Renewable energy subsidies have poisoned Australia’s electricity supply system

I have an article and in this morning’s Australian which addresses the destruction of the once low-cost reliable electricity supply industry, a distruction that has been caused by subsidies to wind and solar.

The article draws from the “Climate and Energy Summit” last week, at which there was a cacophony from industry leaders, senior bureaucrats and ministers all declaring for ‘net zero emissions’ and that renewables are, in any case, the lowest cost sources of supply.  All sought prove this is the case by calling for the continuation and expansion of the subsidies to renewables – not one speaker pointed out the inconsistency of this.

Subsidies through schemes that force electricity consumers and taxpayers to unwittingly pay half the cost of wind and solar remain in place.  These are being supplemented by new subsidies whereby state governments contract with renewable firms for future supplies and engage in measures that subsidise the delivery of those supplies from remote locations to the customers.

The present leaders of this madness are the Victorian Minister Lily D’Ambrosia and NSW Minister Matt Kean. The latter claims his recently enacted regulatory policies will attract $32 billion in new private investment for wind, solar and associated transmission lines. Though the Commonwealth recognises some dangers from such policies, they too favour subsidies and ‘winner picking’ support for new technologies involving hydrogen as well as the $12 billion conversion of Snowy into a system that supports the irregularity of renewables.

In the past, subsidies to renewables forced costs on coal generators and brought closures followed by escalating prices and precarious reliability.

Now the Commonwealth has legislated a requirement for three years notice of closure.   But firms cannot trade while insolvent. And investors bankrupted by government policies that discriminate in favour of competitors may sue.  Businesses, like AGL, have responded to Minister Kean’s legislation by shelving new investments that are adversely affected by the new round of subsidies.

These developments led Kean to fulminate against Big Business that refuses to cop losses by doing the government’s bidding.

The only way to restore this former level of efficiency is through a market unpolluted by government subsidies, regulations and directions. Sadly, there are few advocating this and the hostility to coal, together with the established capacity of renewables means that it is difficult to bring about.

Those politicians recognising the poisonous effects of the assault of coal generation are, like the renewables lobby, forced to accept that any new facility would also need government support.   Meanwhile lobbies advocating for closure of fossil fuel generation – in some cases out of environmental zealotry and in other cases to benefit from subsidies – remain dominant.

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39 Responses to Renewable energy subsidies have poisoned Australia’s electricity supply system

  1. Louis Litt

    The effect on house holds is deleterious. People on low incomes are drawing on their super to buy solar panels. People with solar panels are saying that they are not saving in electricity bills as what they said they would. The payback on this out lay is 8 to 10 years.This in a low interest high asset price environment is acceptable. But then you have to do it all over again are repair broken panels.
    The householder is going into dis saving which means there is less money to live and thus the demand on pension since waste.
    If you are working there is less saving, less money to pay off your mortgage or put money into super.
    I saw on tv last night another enviro friendly family. They built a house in country were there were no buildings, meadow, forest and a river. Unspoilt for all to enjoy. Now there is there house, foam filled with concrete, a solar substation near the home, its huge, their sewage, rubbish and cars driving on this land.
    It’s amazing how these people suck you in under the term of environment friendly. They left their home in a lovely small town in Rural America.
    Rethink requires as suburbs go where man perhaps should not go.

  2. Crossie

    I consider subsidies to renewables as immoral. People are encouraged to buy and install solar panels, and now storage batteries, and then they get a rebate or they recover the costs by selling on the energy to the grid. This works for people with spare cash but not so much for people on lower wages or those renting. They pay for the electricity from the grid at a higher rate than those with solar panels.

    It is actually the poor who are subsidising the rich(er) and apparently they don’t matter to any of our politicians except Mark Latham. This is just another manifestation of the class divide in our society and the toffs have convinced themselves that they are holier than thou therefore they deserve to rule over the little people who don’t know any better.

  3. Perfidious Albino

    So apparently Twiggy is going to build a gas import terminal in NSW. The worlds #1 gas exporter, is going to import gas, no doubt at a premium to our cost to extract domestically.

  4. Nob

    Albino at 7:21 am:

    LNG import to NSW from NW Australia and wherever else (Qld, NT, SA … PNG ?) and regasification at a seaport is probably more efficient than building pipelines.

    Whether it’s more efficient than enabling CSG and shale gas in NSW & Vic I couldn’t say.

  5. BoyfromTottenham

    Spot on, Alan. I am sure that most Australians aren’t aware of the hidden, destructive effects of the nasty Large Scale Renewable Energy Target (LRET) legislation which simultaneously provides a 50% subsidy to all large scale Wind and solar generators, and which domestic electricity consumers pay for as a hidden tax. I am afraid that the situation that you describe will not change unless the pernicious LRET is abolished, which for some reason no major political party will even discuss.

