Snowy Pumped Hydro Scheme Set to Drain ‘Green’ Slush Funds & Starve the Wind Industry of Finance

Snowy Pumped Hydro Scheme Set to Drain ‘Green’ Slush Funds & Starve the Wind Industry of Finance

***

Malcolm Turnbull’s Snowy 2.0 pumped hydro plan has set nerves on edge among the wind industry, its parasites and spruikers and ruffled feathers among Labor politicians and their mates who have wedded their own financial futures to wind.

Likely to cost in the order of $7-8 billion, Snowy 2.0 is set to starve the wind industry of its last line of available finance.

The Clean Energy Finance Corporation is a $10 billion slush fund set up by the Green/Labor Alliance which has thrown millions of dollars in taxpayer underwritten subsidised loans at otherwise un-bankable wind power projects. ARENA is another Federal government slush fund which has attracted plenty of renewable-rent seekers, too.

With the likely cost of Turnbull’s Snowy pumped hydro scheme to be multiples greater than the $2 billion suggested, and with the CEFC and ARENA being directed to finance it, the wind industry will have to work a whole lot harder to find funds for new projects. In short, Turnbull’s Snowy 2.0 is about to drain the swamp.

The Australian’s Paul Kelly only began criticising Australia’s renewable energy fiasco a few weeks ago (see our post here), but it appears that he is a fast learner. Here’s Kelly once again detailing Australia’s self-inflicted energy disaster.

Snowy scheme 2.0 gives Turnbull energy for nation-building
The Australian
Paul Kelly
18 March 2017

Massive disruption has hit our politics with Malcolm Turnbull, having declared an energy “crisis”, now casting himself as an electricity industry nation-builder through re-energising the Snowy Mountains Scheme and waving constitutional threats at gas companies to underpin their urgent action to expand domestic gas supplies.

It is the Prime Minister’s long-awaited breakout into bold policy action that his backers have craved. Significantly, it comes on energy, not the economy, where bold policy options are sparse. This is improvisation on the run, driven by urgency, a blazing blend of naked politics, new energy investment and response to chronic energy policy failures.

It reveals the new turbocharged Australian political climate where the imperative is “action, action, action”, with the rule book between markets and government intervention increasingly being abandoned. The unifying message is government-inspired action — a long way from the days of a carbon price and an emissions trading scheme.

The new mood is mirrored in the bizarre competition and political brawling this week between the Weatherill South Australian government and the Turnbull government as they rolled out startling new energy initiatives and plans. Despite the improvisation, Turnbull won on every count in the short term — his Snowy initiative seems feasible and his strongarming of the gas companies should address short-term supply. As for the long run, it remains shrouded in uncertainty.

The desperation of the SA government was naked in the sunlight as it featured the absurd chant of energy sovereignty and a $360 million taxpayer-funded gas-fired plant with its inevitable consequence of killing off private investment. With the state facing a $6 billion-plus debt its ability to drive this venture is dubious.

What really invites contempt is the ideology of the Labor-Greens-progressives camp that for years has insisted fossil fuels be replaced by renewables cutting gas from the equation, a stance now exposed as total folly.

Not that Turnbull should boast: his rejection late last year of an emissions intensity scheme as the centrepiece of a national energy plan leaves a major vacuum at the heart of policy. This week the Business Council of Australia formally backed such an EIS down the track as “the lowest-cost way for the electricity sector to meet its abatement objectives”.

“I am a nation-building Prime Minister and this is a nation-building project,” Turnbull declared of what he branded the Snowy Mountains Scheme 2.0. The oversell was heavy but understandable given the announced “crisis” that compelled dramatic action. His message this week reflected “all options” and “all sources”.

“Everything can play a role,” he said, referring to coal, gas, wind, solar, hydro, biomass. “But it has got to be integrated in a way that delivers secure and affordable power.” It is a rational stance with political utility. Yet feasibility will vary — the Snowy initiative will surely be more feasible than the PM’s proposed hi-tech coal-fired plant.

There is one certainty — Turnbull still looks better playing as energy policy “fixer” than orchestrator of budget savings and corporate tax cuts. But there’s a catch: having taken much responsibility for energy policy, he now assumes partial culpability if the lights go out.

There are significant short-run risks with the closure of Hazelwood and the guarantee is a mounting blame game between Turnbull and Labor. The spiteful energy policy rivalry between Turnbull and the two ALP governments in Victoria and SA won’t end any time soon.

