The dogma of sustainability and renewables is ruining the power system

‘Sustainability’ is a modern buzz-word, a fashion, a vital tool for preservation and all-to-often a cover for dangerous covert agendas, not the least being the danger of related policies returning electrical power delivery to third-world status

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Australia’s electricity is far too expensive and unreliable

Australia’s electricity is far too expensive and unreliable  By Nick Cater, The Australian, 6 June 2017

There’s an app for everything these days, even one that tracks in real time the startling cost of Australia’s ­ludicrous energy policy.

We are indebted to PocketNEM for informing us that the spot price of electricity on the National Energy Market shot above $150 a megawatt hour in the eastern states late on Sunday afternoon, hitting $365 in the windmill-powered dystopia known as South Australia. During a largely overcast and windless winter weekend, SA and Victoria sucked up megawatt after megawatt of coal-generated electricity from NSW and Queensland, stretching the interconnectors to their limits.

To whom will the cost of these expensive buy-ins be charged? To the customer of course — you, me and the business we rely on to provide jobs, goods and services.

When the dust settles, the 33,000 gigawatt-hour renewable energy target will prove to be the costliest legacy of the Rudd and Gillard governments. Sure, there are plenty of other multi-billion-dollar blunders to choose from — the cost blowout to the National Disability Insurance Scheme, for example — policies that, like the RET, were implemented with noble intent but vacant attention to detail.

Yet on the scale of bureaucratically orchestrated disasters they are dwarfed by the RET, a Soviet-scale exercise in market intervention that is unravelling before our eyes, presenting Malcolm Turnbull’s government with a diabolical policy challenge that cannot be deferred.

How quickly the world has changed. Barely nine months before Turnbull became Prime Minister the Australian Energy Market Commission, which is supposed to know about these things, predicted that scrapping the carbon tax, falling electricity demand and increased capacity would cause retail electricity prices to fall.

The AEMC’s latest forecast presents a very different picture. Household electricity bills will rise acutely, particularly in South Australia and Victoria. The closure of SA’s brown-coal-fired Northern power station 13 months ago, followed by the closure of Victoria’s Hazelwood power station this year, means that for the first time in at least a half-century there is a shortage of active generation ­capacity.

Last December, the AEMC calculated that the closures would increase the cost of wholesale energy by 55 per cent in Victoria and Tasmania and 41 per cent in SA by the next federal election.

The Turnbull government will get only one shot at fixing this mess before rising power prices start to bite, and it will steady its aim this Friday with the release of Alan Finkel’s review of the National Electricity Market.

It is a chance to rescue energy policy from the sectional interests that want the renewable energy gravy train to keep running, and to frame it to serve the national ­interest. The ideologues, aided and abetted by the self-interested renewable energy lobby, will try to make this a debate about “sustainability” in the hope of deflecting attention from our demonstrably unsustainable energy policy. We must ignore their soft-headed nonsense and focus on securing what we really need: a reliable supply of affordable energy within our carbon emission targets.

The review is unlikely to recommend, nor is the government willing to countenance, the abolition of the RET, attractive as that may seem to energy market ­rationalists.

It should, however, help us recognise that putting most of the burden on the electricity grid to deliver Australia’s promised carbon emissions reduction was a ghastly mistake. It has neither assisted the reduction of carbon emissions nor encouraged the development of new technology.

Even Ross Garnaut, the Rudd government’s professor of choice, called for it to be phased out. The RET “does not necessarily encourage the lowest cost means of reducing emissions”, he wrote in 2011, “nor does it encourage innovation: it favours the lowest cost established technologies that are eligible within the scheme”,

In fact, it can cost up to $100 a tonne to abate carbon emissions through large-scale wind and solar, and up to double that amount using small-scale domestic solar panels.

Meanwhile another arm of government, the Emissions Reduction Fund, can do the same job for less than $12 a tonne. Allowing thermal generators to offset emissions by purchasing credits from the ERF instead of renewable energy certificates at eight or nine times the price may give them a fighting chance.

