providing these essential components of a stable supply.  These include compensation to gas generators in South Australia which, due to the inherent deficiencies of wind and solar, are forced to stay on-line against their wishes; such “directions” operate around 40 per cent of the time.  Origin Energy maintained that the prospects of forced divestment and price controls had caused it to shelve plans for an expansion of its Quarantine gas generator in South Australia but that program would face far greater deterrence from being subject to de facto control by the market operator.

In the medium future Origin indicated a pause in its contracting for new wind as a result of the fall in the subsidy price expected from 2020.  The current subsidy of over $60 per MWh (as a point of reference the total electricity price averaged $40 per MWh three years ago) falls to under $20 on the forward market for 2021/2.  At that point the forward price for baseload power also shows a fall, from the current $90 per MWh to $65.  But wind, aside from the costs it is able to “socialise”, needs to have firming contracts, costing maybe $30 per MWh.  Such firmness would be mandatory under the reliability arm of the foundering National Energy Guarantee but would also be insisted upon by retailers in the absence of such statutory requirements.

Someone ostensibly less concerned about the effect of high prices is Sanjeev Gupta who, with the PM, the Leader of the Opposition and the SA Premier, has just announced a 10 million ton a year steel mill for Wyalla based on renewable power and financed by those ever-compliant Chinese (after, of course ,a $40 million feasibility study)! That’s twice the current Australian output. It is unclear who is supplying the power and how much it costs.  But one bonus for the existing facility is promised anti-dumping action and government purchasing preferences, thereby raising all Australian steel prices!

Desperate politicians happily provide high priced protection for the favourable media publicity on the back of a mirage of future prosperity.

 

 

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40 Responses to The mirage of lower renewable energy driven electricity prices

  1. Dr Fred Lenin

    Get these political maggots out of the power industry it worked well before the climste scam kicked in ,stop all subsidies ,remove imposts on coal .refuse ety to the grid unless they can supply 24/7 ,then jorce the carpetbaggers to pay for restorration of sites to pristine condition . The less the aparat interfere the better things work . Too many lawyers in politics trying to invent new laws to look busy make MPs part time work with pay at the average hourly rate watch them scrambling to get in to parliament then abolish career politics cut political donations to $10 per person or organisation per year put the public employeeson one year performance. Basedcontracts .

  2. RobK

    This steel mill is an interesting but complex situation especially with protection thrown in. No doubt scale is paramount. I’m unable to read the linked article but i understand the facility will be augmented by solar at least. Heat scavanging to coincide with electricity peaks, perhaps. There’s carbon being consumed and output optimised. Given enough subsidies it might all work.
    As to getting the price down before the election; i think you are right. That horse has bolted and the dog wont run.
    Its the subsidies and the ever increasing hiden cost of ramping up RE and its enabling support framework. It seems they are locked into a death spiral. Backing out now wont be cheap but not as dear as continuing with RET. Letting the RET wither on the vine with no renewal maybe a middle-ground option if only a change in government would do the same. Im not convinced they would.

  3. RobertS

    Seems like Elon Musk has been talking to Sanjeev Gupta about business opportunities in South Australia.

  4. Desperate politicians happily provide high priced protection for the favourable media publicity on the back of a mirage of future prosperity.

    Those gormless gimps in Canberra and SA probably think they are the smartest people in the world.
    Then the Indian and Chinese grifters walk off with billions of taxpayers money.

    It is unclear who is supplying the power and how much it costs.

    Yankee grifter Elon Musk and the Big Battery that Could Smelt Steel.
    Cost? Who cares, it’s only taxpayers money.

    I can’t wait for SA’s solar powered monorail.

  5. H B Bear

    But one bonus for the existing facility is promised anti-dumping action and government purchasing preferences, thereby raising all Australian steel prices!

    Just like the good ol’ days of Mainland Tasmania behind the tariff wall.

  6. Tel

    As to getting the price down before the election; i think you are right. That horse has bolted and the dog wont run.

    They have all given up the idea of getting prices down … the talking points are oriented around who to blame.

