Energy

I’m a Victorian. Can you please sell me some electricity?

Yesterday’s revelation that the closure of the Hazelwood power station in March 2017 means Victoria will need to import electricity from New South Wales and/or Tasmania during summer peaks shows the extent to which governments are mismanaging our energy future.

The Australian Energy Market Operator report issued after the Hazelwood announcement also noted that in 2015-16:

  • Victoria accounted for 27% of the electricity consumed in the National Energy Market, 86% of which came from brown coal;
  • Victorian exports provided 14% of South Australian consumption, 6% of New South Wales’ and 6% of Tasmania’s; and
  • Hazelwood alone produced 22% of Victoria’s electricity.

When a state that has an estimated 430 billion tonnes of brown coal – equal to hundreds of years of supply, and is the historic heart of the nation’s gas and oil industry, is unable to reliably provide its own electricity, you know you have a big problem.

The problem with Australia’s electricity system is too much government control, too many regulations and playing favourites with particular technologies. This is probably why over the last decade, Australia has slipped from having the lowest energy costs in the OECD to the 27th lowest as revealed  by the Minerals Council of Australia on Thursday.

This is why it was a pleasant surprise on Friday morning when the Australian Financial Review reported that the owner of ERM Power, Trevor St. Baker, has offered to buy Hazelwood, as well as the recently decommissioned Northern Power Station at Port Augusta in South Australia. Whether he is successful remains to be seen, but it is heartening that Australia has not yet lost all of its independent thinking entrepreneurs.

Good luck to him.

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When green fantasies come true

The fact that French electricity multinational Engie would rather close its doors than continue to operate in Victoria tells you all you need to know about the impact of Green renewable energy policies.

Engie today confirmed that it would close Victoria’s Hazelwood power station in March 2017 and in a surprise move said it would also try to sell its Loy Yang B power station, also in the State’s Gippsland region. Together these power stations are responsible for around 35% of Victoria’s electricity.

Hazelwood alone is equal to over 2,000 wind turbines in terms of reliable electricity output. It is nonsense that it can be replaced by renewables any time soon, if at all, and the move will have serious consequences for Australian electricity prices and security.

Victoria is the low price anchor of the National Electricity Market, with its surplus electricity also patching the holes in renewables-rich South Australia and Tasmania. These three states will now be competing for the same, reduced power output. In any market, if you reduce suppliers, prices will rise, and electricity is no different. After South Australia’s last brown coal power station closed in May, two major electricity companies almost immediately announced retail price rises of up to seven times the rate of inflation.

Unfortunately this is the inevitable outcome of federal and state government policies that are destroying the investment environment for fossil fuel companies. In the case of Victoria, in just the last 6 months the Andrews government has tripled the tax on brown coal, announced a new 40% renewable energy target, and extended the current ban on exploration for new gas supplies. What company in their right mind would want to invest?

While predictably, the Federal and State Governments have announced assistance packages, in reality no temporary state or federal government employment schemes or taskforces can possibly replace viable private sector jobs delivering an important commercial product. Nor should they.

Sympathetic comments by environmentalists about the impact on local workers and communities are just crocodile tears, given that renewable energy policies are specifically designed to push coal and gas producers out of the market. They did the same thing in Port Augusta last year.

Meanwhile the CFMEU is pursuing industrial action at a third Victorian brown coal power plant, proving that the union movement has learned nothing after taking Toyota to court in 2013 to prevent it from restructuring to avoid going out of business.

In the last year, South Australia and Tasmania have shown the world what happens when you have an ideological obsession with renewable electricity. Germany also spent €1 billion in 2015 on electricity grid stabilisation alone because of too much wind power and a think tank recently estimating the total cost of its so-called Energy Transformation at 525 billion Euros by 2025.

Given that the Greens have made it clear that they want to close all Australian coal-fired power stations, starting with all four of Victoria’s, the question for the Green movement and its sympathisers in the major parties has to be “Where will our future electricity and gas supplies come from?”

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Electricity prices in South Australia reveal the folly of renewables

Judith Sloan had this to say in The Australian on Tuesday, on the folly of renewable energy after it was revealed that wholesale electricity prices in South Australia reached 30 times the prices recorded in the eastern states ($):

How could this happen? How could it go so wrong for South Australia? The short answer is, contrary to Roy and HG’s famous prognostication that too much is never enough, too much is too much when it comes to intermittent and unreliable renewable energy. South Australia is paying a heavy price for its misguided energy policy, potentially leading to the further deindustrialisation of the state while also reducing its citizens’ living standards. But the real tragedy is that this outcome was entirely foreseeable.

