Energy Disaster Spells the End for Australia’s Renewable Energy Target
It happened in the blink of an eye: Australia went from energy heavyweight to a country in crisis looking for the equivalent of life support.
Since STT got going in December 2012, we have drifted from frustration to despair and back waiting and hoping for mainstream journalists to recognise the existential threat posed by Australia’s suicidal renewable energy policies.
Now that power prices are skyrocketing and the evidence of a grid on the very brink of collapse is becoming impossible to ignore (a run of statewide blackouts and massive load shedding in South Australia is pretty hard to sweep under the political carpet), journalists are lining up to spill ink over how and why Australia now finds itself in the midst of a power pricing and supply calamity.
Gerard Henderson, the executive director of the Sydney Institute and senior columnist with The Australian hasn’t had much to say about Australia’s renewable energy driven fiasco, until now.
Australia goes from being power rich to facing an energy crisis
18 March 2017
Renewables have been promoted at the expense of reliable power sources
Growing up in Melbourne in the 1950s and early 60s, I could never have anticipated that, a half-century later, Australia would have an energy crisis.
Throughout the 20th century, Victoria’s relative economic prosperity was sustained by cheap brown coal from the Latrobe Valley area. Coal extraction led to job creation and increasing living standards. Other states, particularly NSW and South Australia, also benefited from extensive coal reserves to sustain their manufacturing industries.
The Hazelwood Power Station, based at Morwell in the Latrobe Valley, is about to close down. This is expected to lead to increased energy prices in Victoria and diminish the capacity of the national power grid.
It also will probably bring about a situation whereby SA’s energy supply will be even more unreliable than it is today since some of Hazelwood’s coal-powered energy is used by SA to fill gaps in its own power supply.
On Thursday we witnessed the spectacle of SA Premier Jay Weatherill berating Josh Frydenberg, the federal Environment and Energy Minister, over the Turnbull government’s energy policy.
Talk about denial. According to Weatherill, the energy predicament facing his state in particular and the nation at large is the result of poor government in Canberra over the past decade. Weatherill heads a Labor government that was first elected in 2002. Yet the SA Premier maintains that neither he nor his Labor predecessors bear any responsibility for power price rises or energy blackouts in his state.
SA is but a case study of Australia’s energy problems. Last month Paul O’Malley, chief executive of BlueScope Steel, said energy costs in the US were up to 10 times lower than what his company paid in Australia. High energy prices also hit hard at medium and small businesses. What’s more, Australian wages are high by international standards.
How did this come about? SA provides the answer. As Weatherill has conceded, the state’s rapid embrace of renewable energy was a gamble. A losing one, as it turns out. Now about 40 per cent of energy generated in SA comes from renewable energy — some solar but primarily wind.
As Frydenberg explained the situation at the Sydney Institute on February 27: “The challenge is that the quantity of (renewable) generation varies from supplying less than 1 per cent of South Australia’s demand compared to 80 per cent … When the wind’s not blowing and the sun’s not shining, power is not being generated. This means that days of easily forecastable supply are over.”
After more than a decade of advancing the cause of renewables, the SA Labor government recently has announced an emergency energy package that includes the establishment of a state-run new gas power plant and a proposed 100 megawatt battery storage system for renewals.
This may or may not stop blackouts in the state next summer, when demand is expected to be very high on some days. Meanwhile, at the national level, the Prime Minister has said the commonwealth has plans to expand the Snowy Mountains hydro scheme and he assures Australians that, if necessary, his government will act to ensure that the gas industry supplies the domestic market sufficiently.
And so it has come to this. A Coalition prime minister is evoking the concept of a company’s “social licence” to demand the gas industry limits its exports if the domestic market is short of gas. Meanwhile, a Labor premier who barracks for renewables is about to give fossil fuel another chance.
Australia’s energy predicament has been brought about by the long campaign against fossil fuel in the cause of the environment in particular and the need to abate global warming in general. Successive governments — Labor and Coalition — at the state and federal levels have heavily subsidised renewable energy.
The rapid growth of solar panels and wind turbines put pressure on the coal plants. It coincided with an attack by the green left on the fossil fuel industry and those institutions that finance it.