The review also presents the opportunity to end the sacred treatment of wind and solar and to share subsidies, if subsidies there must be, with low-emission thermal energy production such as gas and clean coal. It would not fix the gas shortage but at least it would give the owners of mothballed gas plants a little more confidence of a return on investment.

If common sense is allowed to intrude, we will no longer pay subsidies of about $85 a megawatt hour for the fitful supply of unstable energy using subprime technology of windmills.

Renewable energy suppliers have little incentive to improve the reliability of their product since it is the public, not they, who are forced to pick up the bill for buying in thermal power at the spot price when the blades stop tuning.

The energy market as currently constructed is a classic example of moral hazard where one party decides how much risk to take, while another bears the cost when things go wrong. If renewable energy companies were made to shoulder all, or at least part, of the cost of their failure to provide electricity at 50 hertz for 24 hours a day, they might invest more in the development of storage.

What could go wrong? After all, Alan Kohler assured us in his column in The Weekend Australian that wind and solar are at the point of becoming cheaper than coal and gas, and batteries are just around the corner. We are about to see a flood of renewable investment that will spell the end of coal.

A clear-headed readjustment of the RET will allow us to test that somewhat brave assumption. Oh, and help us keep the lights on.

Nick Cater is executive director of Menzies Research Centre.

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A Dead Man Warns of a Dying Grid

A Dead Man Warns of a Dying Grid  By Alan Moran, Quadrant Online, 5 April 2017

 Not long before his sudden and premature death, Australian Energy Market Operator chief Matt Zema spoke candidly at a private conference of power-industry executives. The enormous subsidies heaped on renewables, he said, mean one thing and only one thing: “The system must collapse”

 

Matt Zema, inaugural head of the Australian Energy Market Operator (AEMO), attended a meeting a year ago of the Regulation Economics Energy Forum at which a number of prominent electricity industry executives were present.  Proceedings at the meeting were private, but the need for confidentiality was removed with Matt’s sad death three months later. The following were among his remarks:

 

“The renewable developments and increased political interference are pushing the system towards a crisis.  South Australia is most vulnerable with its potential for wind to supply 60% of demand and then to cut back rapidly.  Each new windfarm constrains existing ones and brings demand for more transmission. The system is only manageable with robust interconnectors, but these operate effectively only because there is abundant coal-based generation in Victoria…

… wind, being subsidised and having low marginal costs, depresses the spot price and once a major coal plant has a severe problem it will be closed…

… wind does not provide the system security.  But the politicians will not allow the appropriate price changes to permit profitable supply developments from other sources.  And the original intent of having the generator or other beneficiary pay for transmission and services over and above energy itself has now been lost so there are no market signals, just a series of patch-ups that obscure the instability and shift the problem to include Victoria. In the end the system must collapse…”

A month later South Australia’s coal-fuelled Northern Power Station was disconnected from the network because it was unable to operate profitably against subsidised intermittent renewable energy that has priority over other supplies.

In September, 2016, as a result of this capacity reduction, South Australia lost all its power when storms triggered outages and several wind generators were unable to “ride through”,  causing the main interconnector with Victoria to shut down.  A more limited loss of power took place in February, 2017, when wind supply dropped from 800MW to under 100MW in four hours.

The September, 2016, blackout is estimated to have cost the state $367 million. BHP, whose senior executives have long engaged in virtue-signalling in favour of carbon taxes and exotic “clean” renewables, reported a loss of $US105 million with their Olympic Dam project — a loss magnified by the company being forced to suspend its proposed doubling of the mine’s capacity as a result of power uncertainties.

Alan Moran’s new book, Climate Change: Treaties and Policies in the Trump Era
can be ordered by clicking here

Engie, the owners of Hazelwood announced in November, 2016, that the 1600 megawatt facility (supplying between 20% and 25% of the state’s power) will be the fourth big coal-fired power station to close. Hazelwood had been allowed to deteriorate as a result of subsidised wind making the plant unprofitable, which did not stop Engie  being ordered to complete major repairs to at least five of the eight boilers in order to meet occupational health and safety regulations.