Let us not forget that South Australia continues to boast about its status as the wind power capital of the country and having the highest proportion of its electricity generated by renewable sources. Since 2003, the contribution of wind to South Australian electricity generation has grown to more than one-quarter of the total.

Late last year, the state government issued the Climate Change Strategy for South Australia, ­ignoring completely the problems that were already apparent in the system. The wholesale electricity price in the state has been consistently above the national average since early 2015.

The statement reads that “to realise the benefits, we need to be bold. That is why we have said that by 2050 our state will have net zero emissions. We want to send a clear signal to businesses around the world: if you want to innovate, if you want to perfect low carbon technologies necessary to halt global warming — come to South Australia.”

But last week the confidence of that statement had been forgotten. Koutsantonis hysterically blamed what he saw as failures in the ­national electricity market and inadequate electricity interconnection for his state’s high and volatile wholesale electricity prices.

He even pledged to “to smash the national electricity market into a thousand pieces and start again”. How he thought this suggestion would be helpful is anyone’s guess.

The main problem with electricity generated by renewable energy — in South Australia’s case, overwhelmingly by wind — is what is technically called the non-synchronous nature of this power source, because of its inability to match generation with demand.

When the power is needed, the wind isn’t necessarily blowing. Or if the wind is blowing too hard, the turbines must be switched off and again the demand has to be met from other sources — in South Australia’s case, mainly from electricity generated in Victoria from brown coal.

What is clear is that overdevelopment of variable generation using renewable resources is a recipe for higher prices and lower than expected reductions in emissions because of the increasing costs of ensuring system stability and reliability.

… Bill Shorten should take note and immediately ditch his fanciful target of 50 per cent renewable energy lest the South Australian experience befall the rest of the country.

Continue reading here ($).

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Tasmanian energy crisis inevitable after decades of green policies

Yesterday’s Inquirer piece (“Fighting to keep Tasmania’s lights on in energy crisis“, The Australian) overlooked the fact that the current Tasmanian energy crisis is the inevitable outcome of 30 years of green policies.

It is also the height of hypocrisy for people who have opposed investment in new coal, gas, hydro or nuclear power to now criticise electricity shortages.

For too long now, policymakers throughout the western world have used electricity networks to pursue political and environmental goals rather than simply supply affordable, reliable and safe power. In Australia, Europe and North America, investment in fossil fuel or nuclear generation has been discouraged, with preference given to wind, solar, or more interconnectors. The result has been the destruction of market price signals, higher costs, and decreased reliability. South Australia and Tasmania are now paying the price.

Instead of lobbying for another interconnector, the Tasmanian government should back self-reliance, bite the bullet, build a new power station, and send the bill to the Greens.

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Germany “renewables revolution” a lesson in what not to do

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Thursday’s Australian ran an article which included a number of my quotes countering Greens leader Richard Di Natale’s claim that Germany was a positive example of renewable energy policy:

[Hogan] says Germany’s renewables revolution will cost at least 1 trillion by 2030 (after subsidies to solar and wind), but its electricity system is becoming more expensive and less reliable.

“Germany’s major energy companies are now losing billions of dollars each year as subsidised wind and solar power destroys returns on capital and the incentive to invest in more modern, less emissions- intensive generators.”

Read on here ($). Two additional points worth adding:

Continue Reading →

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Solar farms, wind farms… diesel farms?

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Just when you thought the UK’s renewable electricity market couldn’t get any more ridiculous, along comes news that some of the small diesel power generators that Matt Ridley said are offering reserve electricity are actually owned by wind and solar farms.

In a traditional electricity market, consumers demand electricity, then coal, gas, nuclear or oil fueled power stations bid to supply it, and adjust their machines up or down to deliver their product, with a price set based on the level of demand and cost of supply. Simple.

However in a renewables-rich market, because wind and solar farms have no control, grid operators are required to ensure that extra generation capacity is held in reserve, paying generously for this back-up. With many traditional power sources banned, discouraged or run down, diesel is emerging to fill the gap.

Unsurprisingly, this dirty little secret tends to be hushed up. It certainly doesn’t appear on the Hive Energy or Kettering Energy Park websites.

It is the height of hypocrisy for wind and solar farms to take taxpayer-funded subsidies to generate so-called ‘clean’ wind and solar power with one hand, while accepting subsidies to generate diesel power with the other. Especially if this is a way to subvert proposed new rules to make wind and solar farms pay for intermittency costs.