    Its the subsidies and the ever increasing hiden cost of ramping up RE and its enabling support framework. It seems they are locked into a death spiral.

    That’s not what the average punter is being told.

    Backing out now wont be cheap but not as dear as continuing with RET.

    Neither party has the guts to talk about RET … the media won’t ask questions, it’s a black hole topic. Somehow this has remained off the radar for a decade or more and strangely enough it seems impossible to get anyone to even notice.

  7. Ian MacCulloch

    Remove all subsidies and price control; wind up all regulators except safety; allow all forms including nuclear to enter the mix; adopt a quasi zone balance scheme as with telecommunications and see how it unfolds. If the market wants a feed in disruptive supply let it pay the price. In the meantime, let the consumer have
    DIRECT access to the imperfect market.

  8. RobK

    Ian,
    Agreed. It shouldn’t be very hard (but for the posturing) and the “emmissions” would be reduced painlessly.

  9. DaveR

    Frydenberg is wedded to the green illusion that the cost of renewable energy does not, anytime, include the cost of new transmission line connections (“network costs”), frequency/voltage stabilization costs (“grid costs”), or back-up generation standby costs for when renewables dont contribute (just other generation costs). He also will not openly discuss the massive cross-subsides consumers are providing to renewables.

    With this view, he has always missed the clear economics of renewables, as did Turnbull who was ideologically committed to renewables at any cost.

  10. Art Vandelay

    I can’t wait for SA’s solar powered monorail.

    I believe Jay Weatherdill floated the idea of buying Sydney’s old monorail after it was shut down in 2012.

  11. Destroyer D69

    Is that “ideologically” or “Idiotologically” commiitted??????

  12. .

    Repeat after me:

    Coal is cheap, does not affect temperatures in a significant manner and we have a virtually unlimited supply.

    Nuclear is nearly as cheap, does not affect temps at all and we have a virtually unlimited supply.

    The green movement is more about a. Marxism vis a vis big business bashing b. the simplistic Eden myth that William Blake wrote about, but also a deep green anti-civilisational, coercive back to the land movement, much more so than anything to do with actual conservation.

  13. Critical Mass

    So global warmists have finally got it right in their predictions of imminent catastrophe! Except the catastrophe is not in the climate. It is in the economy, industry, power supply and reliability and in household incomes.

  14. Dr Fred Lenin

    How can renewables ever be cheaper when they have to be subsidised and cannot guarentee a 24/ 7 supply ?
    So all this talk praising it it is rubbish lies it is not done to save the planet its a globalist political weapon to steal taxpayers and consumers money while destroying the West where opposition to global fascism is likely to come from ,impoverished people are easier to control .

  15. Dr Fred Lenin

    If renewables need back up,use the backup and scrap the subsidised scammers .simple who need two if one is interrmittent

  16. Governments (Federal and state) are likely to chip in for the feasibility study which is said to cost $40 million but could actually be done for about $1 million (using some clever Indian engineers and some even clever rewarded accountants) but I could honestly and professionally do it for less. Elon Musk was good at getting that sort of money and he could increase the price of his shares on that. Not hard to work out who will benefit from the largess.
    Seriously, BHP failed with their sinter plant using gas. It is necessary to reduce the iron to an iron sponge before it can be electrically melted to form various grades of iron and steel. When BHP owned the works they could back load coking coal from Newcastle and Port Kembla. Whyalla still uses coking coal.
    Iron Pellets used to be produced at Port Latta Tasmania in shaft kilns using anthracite and oil as reducing agents for the high grade mangnetite pumped from the mine at Waratah. Maybe the Chinese and Gupta are thinking of a new type of sinter plant using natural gas and coal from the shut Leigh Creek mine. I think the feasibilty study will find that will not be economic as found by BHP. Never mind a few million in Mr Gupta’s pocket and Pollies saying we tried.

  17. Egg_

    lower renewable energy driven electricity prices

    Try the veal.

  18. hzhousewife

    Close Liddell now.
    Force the issue.

  19. Rafe Champion

    Nice on hz!