  6. Mark M

    Snow in Tasmania in December 2020.

    Hottest November. Ever.

    Simultaneously.

    Is there nothing carbon (sic) can’t do?

    Matt Kean announces further weather altering policies using sunbeam and seabreeze collectors requiring massive tax payer monies shovelled off to green grifters.

    Planet: saved.

    You couldn’t make this up.

  7. MACK

    Tim Flannery 2005: “There’s only two years’ water supply in Warragamba Dam”.
    “If the computer models are right then drought conditions will become permanent in eastern Australia”
    https://www.smh.com.au/national/running-out-of-water-and-time-20050425-gdl6xe.html

    1 December 2020 Sydney water storage level: 93.4 %
    Warragamba Dam at Tuesday 1 December 96.0 %
    https://www.waternsw.com.au/supply/Greater-Sydney/greater-sydneys-dam-levels

    When will journalists (and teachers) start reporting the truth?

  8. RobK

    Thanks Alan.
    Few seem to remember the “gold plating of the grid”that was the supposed cause of price hikes. The beefing up of the grid required to accommodate the sporadic surges between distributed generators will be a repeat of the gold plating but on a wider spread scale. The focus at the moment is on so called “hubs”which will insure cost increments can be managed like the cost increments of other subsidies. Hidden.
    The quality of the energy of the grid has also diminished. Consumers through their insurers, or other means are likely to replace white goods at an accelerated rate or pay heavily for extra stabilising at the connecting point.
    Schemes such as H2 still suffer from vagaries of surges in the weather’s energy content to the extent of sizing the operation to capture occasional maximum supply at a different time to occasional maximum demand.
    The upshot is everything has to be over-designed compared to what we were used to. It isn’t going to be cheaper. To facilitate H2 boffins have suggested a 700% over build of RE. The logical conclusion is you also need 700% more facilitating infrastructure. Electricity will be energy for the well-off.

  9. old bloke

    Subsidies through schemes that force electricity consumers and taxpayers to unwittingly pay half the cost of wind and solar remain in place.

    Why isn’t this challenged in court? The government cannot institute a tax which goes to a party other than the government, yet these mandated subsidies go to a third party.

  10. cohenite

    Why isn’t this challenged in court? The government cannot institute a tax which goes to a party other than the government, yet these mandated subsidies go to a third party.

    Good point.

  11. gafa

    Electricity will be energy for the well-off.

    As will electric cars…plebs will just have to be content with using bicycles.

  12. duncanm

    Mark M
    #3677280, posted on December 2, 2020 at 7:57 am
    Hottest November. Ever.

    That really riles me.

    Go look at the BOM – cool in WA, “hottest decile” in the vast spaces on the inland where there are few stations.

    Pick something in the hottest spot – Ooodnadatta, and you find the max temp for November was reported as 44.1C on 30Nov

    Ok, so let’s look at 30Nov. Hourly measurements only show 43.3C at 7pm.

    ie: They’ve used the new bogus Automatic Weather Station (AWS) data with all its noise.

    Do that across the country, and you have your new ‘hottest evah!”

  13. eb

    Electricity will be energy for the well-off.

    Exactly. Remember, the greenies reckon that we would need 7 (or was it 9) earths if everybody lived a western life style. For them, energy rationing is a feature, not a bug!

  14. Spurgeon Monkfish III

    Why isn’t this challenged in court? The government cannot institute a tax which goes to a party other than the government, yet these mandated subsidies go to a third party.

    Not a chance. All taxation ends up in consolidated revenue – there is no hypothecation or “earmarking” in this country. What needs to be brought to a long overdue end is the government’s “right” to allocate subsidies at all – i.e. the insanity of braindead pig ignorant politicians and bureaucrats attempting to pick winners, of which hideously expensive and inefficient “renewable power sources”* are the absolute antithesis.

    *That crowd out far more efficient and cheaper power sources.

  15. Snotball

    Wasting our time worrying about this. The train has already left the station. So called conservatives like Matt Keen have sold us down the river with the tacit approval of the Morrison government. It’s pretty much every man for himself these days – grab what you can and stuff the rest!

  16. bollux

    The problem could be fixed instantly if we build a coal import facility next to the gas one. We could import coal from China and then threaten them by refusing to unload their ships. Works for them.

  17. RobK

    Snotball,
    Wasting our time worrying about this.
    Nonetheless it needs to be said.
    I commend Alan on his persistence and the efforts he puts in to be heard.