If you are in business and you can’t deliver a product then you should close, and let someone else take your place. But if your customer is the government, they will probably pay regardless.

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Why Turnbull and Shorten are both wrong about our energy future

Labor leader Bill Shorten has decided to outflank Malcolm Turnbull from the left with a commitment to reduce carbon emissions by 45 per cent by 2030 and achieve net zero emissions by 2050.

The Coalition government has committed to 26-28 per cent cuts by 2030, which it says takes into account Australia’s position as a world energy exporter.

Targets are popular with politicians because they divorce them from the policies needed to make them happen. However it is not the target that does a country damage – it is the policies that must be implemented to achieve that target.

Taking Wednesday’s South Australian Low Carbon Economy Experts Panel report as a guide, we can expect such  policies to include more renewable electricity, more inner city apartments, discouraging the use of cars and a relocation of traditional manufacturing jobs to other countries.

Given that the Greens’ Renew Australia pledge from just last week pledged net zero emissions by 2040 with a 90 per cent renewable energy target, it stands to reason that Labor’s July pledge of a 50 per cent renewables target will need to be adjusted upwards as well.

An extra 2.5 billion people will move to cities throughout the world over the next 35 years, and emissions will continue to increase. Whatever Australia does will mean nothing for world CO₂ levels, as countries in the developing world will continue to build the homes, factories, roads, buildings and cars that they are entitled to, to achieve the standards of living we enjoy in the west.

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Electric cars – powered by coal

electric-cars-chargeProving again that government intervention rarely goes quite as intended, yesterday’s Australian Financial Review featured an article which explained how Dutch tax incentives to increase the use of electric cars has led also to an increase in coal-fired power to charge them:

Three new coal-fired power plants, including two here on the Rotterdam harbor, are supplying much of the power to fuel the Netherlands’ electric-car boom.

… Alongside the boom has come a surging demand for power to charge the vehicles, which can consume as much electricity in a single charge as the average refrigerator does in a month and a half.

The adoption of electric cars throughout the world will significantly increase demand for electricity. Given the intermittency problems of wind and solar, this is much more likely to be fuelled by coal or gas.

Environmentalists typically offer no solution to this dilemma and, as in this article, instead choose to talk up car batteries as an additional source of, or storage mechanism for, electricity. Of course, batteries don’t create electricity and can only store the excess that someone else has to create.

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How the ‘home of renewables’ struggles with renewable energy

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While FreedomWatch has covered the UK’s current struggles with renewable energy, we mustn’t forget Germany, the so-called home of renewables.

German newspaper Die Welt reported on Sunday that a leading German transmission grid operator will spend €500 million in 2015 on “stabilization measures” when the wind blows too much. Yes – while not enough wind is a perennial problem, so is too much wind, as some needs to be taken offline (though still paid for) and balanced with imported fossil fuel power from elsewhere.

Wind power is also playing havoc with the viability of Germany’s energy companies. EON recently reported a quarterly loss of €7.25 billion, and RWE is also losing money, as government policies and low wholesale electricity prices continue to destroy electricity industry economics.

Not that low wholesale prices mean low consumer prices. German power bills are among the highest in the world because they are half taxes and fees, with the costs of renewables recovered through taxing consumers. Over one million Germans have had their electricity cut off over the last three years, unable to pay bills that have doubled since 2002.

Yesterday’s Australian cited a 2014 study which found that nearly one in three Australians had missed an electricity bill payment in the previous twelve months. Given the German experience, this problem will likely become even more acute as renewables take a greater share of the Australian market.

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UK government picks gas and nuclear over wind

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UK Energy Secretary Amber Rudd on Wednesday announced a reset of British energy policy, prioritising gas and nuclear power stations after acknowledging that the obsession with so-called green energy has gone too far.

Interestingly Ms Rudd has also said that wind and solar farms will be expected to pay for the extra costs they impose on the system due to their intermittency.

UK renewable energy subsidies currently total £68 per household per year and are expected to rise to £141 by 2020 and £226 by 2030. Economy-wide these subsidies will add up to £9.1 billion per year by 2020. But renewables still can’t provide reliable electricity.

However, proving that politicians like to walk both sides of the same street, the Minister also wants to phase-out coal-fired power stations by 2025. Mandating the end of coal when it is responsible for 29 per cent of the United Kingdom’s electricity and proposed new gas and nuclear plants are way behind schedule, is a bold call.

The problem is not coal – the problem is that government policies have discouraged the private sector from investing in modern coal power plants.

Governments should not be in the business of mandating which sources of energy are allowed to compete in the marketplace.

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