    Egg what is that about veal, where will you find veal after they turn from CO2 reduction in the power industry to CO2 reduction in farming?

    Eat veal while we can.
    Not to mention eggs:)

    I suppose they are coming for the chickens as well.

  20. Rafe Champion

    This would all be hilariously amusing except that it is serious. As the old cartoon said, stop laughing this is serious!

  21. Rohan

    I believe I was load shedded last Friday night. Got home and it was 38C, no power and united energy said via SMS there was a fault. 1/2 hour later they sent another SMS that power was back on, cept it wasn’t. Just under 1200 homes effected.

    The outage map coverage stated that I drove through several traffic lights that funnilly enough all had power. I took off to my sisters and the Woolies/Maccas/servo around the corner and 2 sets of lights there still had power. Same 11kVA feeder. AEMO dashboard had all interconnectors red lining. This is the new norm.

    Comrades

  22. Correction

    Moran favours nationalised electricity?

  23. Rafe Champion

    When we all have smart meters installed Cats will be the first to be load shedded, unless they just go the full monty and shed Liberal electorates. That will only impact a small proportion of the population the way things are going.

  24. Rafe Champion

    That creates a kind of Prisoners dilemma. Do we all vote Labor at the election after next so we will not be load shedded or will that collapse the whole system because there wont be any Liberal electorates to shed.
    Or will everyone vote Liberal because they will be so pissed off with the CFMEU/Greens party after two terms?

  25. Mark M

    After tens of thousands of doomsday global warming climateers took unnecessary fossil-fuelled trips to COP24, failed economist Nicholas Stern claims “if you use fossil fuels you are causing big losses to other people’

    http://time.com/5473167/climate-change-katowice-poland-conference/

  26. hzhousewife

    After tens of thousands of doomsday global warming climateers took unnecessary fossil-fuelled trips to COP24, failed economist Nicholas Stern claims “if you use fossil fuels you are causing big losses to other people’

    What’s the bet that tens of thousands of doomsday miserables get into their jet planes and fly home now.
    By rights they should all walk and swim.

  27. Egg_

    what is that about veal,

    They are comedians:
    “I’m here all week – try the veal!”

  28. Herodotus

    Nationalised electricity? What we have now is nationalised lunacy.

  29. Bruce

    Do any of these clowns know how a blast furnace actually works?

    Do any of them, or their media lickspittles, even CARE?

    I think I am perched on a stout bough when I suggest a very solid NO!

    Aluminium production requires a fair swag of juice. Before the use of electrical smelting of Alumina was discovered, not much more than a century ago, aluminium was more expensive than platinum.

    All of this reeks of carpet-bagging on a cosmic scale.

  30. Myrddin Seren

    All of this reeks of carpet-bagging on a cosmic scale.

    Taking a lead from Mr Rusty upthread, I think the Monorail Salesman has just come to Whyalla.

    We are limited to three links, so choosing carefully:

    Here is the announcement about the initial upgrade

    Liberty Primary Steel Signs Contracts for >A$600m

    In a major move forward, two contracts have been signed today for the design of equipment and construction with contracting partners:

    Danieli, for a new, world-leading, state-of-the-art rail and structural heavy section mill

    CISDI Engineering Co, for a Pulverised Coal Injection (PCI) Plant

    Guess what input is used in a PCI plant – apart from oxygen ? – coal.

    And – show me the money:

    He said these investments would be financed through a combination of funding sources – including GFG’s own resources and vendor finance – and will likely require support from the South Australian and Federal Governments.

    Mainland Tasmania is a mendicant state. So Hello Nett Taxpaying Australia – you are about to become funding partners in a steel mill upgrade.

    On the same page is a link to the second announcement made yesterday:

    Sanjeev Gupta Announces Visionary ‘Next-Gen’ Mega Steel Plant for Whyalla

    I see a lot of ‘Visionary’ rhetoric. I am wondering how Whyalla is going to compete now in a world dominated by Chinese steel production – and with India planning a massive increase too – and be powered by sunbeams and unicorn zephyrs ?

