Australia’s Renewable Energy Disaster Was Both Predictable & Avoidable
In this collection from Quadrant, Jo Nova and The Australian one solid theme emerges: Australia’s energy crisis is entirely self-inflicted and thus it was perfectly avoidable.
Among those who saw it coming was Matt Zema – then chief of the Australian Energy Market Operator, who shuffled off this mortal coil way too soon. Before he left us, Matt predicted precisely what was in store for South Australians, as a result of the Federal government’s Large-Scale RET and South Australia’s hapless Labor government’s obsession with wind power.
A Dead Man Warns of a Dying Grid
3 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.
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.
Turnbull, Andrews achievements: 1,000 unemployed, prices up, blackouts coming
6 April 2017
Good afternoon Prime Minister and Premier,
Before we move on to your new partnership, let us think about Scott Morrison’s words:
“Governments must do no harm”.
As a political thinker he is “out there”, our Scotty isn’t he Gentlemen?
Perhaps we need him on the home team in the energy market do you think?
The solid basis on which the Turnbull/Andrews partnership needs to be formed has to originate with the achievements you have both made so far. Let’s list them:
- Through your deliberate actions (and failure to act) of shutting Hazelwood, you have reduced mankind’s contribution of CO2 by a factor of 0.0002. That reduction, when compared with the CO2 produced by animals consuming vegetation and microbes consuming vegetation is a ratio of 0.000025. Hmmmm……..
- You have just put at least 1,000 people out of work in the Latrobe Valley.
- You will bankrupt many businesses in the Latrobe Valley and devastate a whole slab of the Nation’s economy.
- You have placed the viability of every single manufacturing business in Eastern and South Australia under threat – with the certainty of unemployment for hundreds of thousands of people if the madness continues. These businesses are now less able to compete with imports and less able to compete when exporting.
- You have caused power prices for every single Eastern and South Australian to rise by a ridiculous amount – because the forced removal of a marginal 1600Mw makes a massive difference to the price of a commodity in short supply.
- You have introduced a new unprecedented level of risk of blackouts to 89% of the Australian population. Look at the attached AEMO record for this evidence.
- You have caused an unprecedented rise in the price of east Australian gas by pushing 1600 Mw of generation away from coal and on to our dwindling gas supply.
- Your initiative of closing Hazelwood has increased the probability of gas supply shortages for 89% of our population.
- You have increased our farmers’ costs which also makes them less able to compete with imports and less able to export. After some of them have weathered a few previous frontal assaults from Coles, Woolworths, the Chinese Government and Murray Goulburn, your increased power prices to run milking machines, pumps and chilling equipment are just what a struggling dairy farmer needs.
- You have made the large gas supply companies and power generating companies – and those with a finger in the renewables honey-pot – an absolute fortune for their shareholders. You could be forgiven for thinking that the Australian Federal Government and the Victorian Government actually exist to benefit shareholders of those companies – and not your own constituents!!
Gentlemen, even a compliant media will not save you from what is going to happen soon.
Your choices are simple:
- Wait for a single interconnector trip or other unplanned event to black out a whole slab of Eastern Australia and then receive an absolute flogging over Hazelwood and be forced into an embarrassing re-start of the Station.
- Have some initiative, form a strong home team together and get the Station fired up again without delay.
You have both seen that the Weatherillesque technique of blaming everyone else for his own failures – even with a fully compliant S.A. media on side – wears a bit thin when the lights go out and voters get ready to reach for baseball bats – so it is time for you to form a partnership and start doing the right thing Gentlemen.
You will both be congratulated for putting childish Politics to one side and behaving like true leaders.
Thankyou and best regards,
Ian Waters – Senior Project Engineer, Australian Manufacturer
Lessons from Trump on coal
31 March 2017
In view of Australia’s decline from being one of the world’s cheap-energy economies into one of the most expensive — where power prices have doubled in a decade — governments in this country cannot afford to overlook important lessons from Donald Trump’s swift move to end Barack Obama’s war on coal and his predecessor’s other so-called “progressive” climate change preoccupations. In the interests of promoting investment, growth and job creation, the US President has made energy security and affordability a priority. In doing so, he has unceremoniously dumped his predecessor’s signature Clean Power Plan, with its punitive environmental regulations that have harmed the US economy while doing little to reduce carbon emissions or temperatures.
Such realism is long overdue from the White House. Mr Trump’s policy is designed to give US manufacturing industries assured supplies of cheap energy, a significant advantage over competitors in other countries, including Australia, in seeking investment. The Obama plan compelled state authorities to retire coal plants early. The cost to the US economy, according to the American Action Forum, would have been $US1 trillion in industrial output, with the loss of 125,000 jobs. Householders and business were facing double-digit percentage increases in power costs and a less secure grid.
Despite such heavy economic and social costs, Mr Obama’s own former assistant secretary for fossil energy, Charles McConnell, estimated that a full year of US carbon emission reductions resulting from the former president’s anti-coal drive would be offset, in 2025, by just three weeks of Chinese emissions. Last year Mr McConnell described the Obama plan as “all pain, no gain”. Consumers in Victoria facing another 20 per cent hike in power costs as a result of yesterday’s closure of the Hazelwood power station in the Latrobe Valley will understand. So will long-suffering South Australians who have borne the fallout of the Weatherill government’s unrealistic renewable energy target.
Predictably, environmentalists in the US are claiming Mr Trump has unleashed a “climate destruction plan”. But it is hard to argue against a policy that puts an end to Mr Obama’s ideological obsession with waging war against fossil fuels and deals realistically with the need to save jobs and secure cheap, reliable energy supplies. Mr Trump is right to fulfil the pledge that did so much to win him blue-collar support in last year’s election. For now, Mr Trump has left open the question of whether he will withdraw the US from the Paris climate deal. The deal Mr Obama agreed to would force emission reductions on the US of 26 per cent by 2025 (over 2005 levels) and 32 per cent by 2030, targets Mr Trump has branded, correctly, as “a crushing attack on American investment”. He’s right. Even Mr Obama’s entire Clean Power Plan could not have achieved those targets.
Mr Trump’s realistic energy policy should encourage other nations to reassess. Worldwide, 1500 coal-fired generating plants are being built or are at the planning stage. At least the Turnbull government is on the right track in encouraging the construction of new clean-coal-fired power stations in an effort to mitigate Australia’s energy security and pricing crisis.