Yet the backdrop to the energy policy initiatives this week betrays something deeper: the further smashing of the established policy framework. The government flirts with tapping into super to address housing affordability; Labor is pledged to new laws to repudiate Fair Work Commission decisions; senior ALP figures now speculate on breaking up the banks; the new ACTU secretary authorises trade union breaking of laws the unions dislike. There is a sense in which the norms are falling apart.

Energy policy is now a strange contradiction of intervention to procure gas, building up storage to make renewable energy work better, the dream of new coal plants, and reforms to buttress defects in the National Electricity Market. Turnbull can turn on his mobile phone any hour of the day — and frequently does — to check what is happening in the distribution system across the country. The PM is now a real-time compulsive student of the system.

The Snowy project, estimated to cost $2bn, is essentially an exercise in grid stabilisation. It is only one step in a bigger approach to meet the energy supply crisis. Turnbull sees it as a system “game changer”. He sells it as “preventing blackouts” and “putting the brake on energy prices” — but that’s down the track. The figure of four years is mentioned as the time span for the Snowy ­initiative.

As the Snowy authority’s head Paul Broad explains, once you begin to rely on renewables “you need power that can come on quickly to fill in the gaps when the sun is not shining and when the system is out of balance”. Turnbull says the purpose is to “help make renewables reliable”. He boasts the priorities in energy policy now are sound engineering and sensible economics — not ideology. In truth, energy policy will remain mired in ideology for years.

While there will be an initial feasibility study, Turnbull has pre-empted the outcome. He insists the project will be commercial, that the expansion is “very bankable” and that the other shareholders — the NSW and Vic­torian governments along with the federal government — can make their own decisions on whether to pledge equity. Broad says he runs “a very profitable company” that will use both debt and equity in this expansion.

Labor’s energy spokesman Mark Butler has attacked the idea as a damp squib, saying “it won’t create any new generation capacity, won’t resolve the investment uncertainty that is crippling new electricity sector investment and won’t deliver a solution to the energy crisis gripping Australia”.

The earlier stage in Turnbull’s strategy was the meeting with gas companies that produced their pledge that gas “will be available to meet peak demand periods”, operative from next summer. This was triggered by a public warning from the regulator of gas shortfalls and electricity supply shortfalls threatening NSW, Victoria and SA from the summer of 2018-19 onwards.

After meeting the gas companies Turnbull was rattling his sabre — he said state governments must lift their “reckless” moratoriums on gas exploration and development and that it was “utterly untenable” for domestic consumers not to have access to affordable gas; he also raised the threat of using the commonwealth’s constitutional powers over exports against the companies.

The latter was pure political melodrama. Every sign is that the gas companies came bearing concessions. They would be fools otherwise. Turnbull wants the companies to sort this out short of any specific government intervention or gas reservation policy — and that’s a big incentive. In reality, he doesn’t know much about what the price benefits might be, but his explicit reference to the gas companies operating on a “social licence” should send a chill up their collective spine.

The extent of the pent-up gas fiasco was captured in the lethal and clinical speech at the start of the week by Australian Competition & Consumer Commission chairman Rod Sims, who a year ago warned of “an urgent need for both new and, importantly, more diverse sources of gas supply into the domestic market”.

“Our worst fears are being realised,” Sims said this week. “Australia often makes it hard to be involved in manufacturing. We are now making it extremely difficult if not impossible for some.” He said the trends had been obvious for some time, with the portion of gas-fired generation in the national electricity falling steeply.

He demolished the nonsense argument — peddled by populists of the right and left — that the blame lies with the three big Queensland liquefied natural gas gas project developers and exporters. Sims said Australia will benefit “enormously” from these projects. “The three LNG producers, however, could not have foreseen that after their initial investment decisions were made that east coast onshore gas exploration and development would be largely prevented,” he said.

“I doubt anyone in the industry expected Victoria to ban all onshore gas exploration and production, which has stopped even conventional gas projects; nor could they have foreseen the delays and uncertainty over projects in NSW and the NT.

“It is, of course, up to governments to make such decisions. Having made them, however, it is difficult to see how people can then criticise the commercial contracts that were freely entered into by the LNG producers at a time when the likely supply outlook was different.”

In short, having embarked on a mad ideological policy, the Victorian government, instead of confronting its own responsibilities, wants to complain about the operations of the LNG exports contracts.