This has led to a situation where business in Australia is reluctant to fund new power stations but business in Japan is willing to purchase Australia’s high-quality coal to fuel energy plants. Japan, which, like Australia, has signed up to the Paris Agreement, is in the process of constructing 45 high-energy, low-emission plants. So Australia is ensuring the reliability of the Japanese energy network by exporting high-quality black coal while Australia’s regular supply of energy is anything but assured.
Today some supporters of renewables exhibit similar symptoms to Christians of old encountering the Holy Land for the first time. Last month, Fairfax Media’s Peter FitzSimons wrote about viewing wind turbines near Goulburn from a plane. He described the turbines “lazily and gloriously spinning in the afternoon sun”. Really?
It’s not clear if FitzSimons has been up close to the brutal concrete structures that produce wind power. Nor if he has ever had the misfortune to be caught in a lift during an Adelaide blackout.
It is the love affair some Australians have with renewables, along with the opposition of others to the base power provided by the production of coal, gas and uranium, that has brought about a situation where energy-rich Australia has an energy crisis.
Call it the elephant in the room, call it the fly in the soup, call it what you will, but central to Australia’s power crisis is the Renewable Energy Target: the largest single industry subsidy scheme and the biggest forced wealth transfer in the history of the Commonwealth. The Australian’s Editor knows that its days as a protected species are done.
Renewable energy target crucial in climate debate
18 March 2017
Government interventions piling up in power policy field
The review by Chief Scientist Alan Finkel into energy security is just the latest in a long series of reports into climate and energy policy in this nation. Yet confusion, investor uncertainty and market volatility remain palpable. An economy that once thrived on plentiful and affordable energy now is adjusting to an environment of expensive and unreliable electricity — an economic advantage is turned into disadvantage. We need to question why we are doing this to ourselves and whether there may be another way. Yet the debate is proceeding in a constrained fashion with both major parties in alignment on the primary government intervention: the renewable energy target.
That the RET is quarantined from the debate is difficult to understand. Former prime minister Tony Abbott is the only leading political figure to have raised the possibility of capping it at currently approved projects while we pause and catch up on energy and climate policy.
Instead we are likely to see the investment of an additional $10 billion across the next three years to almost double the installation of renewable energy projects to fulfil the target of 33,000 gigawatt hours.
[note to Ed, no one believes that Australia’s current LRET will be satisfied by 2020, or at all. The number of new renewable projects being constructed can be counted on one hand and the level of uncertainty is such that commercial finance is simply unavailable for new wind power projects. The inevitable result is the imposition of the shortfall penalty, which will soon start costing power consumers $1.5 billion annually and $20 billion over the life of the LRET (see our post here)]
Just how much additional pressure this puts on existing generators, prices and reliability we will have to wait and see, but the price and security issues in South Australia are an ominous portent.
The nation needs policy clarity and certainty. As the Australian Industry Group warned yesterday, “bipartisan and nationally co-ordinated policy on climate change” is needed to underpin investment. “Electricity generation facilities last for decades and investors need to know what rules they will face before they take the plunge,” AI Group’s Innes Willox said. “A well-designed and technology-neutral market mechanism is likely to be the best option.”
That is code for a price on carbon; so we are drawn back into that debate. But it is also an indirect repudiation of the RET. Malcolm Turnbull, too, talks about “technologically agnostic” approaches on energy, but the RET is anything but. It is massive intervention to promote and cross-subsidise renewable energy at the expense of fossil fuel generation. This has a range of cost, supply, security and investment repercussions.
We must ask whether the creation of obvious economic disadvantages are worth the effort. Are national carbon dioxide emission reduction targets making a valuable contribution to the global environment? Is the rest of the world doing as much and paying the same price as us? If no environmental gain is likely, why would we undermine our economic progress? And if we must meet the emission reduction targets, are there other ways to meet them that are less costly and disruptive?
A new hydro storage project here and publicly funded gas generator there may be well and good, but is this just plugging gaps? These can be seen as government interventions to resolve problems created by the government intervention of the RET. We need a more co-ordinated and predictable approach, and Dr Finkel’s review may be another step in that process. But it won’t happen without a full and frank political debate of the policy options.