  18. Ƶĩppʯ (ȊꞪꞨV)

    This scam about driving the west towards a new Dark Age, figuratively and literally.

  19. Lrp

    Inner city liberals like Matt Kean and Berejiklian look after inner city “green” liberals, who are have invested heavily in renewables green technologies. Crony capitalism at its finest. There are no good options left, and politicians will not save us. The worst thing is that this handover from fossil fuels economy to renewables results in lower overall productivity. Some people will get richer indeed, but more people will become poorer; just doo your best not to be one of the later.

  20. RobK

    In WA the McGowan government has given every electricity consumer a $600 gift as a credit to their electricity account, thanks to the state recovering money from the Alan Bond debarcle.
    A political master stroke of sorts; shower gifts, stimulus, compassion, help out the poor.
    A sign of things to come. Dependence on the compassion of the state through energy supply.

  21. RobK

    I would add, this gift came hot on the heels of another earlier $1500 electricity gift to commercial accounts as a covid stimulus. Electricity consumption is now cheaper, for a while.

  22. H B Bear

    I think Sneakers $600 gift was to Western Power which is now haemorrhaging cash after sending dividend cheque’s to the government since …whenever.

  23. Herodotus

    Something has certainly poisoned Australia’s supply of common sense.

  24. Viva

    Something has certainly poisoned Australia’s supply of common sense.

    Simply another symptom of the West’s steep decline.

  25. Dr Faustus

    LNG import to NSW from NW Australia and wherever else (Qld, NT, SA … PNG ?) and regasification at a seaport is probably more efficient than building pipelines.

    Quite correct. AGL’s Newcastle LNG Gas Storage Facility works on a similar principle, albeit on a smaller scale. With an import facility however, the commercial problems of price and economic connection to international energy markets remain.

    Squadron Energy’s Port Kembla project has nothing to do with reducing electricity prices. This is purely a ticket-clipping opportunity for Twiggy, arising out of the renewables reliability car crash, to carve out a monopoly position in the East Coast energy infrastructure.

  26. Art Vandelay

    Though the Commonwealth recognises some dangers from such policies, they too favour subsidies and ‘winner picking’ support for new technologies involving hydrogen as well as the $12 billion conversion of Snowy into a system that supports the irregularity of renewables.

    As someone pointed out, the Liberal government isn’t picking winners when it comes to subsidising hydrogen. In fact, they are picking losers.

    If hydrogen was a winner, then it wouldn’t need subsidies.

  27. Noddy

    Electricity distributors should be subject to audit.
    My account comes with a 34% ‘pay on time discount’.
    What about the poor bastard who can’t meet their obnoxious demands and cops a 34% loading!
    Oh yes, it also attracts GST!
    Energy costs across the board, are already far too high – if you are classed as a business you cop it again because the suppliers think being able to deduct it from your tax is a benefit
    Rogues abounding aided and abetted by elected representatives!

  28. BoyfromTottenham

    oldbloke – I totally agree. I have been asking for the last couple of years ‘is the LRET constitutional’, but just crickets. The LRET is a cunningly designed renewables boosting, fossil-fuel generator-killing piece of legislation that is both a tax (on consumers) and a subsidy (to renewables), but is not described as either. If so, is it even constitutional? And who dreamed up this nefarious piece of legislation anyway – I bet it didn’t originate in Australia. I would be grateful if someone can enlighten us.

  29. The REAL problem is that the ‘masses’ (and 99 out of every hundred politicians) believe without question that ALL electricity is equal.
    As long as it comes out of the proverbial ‘hole in the wall’ outlet, then they will blindly think that no matter what the generating source, it’s all the same, because all power plants are connected to the grid, and that’s where wind and solar take advantage, without having to explain anything at all, and anyone who tries to explain is just marginalised.
    Until they start closing those coal fired plants, that thinking will persist.
    Note here that the ONLY coal fired plants which have closed are those ancient old clunkers which reached, and in most cases exceeded their use by dates, most of them 50 years plus.
    Even then, up till eight years or so ago, they actually still operated, mainly as rolling reserve, so that when the main plants had a Unit off line for maintenance, those old Units were ‘burning and turning’ but not connected to the grid until needed. Once this ‘farce’ started to take effect, that was their excuse to finally shut down, and then, as they did, those green ‘friends of the dirt’ nodded their heads knowingly (cluelessly really) and said in unison “see how the climate change/global warming situation has caused the closure of coal fired plants.”
    And then it just stopped.
    Those still existing plants just kept on doing what they always did, delivering huge amounts of power to keep the grid operational, and make it ‘seem’ that wind and solar are pulling their weight, which they aren’t.
    If the situation really was as dire as we are told, do you seriously think they would have stopped those coal fired plant closures after the clunkers shut down, even ancient old Liddell. They would have kept going as wind plant Nameplate more than doubled, and both versions of solar more than doubled.
    Wait till the truth actually does start to dribble out. A finger in the dyke won’t stop that.
    Tony.

