AGL’s Renewables Ruse: The Solution to Australia’s Energy Crisis Isn’t More Subsidised Wind Turbines & Solar Panels
While choice remains an option, the adage that ‘when you’re in a hole stop digging’ obviously applies when you find yourself in the midst of a disaster of your very own doing.
Australia’s unfolding energy calamity has turned what was once an energy superpower, into an international laughing stock.
Blessed with abundant coal, gas and uranium reserves – unequalled in the world on a per capita basis – Australia is now paying the highest prices for electricity amongst its trading competitors; in notionally wind powered South Australia, they’re lucky to get it at any price and when they do its almost double the price paid by consumers in Victoria.
Gas prices have literally gone through the roof in the space of a couple of years, leaving PM Malcolm Turnbull looking like the Generalissimo Stalin rounding up Kulaks for ‘hoarding’ grain, as he tries to prevent gas being exported and, instead, kept at home for domestic use.
If we were just a tad cynical, we might suggest that the reign of terror unleashed by Turnbull on gas exporters (one of the few remaining profitable enterprises in the country) is all about propping up wind and solar power, which depend on fast-start-up Open Cycle Gas Turbines to keep the grid from collapsing, when the sun goes down or as wind power output collapses on a daily basis.
As we have pointed out before, Turnbull, through his son Alex has more than just a passing interest in the longevity of the greatest subsidy rort of all time. You see, in late 2015, Alex Turnbull, through his investment fund, Keshik Capital threw buckets of cash at the, then near-bankrupt, wind power outfit, Infigen.
That investment was uncannily timed: Infigen shares went from $0.20 to $1.20 in the blink of an eye, during which time Alex’s dad determined to sign up to the Paris climate change accord and to announce that the Federal government would shovel a bucket load of taxpayer money at renewable energy slush funds (see our post here), which have been lately used by Infigen to resurrect a long-dead wind farm project at Bodangora (see our post here).
The model dreamt up by the wind industry and its parasites is one involving replacing cheap and reliable coal-fired plant, designed to run at their most efficient 24 x 365, with OCGTs, which can fire up in a matter of minutes, albeit at a running cost at least four or five times that of efficient coal-fired plant. OCGTs – which are little more that jet engines, run on gas or fuel oil (diesel) or kerosene.
The initial capital outlay is low, but their operating costs are exorbitant – depending on the fuel input costs (the gas dispatch price varies with demand, for example) operators need to recoup upwards of $300-400 per MWh before they will even contemplate firing them into action. For a wrap up on “fast-start-peakers” see this paper: Peaker-Case-Histories
As to the insane cost of running them, see this article: OPEN GAS CYCLE TURBINES: Between a rock and a hard place
For peaking power operators, the inevitable and total collapses in wind power output is where the greatest rort of all time begins.
Running peaking power plants is highly lucrative: their owners are able to extort prices running from $2,000 per MWh, all the way to the regulated market cap of $14,000 per MWh – for something a coal-fired plant can deliver, profitably for less than $50, all day, every day, rain hail or shine (see our post here).
So, not having a readily available supply of gas on tap to run their OCGTs – or the thousands more that they plan to build in conjunction with another few thousand of these things – stands as a tiny obstacle to their ability to extract obscene prices for power from a grid manager desperate to keep the lights on, whenever the wind stops blowing or the sun stops shining.
The same model worked a treat for Enron when it gamed the Californian power market by deliberately shutting off the power plants it controlled, waiting for the grid to reach the brink of collapse and then ‘offering’ power at prices 1,000 times the average (see our post here).
Now, AGL are publicly crowing about their opportunity to do precisely the same thing, with a run of television and print media advertising, using an obsequious, too-neatly-bearded git, touring a wind farm in his tiny battery powered buzz-box.
One line in the TV ad which smacked of pure marketing ‘genius’, was when the smarmy young hipster – having announced that AGL is “getting out of coal” and is all about delivering “sustainable” wind and solar power to your door – asserts that it all comes “with no compromises to you”.
What utter bollocks!
Ask a South Australian – where AGL led its insane wind rush, starting back in 2009 – about ‘compromises’. Or, perhaps, routine load-shedding, statewide blackouts and power prices more than double those prevailing in neighbouring states (with worse to come) doesn’t amount to any kind of ‘compromise’?
Clive and Trina Gare know all about ‘compromise’ and AGL’s business ethics.
The Gares are South Australian farmers – who receive over $200,000 a year from AGL to host turbines on their property near Hallett. Clive and Trina gave evidence in June 2015 to the Federal Senate Inquiry into wind power, explaining that the noise from the turbines on their property is “unbearable” and continues to prevent them sleeping in their own home, even after the installation of sound-proofing and double glazed windows, paid for by AGL.
They called signing up to host turbines for AGL “the worst decision” of their lives and detailed how AGL’s tactics involved bullying, lies and deceit in order to get them into their contract in the first place – starting with lies about the impact of turbine noise, Clive pointing out:
One of their little tricks is to take people right up to the towers and say, ‘This is how noisy they are.’ But that is not so.
The further you get away from the tower the noisier they are. That is a funny thing, to a point I guess. When you are right underneath them and they are 80 metres up in the air there is very little noise. There is just a bit of wind noise. As you go away one or two kilometres it actually gets worse.
