NEG: the energy policy you have when you aren’t having an energy policy

Getting real details about the New Energy Guarantee is really difficult, because so much of the hard work on details has not yet been done. But apparently the media thinks it ticks all the right boxes. The carbon tax has gone, the emissions trading scheme is dead, as is the emissions intensity scheme. According to the economics editor of The Age, Peter Martin, the NEG will do more or less what each of the other schemes would have done. It will make the electricity system cleaner (in accordance with the Abbott government’s commitments under the Paris climate agreement) while giving investors the certainty they need to work out what kind of power stations to build and when.

 Well, that’s comforting. It had seemed to me impossible for anyone to design an energy policy that provided cheap electricity, reliable electricity and achieved what Australia had signed up for in Paris. You could in theory have any two of them, even cheap power and Paris commitments, if we covered the landscape with solar farms and wind turbines, and governments absorbed the cost so that consumers didn’t pay any more than they were doing now (forget about the increased taxation or reduced benefits). But you couldn’t have all three.

Now where did the NEG come from, apart from out of the blue? Ah, it is the work of the Energy Security Board (ESB). Who is it/are they? Ah, well, the Board was set up in July by the Council of Australian Governments (COAG) to co-ordinate the implementation of Dr Finkel’s energy policy reform blueprint. And what it has done is unanimously to reject Dr Finkel’s Clean Energy Target (CET), which is an interesting version of ‘implementation’. The Government has accepted this recommendation, which gives it more elbow-room in which to design a policy. Because Labor hasn’t so far completely opposed the new scheme, and because there are some who say it is really a carbon tax in disguise (it must be a good disguise, in my view), there appear to be sighs of relief, as though it’s all fixed. I can’t see what is actually to happen, and indeed, if my suspicion is well-placed, I can’t see how anything much that is useful is to happen. Oh, I should admit that there is no sign that the NEG will allow Australia meet its obligations under the Paris Accord — and I’m happy about that, since I think that whole exercise is fatuous. But there is no obvious sign that we will get either more reliable or cheaper electricity.

But, as I said at the beginning, it is really difficult to work out, or to find out, exactly what is at the heart of the problem. There are many factors. The state governments have got out of the business of generating electricity, and much of it is now private sector business, with the additional possibility that much of it is owned by an offshore corporation. Then the state governments have been steadily increasing the royalties on the extraction of coal by mining companies, which means coal is increasingly expensive, to the point where building a new coal-fired coal-based power station doesn’t seem particularly worthwhile. That doesn’t mean that investors have gone Green suddenly, only that it looks like a risky venture. Hence the call for certainty for investors. Yes, that makes sense. But I can’t see any sign in what I have read about the NEG that it changes the risk factors. I’d be happy to have my oversight pointed out.

You might ask why the Commonwealth Government is involved at all, since there is no Constitutional head of power that gives it standing in the matter of electricity generation. And the grid itself is complicated, institutionally. Is anyone really in charge? I’m not sure. Let us start with  the NEM, the National Electricity Market, the system that allows the cross-state generation and use of electricity. The Australian Energy Market Commission (AEMC) makes the rules and generates policy for the NEM. The Australian Energy Regulator (AER) enforces the AEMC rules and is responsible for the economic regulation of the networks. The Australian Energy Market Operator (AEMO), a creation of COAG, seems to incorporate all of these functions and oversees system security. It also looks after the reticulated gas system that is also cross-state in its reach. Got all that? Then there is National Electricity Law (NEL) and National Electricity Rules (NER). The Commonwealth did not set any of this up, though it approved it. The NEM and its institutions are an initiative of co-operative federalism. To repeat, I’m not sure that any one is in charge. You’d think it must be the Operator (AEMO), but it seems quite modest about its role. But wait! The ESB (remember it, the CET killer?) consists of the heads of the AEMC, the AEMO and the AER, with an independent Chair and an independent Deputy Chair. Very possibly the ESB is now the boss of the system. It would be nice if someone competent said so.