  30. Squirrel

    I live in hope that China’s ultimate trade punishment for Straya will be to ban exports of solar panels and wind turbines.

  31. mundi

    They can make all the claims they want about being cheaper etc.

    At the end of the day, the reality is that unreliables are only snatching the low hanging fruit by making the real power station spin up and down.

    Once that low hanging fruit is done, the price will abruptly sky rocket and there will be mass out-rage.

    If they botch it enough, it will be cheaper to actually go off the grid with a petrol generator.

  32. 1. The world beating privatised NEM resulted in real electricity price rises of 60% in Victoria when the SECV had reduced real prices every year and paying the Victorian government $500 m in dividends. The cost of privatisation in Victoria works out in current dollars at about $2,000/ family per year.

    The last power outages in Victoria occurred because 40% of coal capacity was offline because the poor dears could not cope with hot weather.

    You are correct, it was a world leader but in ripping off customers and failure to invest- not in providing reliable cheap power.

    2. Where is the evidence of the $7 bn in subsidies. What budget line is it in. In Victoria, Contracts for Difference helped wholesale power prices fall from $109 in 2018/19 to $48 year to date. If prices stay this low for ever the CFDs will cost about $25 m/ year and the saving to Victorian electricity users will be $2.6 bn/year – a 10,000% p.a. return to taxpayers

    3. In SA, the installation of the Hornsdale battery, has saved consumers almost $200 m at a cost to the government of $4 m per year. In 2015/16 SA was still running its coal plants, it imported a net 13.5% of its power and averaged wholesale price of $64.50. In this financial year it has exported a net 7.1% of its generation and average wholesale prices are $43

    4. According to AEMO, NEM wholesale power prices YTD are $45.90/MWh the lowest they have been in real terms for many years.. Just as in Texas, the UK and Germany, wholesale power prices have fallen once renewables cross a 25-30% threshold

    5. We do agree on one thing, the abominable waste of Snowy II, a project not initiated or sponsored by Ms Zibbelman or Schott but by our very own LNP government lead by Turnbull and Morrison. Now the government want to compound the damage by installing a government owned 1,000 MW of gas capacity when according to AEMO it is 154 MW at worst and easily covered by the proposed battery installations from AGL and Origin

  33. Peter Farley,

    Massive saving in cost with privatisation. the assets which were the old genvic operate with 90% plus availability cf. 77 % under genvic. Prices were markedly reduced as yoou would see if you read some of my work for the IPA 15 years ago. As to current costs of subsidies see. https://35b1ca50-ea91-45c2-825d-3e16b7926e46.filesusr.com/ugd/b6987c_afd260bfd8284f9db5d97d73fe52cedb.pdf

  34. Charles Rasp

    Mr Farley …
    1. Show us your workings on the guesstimate of $2000 per family pa please. As to the “poor dears”, they are obviously now kept on a maintenance shoestring, threatened with a gun at their head by government fiat, but still provide about 70% of NEM power output. So much for old dears.
    2. Alan shows you the insidious ways in which NEM renewables are heavily subsidized. You’re welcome.
    3. Hornsdale battery is a solution to a problem invented by renewables. That’s a cost, not a saving. And whoopee, beggar thy neighbor SA relies on the extension cord from Victoria (brown +black coal) to keep the lights on, so it can sell subsidized electricity when the wind blows (it often doesn’t) and when the wind blows hard (which it does very regularly in SA). Lucky SA.
    4. Wholesale prices at $46 YTD …. lowest they have been since coal fired power gave us amongst the world’s cheapest electricity maybe? Except today’s prices rely on enormous subsidies ($7 billion as Alan shows you) which are included in consumer’s bills while the renewables generators make fat profits by government fiat. In a free market, your “lowest for many years” wholesale price becomes hugely expensive. Oh, and Texas has the luxury of buying power from elsewhere in USA and local gas power for when the wind don’t blow …. NEM is isolated and has no such luxury.
    5. Good, we can agree that Snowy 2 is a dog, no thanks to dilettante former PM Turnbull. And the AGL , Origin batteries will provide stabilization services (like the Hornsdale battery) to again solve a problem introduced by renewables, but cannot replace Liddell for example for dispatchable power.