And that type of skulduggery was being pulled amidst the usual inordinate pressure applied to unwitting farmers by developers, described by Trina as a process that:
began with high-pressure consultations, negotiations for weeks on end, numerous phone calls and face-to-face meetings with the developers. We seemed to be under constant pressure to agree to their wishes and, if we wanted any changes, it took a lot of negotiation.
All tricks, all traps, and all to AGL’s advantage. For more on AGL’s ‘compromising’ style with its contracted farmers, see our post here.
And for AGL’s ‘compromising’ style with those who aren’t being paid one red cent to suffer the kind of misery experienced by the Gares, look no further than the way it treats the community at Macarthur in Victoria (incidentally the biggest wind farm in Australia and the one bragged about in its TV ad). Since its turbines swung into gear in 2012, it has destroyed the ability of dozens of families to live in, sleep and otherwise enjoy their very own homes; doctored acoustic reports to claim compliance with the noise conditions of its planning permit and constantly lied about the noise impacts on its long-suffering neighbours (see our post here).
Here’s Alan Moran tackling AGL’s latest effort to convince people that, not only is black white, but that what has occurred in South Australia is all a figment of its beleaguered power consumers’ torrid imaginations.
The way out of energy crisis is reliable coal plants, not renewables
27 April 2017
AGL claims it has “a plan to get out of coal as smoothly as possible — embracing cleaner, more sustainable sources of energy like solar, wind and hydro”. This, it says, will be an “orderly” process beginning five years from now and finishing in 2050. Now that’s planning.
While anxious to promote its green credentials, 90 per cent of AGL’s actual generation is fossil fuel based, mainly coal from Bayswater and Liddell in NSW, and Loy Yang A in Victoria.
With more than a quarter of the nation’s major coal and gas plant, AGL has benefited enormously from the closure of South Australia’s Northern and Victoria’s Hazelwood power stations. Although those two power station closures represented only about 4 per cent of the national market capacity, they constituted a far greater share of baseload supply.
Together with the scarcity of gas as a result of state government exploration bans, the tightening of supply from their withdrawal of capacity has resulted in skyrocketing wholesale electricity prices.
Compared with average spot prices prevailing in 2015, the forward price has trebled in NSW, Victoria and South Australia, and doubled in Queensland.
Although all suppliers and retailers buy most of their electricity on contracts that cover them a year out, the elevated forward prices will be those that retailers and therefore customers have to pay.
At the current year’s spot price, as forecast by the Australian Energy Regulator, AGL will see an increase in revenue at no extra cost of $3 billion. On the company’s estimated profits for the year ending in June of less than $1bn, this is a colossal bonus to the shareholders. Other major producers — Origin, China Light and Power, and the Queensland government — also will see $1bn-plus benefits. In Origin’s case this is on top of an underlying profit of less than $400 million. Perhaps the biggest winner is ERM/Sunset, which bought the Vales Point Power Station for a knockdown $1m in November 2015 and has since seen the NSW spot price rise from $35 to $110 a megawatt hour.
Overall, generators are estimated to increase their revenues, at no extra cost of production, from a little over $7bn in 2015 to more than $22bn in the present 12-month period. Of course, the flip side of this bounty to the electricity generators is distress for customers. Households are the customers at the political frontline and prices are shifting upwards. But household distress is less significant than the impact on business competitiveness.
For much industrial plant, a trebling of the wholesale ex-generator price, once line charges are included, becomes a doubling of the price at the plant. Many firms will go under in the face of such an impost. Others will see the cost of expansion in Australia leapfrog compared with costs of alternative overseas investments and make the appropriate investment decisions.
This translates into a deindustrialisation process with profound consequences for all our living standards. Such unfortunate outcomes from the upsurge in prices are further aggravated by the deteriorating reliability of the system. A harbinger of this was the South Australian blackout last year followed by a near miss this year. Deteriorating reliability stems from subsidised wind replacing more dependable fossil supplies and because of the tighter supply resulting from the forced closure of the coal stations, reducing the amount of spare capacity to cope with breakdowns and weather events.
The only reason Australia is confronting this detrimental economic situation is because of the energy policies being followed, primarily the subsidies to wind. The situation remains retrievable partly by salvaging mothballed plant in Victoria and NSW (South Australia having already destroyed its closed coal generators). We may also see the building of new plant. AGL may have turned its back on fossil fuels but there are dozens of other enterprises around the world and locally that would seek to exploit the profit potential from supplying a market that is overpriced.
And such potential is readily available. The last major coal generation power station built in Australia was Kogan Creek owned by the Queensland government and commissioned in 2007. At that time the power station could operate profitably by selling power at under $45/MWh. The cost, taking into account the preference given renewables, is now said to require $70/MWh, though this seems excessive as inflation since 2007 has been only 24 per cent. What is certain is that the price of coal-based electricity is a fraction of that available from renewable sources — which costs $110/MWh — and well below that available from gas plant.
To maintain living standards, Australia needs to prevent premature closures of low-cost electricity generators and to build new ones that take advantage of our abundant coal supplies and the expertise of the workforce. The only thing stopping this is government regulations forcing subsidies to renewable energy.