Now where is the certainty to come from? Let us remember that coal is far and away the major source of all electric power in our country, as is shown by this 2015 diagram from Origin.

I would have thought, and the diagram suggests it strongly, that the certainty needed is that with respect to building new coal-fired power stations (I’ll leave nuclear energy aside for this essay, as it is a subject in itself). All power stations have a finite life, and in due course need to be extensively renovated or scrapped altogether. For there to be certainty for investors in this area, there would need to be some rule that capped royalties, which is not a Commonwealth matter. There would also need to be some rule that guaranteed that the proposed power station would always be running, or at least running optimally, since it takes a day or so to get such a system up to its optimal level. Stopping and starting coal-fired power stations is wasteful and unproductive.

I see no sign of any of this in what I have read so far. Perhaps that is for later, but I am told also that there are serious anxieties about the current system’s capacity to deal with sustained heavy demand in summer, especially when there are hot windless days for a week or more. We will see. If someone can point out to me where the investors are to get their confidence, then I will be an attentive and courteous reader.

Finally, where is the cheaper electricity we are told about, not to mention the cheaper gas? Ah, we seem unlikely to see any lower bills for some time, and the figure of $2 a week, or $100 a year, has been bruited about. With all modesty, I would have to say that $2 a week reduction is not what I was looking for. Our bills are rising at about twenty per cent a year, with no end in sight. What I am reading about is the proverbial feed for chickens.

Oh well, it all has to be approved by COAG, which meets in November, and the whole exercise so far smacks of the back-of-envelope calculations that people make excitedly in hotel bars. There are those who think that Mr Turnbull has done very well with his NEG. My own feeling is that, to follow W.S.C., the NEG is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning. A whole lot more needs to happen before we have a real, stable, national electricity strategy. And there simply is no sign that renewables are the future, however dear they are to you. Just look at that diagram again.

 

 

 

Join the discussion 46 Comments

  • JimboR says:

    “and because there are some who say it is really a carbon tax in disguise (it must be a good disguise, in my view)”

    More an Emissions Intensity Scheme than a carbon tax. I believe that bit is hidden in a briefing note to COAG. It says:

    “Some electricity retailers will not be able to meet the required emissions profile, while others will overachieve,” it reads. “Therefore a secondary exchange will occur between retailers to balance their portfolios.” That “exchange’ will also be open to those underachieving retailers to buy a yet-to-be-determined portion of any “emissions guarantee” shortfall using Australian carbon credit units or international units, the briefing note says.

    To which Frydenberg responded:

    “Under the new initiative, the commonwealth will legislate the target and retailers will be required to have an average emissions level across their portfolio,” he said. “They can use existing contracts to meet this obligation, potentially including international permits and domestic credits.”

    I think that is pretty close to an Emissions Intensity Scheme that was previously considered but rejected by the party room.

    • JMO says:

      Ah., Jimbo – I am so surprised you (of all people) forget; it is the words used that is important no matter our incorrect or wrong they are. Let us see, the obvious:
      1 – Carbon Dioxide (transparent, odourless and essential to life) gas is reworded to carbon a black, smelly and poisonous) solid.
      2 – CO2 is called a “pollutant” when really life on Earth depends on it
      3 – An electrical generator is called a “power station” if it is powered coal or gas but a “farm” if is powered by the sun or wind.
      4 – CO2 causes “äcidification”of the oceans ( so makes us think of a steaming beaker of HCl, H2SO4 or HNO3) when really it is the very unstable and the weakest acid H2CO3 (if you remember your school chemistry) and all it does – at worst – it may slightly reduce the ocean’s alkalinity.
      5- Electricity from windmills. or solar is “clean energy” whereas from coal/gas it is pollutant or dirty energy when nearly all real pollutants have been scrubbed out so just mainly steam and minor amount of CO2 (NOT carbon) comes out of the chimneys whereas we do not mention the enormous amount of CO2 produced in building wind turbines ( 400 tonnes of concrete for the base, 100 metre steel tower, the resin blades, the generators and the mining and refining of rare earth minerals desecrating countries such as Mongoli.
      6 – Electricity from windmill and solar is “sustainable”even thought the effective life of a wind turbine is 15-20 years and solar panels about 5 years longer, whereas a coal power station is ‘unsustainable’ despite its effective life is twice as long at least) and we have enough coal to last us at least 250 years.
      I could go on but surely even you can get the point. It is all in the wording.