    As a thought experiment perhaps you can enlighten us how we could maintain lowest possible consumer bills for electricity in NEM, provide the 99.999% reliability expected of a world class power system, have no consumer and taxpayer subsidies to the industry, and meet the (wholly unnecessary) target of net zero emissions by 2050, which seems to be the aspiration of the Australian political, activist, and renewables classes? Please show your workings.

  35. Fair Shake

    Electric Vehicles are coming. Germany has penalised and incentivised their local vehicle makers to shift to EVs. As a result these manufacturers and others will push for global markets to accept the wisdom of EVs. It will be a wave of marketing, media and comms with government subsidies to follow. Our bed wetting leaders will roll over. When they do I do not see how our infrastructure can accommodate this without either a) cranking up evil coal or b) establishing nuclear. Renewals will not meet the demand coming.

  36. Tel

    If they botch it enough, it will be cheaper to actually go off the grid with a petrol generator.

    Funny you should say that … I was just thinking about generators, and what occurred to me (completely hypothetically) is pondering about what kind of earthing strap is good for a small generator? Does it even matter to be earthed properly? Any suggestions for a good supplier? Farnell, no Element, no Avnet, yup definitely Avnet has good one for $40 with nice old-school crocodile clips that would happily bite a water pipe or the top of an existing Earth spike but apparently you have to wait like two weeks while they source it from halfway around the world! A freaking Earth strap? What’s wrong with this country?

    You can also buy these big brass Earth clamps that come right out of a Frankenstein movie, which bolt together in various ways and probably take about 20 minutes to install. I’m told that Farmers use these for electric fences … but I doubt that. Supply available from the same outback warehouse that stocked up buying post war surplus in 1950.

  37. Charles Rasp

    Charles Rasp
    #3678647, posted on December 3, 2020 at 4:59 pm
    EDIT

    3. Hornsdale battery is a solution to a problem invented by renewables. That’s a cost, not a saving. And whoopee, beggar thy neighbor SA relies on the extension cord from Victoria (brown +black coal) to keep the lights on, so it can sell subsidized electricity when the wind blows (it often doesn’t) but not when the wind blows hard (which it does very regularly in SA) because it disconnects. Lucky SA.

  38. RobK

    3. In SA, the installation of the Hornsdale battery, has saved consumers almost $200 m at a cost to the government of $4 m per year.
    The battery makes money by supplying FCAS and arbitrage. FCAS (frequency control and ancillary services) was a free by-product of rotary machines. RE requires it for stability. Prices are capped at some $15k/MWh. That’s where your claimed savings are from, its a cost only in an RE saturated grid. Some strange savings.

  39. Delta

    Charles R – Peter Farley won’t be showing you any workings because he doesn’t have any. In fact he is rather adept at sprouting the sort of stuff he has posted here. He’s done the same thing this year on an Engineers Australia Exchange forum – which is an open forum (only) for members of Engineers Australia to raise issues and present opinions.

    A thread was started in the forum on 10 Oct with the title, “Waste of money in so-called renewable energy” referencing a paper Energy and Climate Policy—An Evaluation of GlobalClimate Change Expenditure 2011–2018

    The engineer who started the thread wrote, “The paper can be downloaded. Particularly look at the waste of expenditure on solar. There is nothing sustainable about solar energy which can not produce electricity for base load reliably or even more than 12 hrs per day in one location. Just think if similar expenditure had gone into nuclear energy which is one of the few things that is sustainable and will be the only effective source of electrical energy production in 100 years time. Waste of money is a breach of the present poor revised code of ethics of EA. ”

    And then it was on – about nuclear energy. Peter Farley was soon in full swing and I won’t waste my time trying to summarise what he wrote. Over a period of about 5 or 6 weeks, there were 116 posts on the thread of which Farley contributed 34 most of which were lengthy (I just counted the number to see). He conveniently overlooks facts that don’t suit him or ignores glaring errors in his arguments but that I suppose is what an activist (engineer) does, because no profession is immune from zealots or ideologues.

    Generally I don’t participate in the EAX forum because when it comes to so called climate change issues, the level of vitriol increases and has at times been rather nasty. I’ve come to the conclusion (as an old school electrical power engineer) along with some of my colleagues that the mess in the national electricity market created by governments egged on by rent-seeking activists will only be fixed after one or two or more system blacks. We’ve had SA and Alice Springs twice. Maybe WA will be next because over there the government is rapidly following the RE path, but no matter the instability introduced by closing base load synchronous generators can only be rectified by load following synchronous generators. No arrangement of asynchronous generators, batteries, inverters or so called RE generators can fill the gap. And that includes hydro generation as well because it is a net user of energy and eventually you run out of water either for generating or pumping.

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