This week the Labor Party rightly pointed to the absence of any centrepiece for Turnbull’s national energy policy. This critique was apparent in the BCA submission to the Finkel review into the National Electricity Market.

The BCA calls for retention of the current market framework, a three-year notice period for the withdrawal of large generators to provide a better adjustment time, no further changes to the renewable energy target — while recognising its deep historical defects — increasing gas supply as an “urgent priority”, and a vital market signal such as an EIS to help meet Australia’s future emissions reduction targets under global agreements.

Like Turnbull, however, the BCA says “Australia can’t afford to put all its eggs in one basket” and rejects policies “that favour particular technologies or operate outside the market” — we have made these mistakes too many times before.
The Australian

***

Claims that Snowy 2.0 offers salvation to the wind industry ignore both time and money.

At the very earliest, the additional capacity offered by the expansion of the Snowy Hydro scheme is 5 or 6 years away, a veritable aeon in politics.

The fundamentals haven’t changed; there will still be a shortfall of the renewable energy certificates needed to satisfy the Large-Scale RET; that shortfall will still result in power consumers suffering $1.5 billion a year in shortfall penalty charges (ie fines); with the total of those fines to exceed $20 billion over the life of the LRET, from now until 2031 (see our post here).

Anyone with an inkling of political sense understands that once power consumers (read ‘voters’) realise that they are paying a $20 billion Federal power tax – because retailers have determined not to pay 3-4 times the cost of conventional power for a power source that is only occasionally delivered and at crazy, random intervals – the LRET will be slashed, capped or scrapped.

It’s a matter of when, not if.

 

About stopthesethings
We are a group of citizens concerned about the rapid spread of industrial wind power generation installations across Australia.

Comments

  1. John P McKerral says:

    This is a logical fallacy for certain : “PM Turnbull says the purpose is to “help make renewables reliable”. He boasts the priorities in energy policy now are sound engineering and sensible economics — not ideology. In truth, energy policy will remain mired in ideology for years.”
    He is not making renewables more reliable but providing backup, very expensive backup, making the supply more reliable by filling in when the unreliable renewables can not provide sufficient electricity. And, as you would expect from a politician, that is supposed to make electricity cheaper. These people are either complete idiots or they are dissembling, lying or just plain stupid. Why don’t they provide us with a balance sheet demonstrating all of these savings?
    Oh yah, they think that of us and think that we are incapable of seeing through their foolishness and will accept their foolish plans.
    John P McKerral
    PS I have appended a copy of the letter to the editor, Canberra Times, that they published. :

    Your editorial writer seems to be suffering from delusions, “CT 25/3/17 Comment, Hazelwood has to go for the good of all.”
    You will find that South Australians (SA) may not agree with his sentiments. Often, in the future, when they need electricity from the inter-connector they will find it unavailable as Victoria will not have enough to spare.
    Our lifestyle is inextricably dependent on cheap, reliable and abundant electricity. Those from SA have had a brief introduction to putting up with electricity outages but things will get much much worse without that venerable electricity generating plant.
    With the renewable energy target (RET) in existence no one will risk money building a replacement coal-fired plant. The RET will continue to make electricity more expensive and less reliable!
    Yes the advocates for renewables will loudly claim that renewables are as cheap or nearly as cheap as fossil-fuel powered electricity. Fine, do away with the subsidies, rescind the RET and see what happens! Go on, I dare you.
    Yes I know, all further renewables development would end immediately should that occur!
    As Australia is a net CO2 sequester and CO2 is hugely beneficial to mankind anyway, there is no need for the RET at all.
    Hazelwood’s going will do no good at all.

    • John, while we agree with most of what you say, we disagree with your statement that ‘Hazelwood’s going will do no good at all’. The loss of that volume of cheap reliable power will be precisely the disaster that you predict, but the good that will follow is that the RET will be scrapped, and the idiots who claim that Hazelwood won’t be missed; that the RET is inert etc will be exposed for the voting public to see. Ideology lasts right up to the point that Melbourne and Sydney start suffering blackouts like SA does routinely. The sooner the better. Then the engineers will be listened to and those in on the rort will be ejected from the halls of power. The RET wrecked our system, SA knows it, it just needs the same chaos to be inflicted in the other states. Which it very soon will be.

  2. Hi,

    I started a PETITION “SA PREMIER JAY WEATHERILL : Demand the RESIGNATION of the Energy Minister for HIGH POWER PRICES CAUSING SA’s JOBS CRISIS and 15,000 household POWER DISCONNECTIONS, frequent POWER BLACKOUTS and the JULY 2016 POWER CRISIS” and wanted to see if you could help by adding your name.