      • BoyfromTottenham says:

        Jmo, and to really pi$$ off jimboR, add the fact that coal is organic!

      • JimboR says:

        I’ve no idea where this thread is going. I thought we were discussing whether or not there’s a hidden carbon tax in the NEG. For the record, I’m a huge fan of coal and its organic status. All those trees suck all that CO2 out of the atmosphere, die, get buried, turn to coal and lock that carbon up for millions of years. It’s nature’s own carbon sequestration program, and barring the occasional volcanic eruption, coal is extremely stable buried down there. It’s almost enough to make you believe in God.

        As to whether there is a hidden carbon tax in the NEG, my take is: by the strictest definition of “carbon tax” I don’t think there is. By the more generic meaning of “price on carbon”, “emission trading scheme”, “emission intensity scheme” etc. I think there is as indicated by the minister’s response quoted above. I think the reason Don is struggling to find it (I assume that’s what he means by “it must be a good disguise, in my view”) is because they’ve hidden in a different document.

        In the ultimate irony, the guy that signed us up for all of this tried to slow things down in the party room but got immediately slapped down by Turnbull, to a round of applause from everyone else:

        Says a minister present: “Tony is a normally a very persistent guy. He just got completely closed down. Turnbull is usually quite accommodating but he was firm with Abbott”. The room was with him. “The room was so wholly with the Prime Minister that applause erupted once he put Abbott in his place. “It was an indication of where the relative support is,” says the minister.
        http://www.smh.com.au/federal-politics/political-news/power-play-will-the-governments-new-energy-policy-finally-silence-tony-abbott-20171020-gz4uuu.html

        Abbott is now off to the US to give some speeches on same sex marriage…. hopefully they’ll be as entertaining as his London speech about chucking goats into volcanoes. My guess is there’ll be Labradors at the bottom of the slippery slope. I’m more a Giant Schnauzer man myself.

        • spangled drongo says:

          Wow! That’s an accurate summation, jimb.

          Second hand from an unnamed pollie and John Hewson to follow with a few good kicks.

          Try a little more detail instead of Trump-style rants:

          “The government woke up to the reality that a 43 per cent clean energy target would be all-but indistinguishable to Labor’s (insane) 50 per cent renewable energy target. But it then opted for something even more opaque. And, $2 a week off your power bill, in 10 years, maybe, doesn’t really seal the deal.

          In 2013 candidate Abbott made it very clear: vote for me and “I’ll axe the tax”. And won, rather well. In 2019, candidate Turnbull needs Axe the Tax version 2.0. He and 24 million Australians also need it for policy rationality, but that’s a different story.

          Well, Abbott gave him the broad rudiments of what ATT2.0 could be, in his London speech. No-one could possibly deny that it would provide absolute clarity of differentiation from the even higher prices and inevitable blackouts, pervasively in all of the eastern states, that Shorten offers and indeed promises.”

          http://www.theaustralian.com.au/business/opinion/terry-mccrann/policy-to-merely-keep-the-lights-on-is-dim/news-story/61052ca11d64c1757a8b55a8e0792a48

      • David says:

        “CO2 is called a “pollutant” when really life on Earth depends on it”

        JMO, these black and white arguments about what constitutes a “pollutant” are puerile. E.coli is recognized as a pollutant, but life on Earth depends on it, too.