The bottom line is that the loss of the coal-powered stations has resulted in at least a doubling of the wholesale electricity price in the southern states and the concomitant loss of reliability.

Blame shifting between politicians has characterised the various events. Reliable coal plants are being forced to close due to competition from renewables which currently enjoy a subsidy of $84 per MWH, double the actual price received by coal plants.  The forced closure of these plants has compounded the cost impost by forcing up pool prices. The subsidies favouring renewable energy include several put in place by state governments, but the most important regulations are at the Commonwealth level — especially those requiring increasing shares of wind and solar within the supply mix.  These regulations give rise to the current subsidy for wind and solar, currently at $84 per MWh and capped at $92.5 per MWh.

The roll-out of new subsidised power is on-going.  And various schemes are being floated for buffering and overcoming wind’s intrinsic lack of reliability. Among these is the mooted South Australian battery investment using the technology developed by Elon Musk and the proposal floated by the Prime Minister to augment the Snowy hydro system with “pumped storage”.  These measures, should they go ahead, allow the transfer of power over time and, in doing so, reduce the gross power available.

New “solutions” using subsidised wind and solar abound.

Last week, for example, South Australian Premier Jay Weatherill announced a new solar-battery combination, Lyon Solar in the Riverland, which promises 300 Megawatts of capacity.  This is the equivalent of perhaps 80 megawatts of coal fuelled electricity and comes at a cost of one billion dollars.

The now-shuttered Northern Power Station had 540 megawatts, yet Weatherill declined to take up an offer that would, for a mere $25 million, have kept it open. Instead, he plumped to spend $500 million-plus on a gas generator of half that capacity and, plus Elon Musk’s much bally-hooed batteries!

On paper, the new Lyon Solar facility is profitable only because of the penalties imposed on coal. These include the subsidy under the Renewable Energy Target of $84 per MWh.  In addition, the facility benefits from the forced closure of the coal-fired stations. This has resulted in the wholesale price of electricity rising to a new norm of $130 per MWh, compared with the average price in the four years to 2015 of $50 per MWh. The bottom line is that the consumer will pay $214 per MWh for $50-per-MWh worth of electricity from the new facility.

With that sort of money being littered around the industry for gee-whizz exotic projects it is little wonder that moochers are circling the state like moths round a candle. In the end, renewables require at least three times the price of the supposed dinosaur facilities they are displacing; consumers and industry will need to pay this and, in addition, fork out for grid additions to offset some of the inevitable deterioration of reliability the brave new energy world entails.  Obviously many outfits, especially those in the energy intensive mining and smelting and agricultural processing sectors will not find it profitable to remain in an Australian market where wholesale electricity prices have more than doubles and the system’s reliability has deteriorated.

We are seeing the future with these renewable energy facilities and it is not working. The contagion that is undermining the South Australian economy and impoverishing the state’s households is spreading to Victoria.

Ominously, on the very day that Hazelwood closed, Victoria evidenced what will be the new norm.

Incredibly, with no heatwave or any other factor to inspire a spike in electricity demand, it had to import electricity from New South Wales and Tasmania.

 

Alan Moran’s latest book,  Climate Change: Treaties and Policies in the Trump Era, is now published and, if not in your local bookshop, available on Amazon and direct from publisher Connor Court.

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Is politicians deliberately ruining the power system a ‘crime’?

Is politicians deliberately ruining the power system a ‘crime’ By Robert Gottliebsen, The Australian, 30 March 2017

 The federal government may need to declare a state of emergency and restore the Hazelwood power station.

Former trade minister Andrew Robb has taken an unprecedented and important step towards bringing the politicians who vandalised our power and gas systems before the courts.

I emphasise that Robb did not describe as “criminals” the politicians who put NSW, Victoria and South Australia at risk of blackouts and forced hundreds of thousands of Australians to consider installing their own generators or batteries.

But at this week’s Food Forum Robb did describe what happened as a “crime”. I believe it is the first time a former Coalition minister has used the word “crime” to describe the destruction of low-cost energy.

He did not discuss blackout danger but, if anything, that is a greater “crime”.