    Our goal is to reach 200 signatures and we need more support.

    You can read more and sign the petition here:

    https://www.change.org/p/sa-premier-jay-weatherill-demand-the-resignation-of-the-energy-minister-for-high-power-prices-causing-sa-s-jobs-crisis-and-also-15-000-household-power-disconnections-frequent-power-blackouts-and-the-july-2016-power-crisis?recruiter=135406845&utm_source=share_petition&utm_medium=email&utm_campaign=share_email_responsive

    Please share this petition with anyone you think may be interested in signing it.

    Thankyou for your time.

  3. Government meddling in the Australian energy industry is fundamentally what is creating the great train wreck we now see unfolding. Australia has gone from once having amongst the world’s lowest cost energy to now being amongst the highest cost. This hasn’t happened by accident, sadly when governments meddle with free markets, as they have with the Australian gas and electricity markets, inevitably they create disaster.

    The Turnbull Snowy 2 thought bubble is just another ill-conceived band-aid. In the absence of still more shiploads of taxpayer handouts to willing rent seekers it would never get off the ground, fundamentally it does not stack-up on rational economic grounds. The addition of a similar pumped storage scheme to the Snowy was considered some years ago, it was rejected then as being uneconomic. While such a scheme would add capacity (essentially peaking megawatts) not in two years but more likely in six to eight years time, it would add no new energy (megawatt hours).

    With the closure of the significant base load plants in South Australia, Hazelwood in Victoria and with NSW base load plant also about to be forced out of business due to the market distortions of the RET legislation, Australia has an emerging energy problem, a shortage of Gigawatt hours.

    No amount of ad hoc government band-aids will work. The answer is simple, all levels of government must stop their meddling, get rid of the morass of ideologically inspired subsidies and bans. Repeal the RET, get rid of all state renewables subsidies and lift the irrational state bans on gas exploration and drilling.

    Without such action sadly it’s simply a case of waving goodbye to our industry, jobs and prosperity…. third world here we come.

  4. Jackie Rovensky says:

    This country has set itself on a road to nowhere except energy shortages and high prices.
    Until someone takes hold of the situation and makes some significant decisions to build new baseload power stations – not a Gas plant that is intended to only operate on standby, with a useless battery backup, or even extending the Snowy hydro which relies on there being sufficient water available for not only the production of energy but for the significant needs of those along the River Murray, we will continue to go downhill -FAST.
    The proposals by anyone to Frack for gas especially in areas where they could destroy water sources is going from bad to even worse policy.
    We in the SE of SA are not going to allow anyone Federal or State to wantonly destroy lives, livelihood and ability to live in a magnificently productive and beautiful part of this State and Nation.
    Allowing Fracking or even Conventional gas exploration and extraction in the youngest volcanic area in this nation, an area with a Dormant NOT extinct Volcano, that has vast water resources below its surface which not only provides water to the people of Mt Gambier and throughout the SE, as well as environmentally significant places like the World Heritage listed Picanninie Ponds, as well as drainage into the Coorong and contains the significant paleontology of the Naracoorte caves which could become inaccessible to researchers and the public if fracked rock below allows gas leakage into the caves.
    It’s time no matter where that any drilling should not be allowed in any form in areas where water could be damaged or in areas of significant farming activity.
    Whether the SA Labor Government or our current Federal Government I do not see anything coming from them that will ensure our safety in Energy supply or environment.
    They are both intent on doing the bidding of the national and international ‘green force ideologically challenged’ and are too weak to stand up against it.
    But they both do this by rushing into fracking for Gas – a fossil fuel that destroys the environment faster than any Climate Change!!!!
    That makes sense doesn’t it???

  5. Crispin Trist says:

    A family member recently stated to me, “Do you think that Tony Abbott has managed to get one over on PM Malcolm Turnbull? By drawing Turnbull out to state that the Federal Government will not save Hazelwood, does the PM now ‘own’ the problem if the lights go out in both Victoria and South Australia?”

    Only time will tell.

    The only time to close down a base load power generator is when you have something to replace it with like for like. And not before.

    And still no mention of new nuclear power.

    What is Lucas Heights? Scotch mist!

    https://en.m.wikipedia.org/wiki/High_Flux_Australian_Reactor

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s