    Does Gupta’s Liberty House website give any clues ?

    Greensteel

    2. Invest in green energy, not green taxes.
    We have committed investment in generation of low-cost, low carbon power for use in steel recycling.

    We will strive to reduce the impact of carbon taxes imposed on coal and gas based electricity to the manufacture steel (but not on coal for blast furnaces). We already hold investments in low cost power from hydro to bio fuel, and we are working to convert coal power plants to biomass and waste-to-energy stations. We will seek to grow our renewable energy portfolio to the advantage of our steel and engineering capabilities.

    Good luck at running an EAF plant solely on renewballs. This sounds like another subsidy mill.

    And here is Gupta’s interview with Leigh Sales:

    LEIGH SALES: You have previously said that you are going to power the mill with renewables. Is that still the plan and why?

    SANJEEV GUPTA: So renewables, especially solar, is now, in our view, not just in our view, the investments are making it certainly the cheapest form of new energy possible. So that underpins most of our energy strategy going forward. There is need for balancing mechanisms for that, so we are looking at pumped hydro, but steel plants give us possibilities for generation.

    Once again that is in the portfolio.

    LEIGH SALES: There are some people who worry about the reliability of renewables. Is that something that worries you?

    SANJEEV GUPTA: Yes, definitely. I think that is the key issue now going forward for renewables. Solar I believe is the camel’s back, so to speak.

    Solar is now by far the cheapest energy available. It will get cheaper and cheaper as scale and technology evolve. So what needs to happen now is this very, very competitive form of energy will pull down the cost of storage, whether it is batteries, whether it is hydro or other forms of storage. That is the next evolution or the revolution to happen in renewables, but we will lead firmly on that path.

    What ??

    Brace. This sounds like a ‘wonderous’ investment opportunity – so much so that the taxpayers will get the inside running on funding it, instead of commercial lenders. Wink, wink.

    Australia – a national Town Hall meeting in Springfield.

  31. Myrddin Seren

    Arggghh – the Bird filter !!

    Second pass
    +++++++++++++++++++++++++++++++++++++++++++++++++

    All of this reeks of carpet-bagging on a cosmic scale.

    Taking a lead from Mr Rusty upthread, I think the Monorail Salesman has just come to Whyalla.

    We are limited to three links, so choosing carefully:

    Here is the announcement about the initial upgrade

    Liberty Primary Steel Signs Contracts for >A$600m

    In a major move forward, two contracts have been signed today for the design of equipment and construction with contracting partners:

    Danieli, for a new, world-leading, state-of-the-art rail and structural heavy section mill

    CISDI Engineering Co, for a Pulverised Coal Injection (PCI) Plant

    Guess what input is used in a PCI plant – apart from oxygen ? – coal.

    And – show me the money:

    He said these investments would be financed through a combination of funding sources – including GFG’s own resources and vendor finance – and will likely require support from the South Australian and Federal Governments.

    Mainland Tasmania is a mendicant state. So Hello Nett Taxpaying Australia – you are about to become funding partners in a steel mill upgrade.

    On the same page is a link to the second announcement made yesterday:

    Sanjeev Gupta Announces Visionary ‘Next-Gen’ Mega Steel Plant for Whyalla

    I see a lot of ‘Visionary’ rhetoric. I am wondering how Whyalla is going to compete now in a world dominated by Chinese steel production – and with India planning a massive increase too – and be powered by sunbeams and unicorn zephyrs ?

    Does Gupta’s Liberty House website give any clues ?

    Greensteel

    2. Invest in green energy, not green taxes.
    We have committed investment in generation of low-cost, low carbon power for use in steel recycling.

    We will strive to reduce the impact of carbon taxes imposed on coal and gas based electricity to the manufacture steel (but not on coal for blast furnaces). We already hold investments in low cost power from hydro to bio fuel, and we are working to convert coal power plants to biomass and waste-to-energy stations. We will seek to grow our renewable energy portfolio to the advantage of our steel and engineering capabilities.

    Good luck at running an EAF plant solely on [email protected] This sounds like another subsidy mill.