I emphasise that Robb did not say politicians should be prosecuted, but now the “crime” word has been used, if we have power blackouts in NSW, Victoria, or South Australia over the next two summers an enraged community is going to demand that the perpetrators of the “crime” — the politicians — be hauled before the courts.

As I have described previously there is a 75 per cent risk of blackouts in NSW and Victoria. But it might not happen. The politicians could be lucky.

We are fortunate in Australia to have a section of the criminal code that covers politicians and public servants who make false statements or mislead the public. It sets out that if they are guilty of an offence they can be punished with 12 months jail. Every word uttered by ministers as they vandalised the network and created higher prices needs to be examined to determine whether an offence has been committed. It’s not my job to say they have committed an offence and, as is their right, the politicians will fight any prosecutions with great vigour.

The question for the courts to decide will be whether the community was told by the politicians that, to guarantee supply security, solar and wind installations required backup facilities and a reconfiguration of the power network, which the politicians did not undertake.

In addition, was the community told that blocking gas developments in NSW and Victoria would create supply dangers given Gladstone required southern gas. Prices of energy would have to rise.

Quite rightly, Senate crossbencher Nick Xenophon is refusing to allow tax cuts until the power and gas mess is sorted out. And he is right. Few local or overseas groups are going to make substantial new investments in Australia while power and gas prices are out of control, plus substantial gas shortages and blackouts are on the menu.

The federal government may need to declare a state of emergency and restore Hazelwood, given that a “crime” has been committed, as well as accelerating the Snowy plan and quickly taking other emergency measures.

Like Andrew Robb and my readers, I can’t help thinking about why our politicians made such fundamental and catastrophic errors. I have written about the need for advice outside the public service and the “yes” people among the ministerial advisers. But watch question time in state and federal parliaments and you will see politicians using too much of their time thinking up ways to abuse each other.

That time could be used to make sure we avoid blackouts.

Vast amounts of state and federal government resources are used to duplicate what the other is doing, and usually one bags the other so no decisions can be made. We need to synchronise power structures so states control some areas and Canberra others. When duplication is ended, not only do we save countless billions but real policy can be determined, rather than developing new weapons for the state/Commonwealth fights.

Paradoxically, it was Andrew Robb who in the lead-up to the 2013 Abbott election victory was shadow finance minister and set out detailed plans to save those billions by ending state-federal duplication.

But Tony Abbott made him trade minister, and since then the Coalition in government has set about increasing duplication and infighting, which takes state and federal politicians’ eyes off the ball and leads them to poor decision-making.

Maybe long blackouts and gas shortages are what the community needs to rewrite federation and change the way we make decisions. It is the most important issue in the nation.

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About Peter Senior

I'm a very experienced and pragmatic management consultant. I've reviewed and led the restructuring of many organisations - large and small corporations and Government Departments, much of the time as President of the New Zealand Institute of Management Consultants. Before that I was General Manager of a major NZ newspaper; earlier, an analyst for IBM UK. I gained an honours degree in engineering at London University, and studied management at Cambridge University. This wide range of experience has left me frustrated: I continue to see too many examples of really bad management. Sometimes small easily fixed issues; sometimes fundamental faults; and sometimes really tricky problems. Mostly these issues can be fixed using a mixture of common sense, 'management 101' and applying lessons from years of management experience. Unfortunately, all too often, politics, bureaucracy and daft government regulations get in the way; internal factors such as poor culture and out-of-date strategies are often evident. So what's gone wrong, and why, and most importantly, how to fix 'it'? I hope there are like-minded people 'out there' who will share their thoughts enabling 'us' to improve some significant management failures that affect the general public. If you just accept bad management, you don't have the right to complain! If you'd like to share thoughts on any aspects of management, send me an email to petersenior42@gmail.com . My latest project has the interim title 'You’ve been conned. Much of what you were taught and read is largely irrelevant, misleading or plain wrong – this is the REAL story of life: past, present and our possible future.' The working paper so far comprises 105 pages, many listing references and interim conclusions. The main problem is finding sufficient credible evidence, and realising the more Iearn, the more I realise I don't know!
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