    And here is Gupta’s interview with Leigh Sales:

    LEIGH SALES: You have previously said that you are going to power the mill with renewables. Is that still the plan and why?

    SANJEEV GUPTA: So renewables, especially solar, is now, in our view, not just in our view, the investments are making it certainly the cheapest form of new energy possible. So that underpins most of our energy strategy going forward. There is need for balancing mechanisms for that, so we are looking at pumped hydro, but steel plants give us possibilities for generation.

    Once again that is in the portfolio.

    LEIGH SALES: There are some people who worry about the reliability of renewables. Is that something that worries you?

    SANJEEV GUPTA: Yes, definitely. I think that is the key issue now going forward for renewables. Solar I believe is the camel’s back, so to speak.

    Solar is now by far the cheapest energy available. It will get cheaper and cheaper as scale and technology evolve. So what needs to happen now is this very, very competitive form of energy will pull down the cost of storage, whether it is batteries, whether it is hydro or other forms of storage. That is the next evolution or the revolution to happen in renewables, but we will lead firmly on that path.

    What ??

    Brace. This sounds like a ‘wonderous’ investment opportunity – so much so that the taxpayers will get the inside running on funding it, instead of commercial lenders. Wink, wink.

    Australia – a national Town Hall meeting in Springfield.

  32. RobK

    I have a sneeking suspicion that the co-production or heat scavenging component of this scheme is a coal fired turbine of sorts. It will be interesting to see the detail…..something missing from the dialogue now yet the studies are done and the tax payer is on the hook.
    Where is the transparency and public due diligence?

  33. Myrddin Seren

    RobK

    Where is the transparency and public due diligence?

    Given recent experience with both the NBN and a series of major naval purchases, I think we can safely say transparency and public due diligence are as dead as a dodo in this country; ministers and local councils can spray money around with gay abandon and whatever review processes exist are post-fact and too late. ( see the recent Senate estimates hearing that started to get a handle on the real cost of the Pyne submarine purchase ).

    Get yourself in to government and start hosing the money around.

  34. yarpos

    Lily D’Ambrosio told me renewables would put “downward pressure” on energy costs. When I asked what the mechanism for that to happen would be all I got was pollie speak and unsupported generalisations.

    During the recent VIC election I got into an email exchange with my local Labor candidate on what Labors energy policy was. To her credit she was at least prepared to engage. During the exchange I got these gems from the Labor playbook:

    “the main cause of grid instability is ageing generators that can’t cope with high demand on very hot days and fail……”

    “….unlike these ageing generators, solar and wind power is most reliable on very hot days.”

    “Labor has built or is building almost 3,900 MW of new clean renewables – almost two and a half times the capacity of the former Hazelwood Power Station.”

    They clearly have no idea what they are buying into or any basic understanding of the nature of solar and wind power. I used to sarcastically remark that they expected the grid to run on wishful thinking. Sadly I think that statment is true. They.have.no.clue.

  35. RobK

    From MSs first link above;

    CISDI Engineering Co, for a Pulverised Coal Injection (PCI) Plant

    And

    Steelmaking equipment and on-site power generation.

    The headline could read: “We are making a combined steelmill and coal fired power plant.” Again it’s the subsidies that are the worry.

  36. RobK

    As agl and others have shown, if you burn coal but have sufficient renewables in-house, you can capture your own RET penalty. This has nothing to do with RE being cheaper and it doesn’t bring the cost of electricity down; quite the opposite but profits are maximised.

  37. RobK

    The Qld government is pretty smart. It has invested in wind and solar in WA, thus harvesting RET dollars that are not part of its competition for the NEM eastern seaboard market. Cast the subsidy net wide.

  38. RobK

    I expect this is Mr Gupta’s MO.

  39. I need to go to the tip and dump a stack of bottles and plastic containers that I’ve paid a deposit on.
    Nearest return depot?
    Townsville – 1262Km round trip.
    These are the things that really piss people off.
    How damn blatant a ripoff is this?

  40. stackja

    RGR pink bats, BER etc weren’t about anything but OPM.

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