  • Neville says:

    We’re not yet into summer and generation problems are starting already. Please bring back Hazelwood and stop closing CFired stations. Unless we have a coolish summer and lots of wind we’ll be begging SA for power to Vic. Great thinker Danny Andrews, NOT.

    http://www.heraldsun.com.au/blogs/andrew-bolt/victoria-now-needs-to-import-electricity-with-hazelwood-gone/news-story/38aa4cc471e300feedeb51d89b413649

  • JimboR says:

    “To repeat, I’m not sure that any one is in charge. ”

    In charge of what exactly? That’s a bit like asking who’s in charge of Europe. You’re going to be very disappointed if you’re looking for a simple hierarchical structure over all of it. It wasn’t that long ago that power generation was the responsibility of city councils. As more and more cities started running cables to each other, the states decided they better get involved to co-ordinate it all. Now as more and more states start running cables to each other, the feds think they need to get involved in the co-ordination. In spite of the ‘N’ in many of those acronyms, WA isn’t involved in any of it as the cables don’t cross the Nullarbor. Qld operates on-market as well as off-market operations:

    http://www.couriermail.com.au/news/queensland/queensland-government/queensland-power-prices-government-returns-to-electricity-market/news-story/fb28ddbc436dbef0286274bb9cff4dd9

    SA is threatening to go it alone with two new gas fired power stations being built (one by AGL and one by the SA govt.) and the world’s largest battery to be installed alongside the expansion of Hornsdale Wind Farm.

    • Don Aitkin says:

      Why is it important that someone be own charge? For attribution, complaints, responsibility and the rest.

    • JimboR says:

      Indeed. That’s pretty clear every time the lights go out in South Australia:

      http://www.abc.net.au/news/2017-02-09/aemo-orders-back-up-power-station-at-pelican-point-on/8256594

      “South Australian Treasurer and Energy Minister Tom Koutsantonis slammed AEMO for choosing not to turn on the second unit at Pelican Point on Wednesday.”

      During all of SA’s recent blackouts, there have been gas power stations in SA sitting idle. That’s one of the driving forces for SA going it alone. The energy market is clearly not working out well for them.

      • bb says:

        Pelican Point has two units and when the South Australian blackout happened only one of those was going some of the time. The reason being was the cost of gas at the time the owners could not get gas at a price that they can run of the profit so they had closed half the power station and made the decision the rest would only run when they could make a profit. Blaming them for the problem shows a ludicrous ignorance of the problem. When South Australia lost FCAS because of the overload on the Heyden interlink every generator in South Australia shut down that is the way it works. Your statement is spurious.

  • spangled drongo says:

    What is so obvious is a federal govt that traditionally has no involvement in power generation is now spending billions of taxpayers funds to present themselves as progressive, yet real reduction in CO2 emissions is not happening.

    And the alternative govt is even worse.

    IOW, it’s all bull sh1t !!!

    What a gutless lot they all are when they dance about to absolutely no purpose yet won’t even discuss the logical “renewable” which is nuclear.

    Nuclear fuel made with uranium extracted from seawater makes nuclear power completely renewable:

    https://www.forbes.com/sites/jamesconca/2016/07/01/uranium-seawater-extraction-makes-nuclear-power-completely-renewable/#23a48d4e159a

    And when we already have a nuclear reactor for health purposes.

  • Chris Warren says:

    As interesting as it may be, whatever the Australian government is doing, the real problem is global. The only solution is that all developed (ie OECD) economies must reduce fossil fuel usage.

    I do not think the Paris Agreements and Australian energy policy framed to “meet our Paris Agreements” serves any useful purpose.

    For example OPEC simply blows any Paris Agreement scenario right out of the water by 2020. They now projected that oil production will be 100 million barrels per day in 2020.

    see: archive.is/2pHVw

    It is a simple matter to see where this leads…

    If you use the US government calculator at:

    https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

    you will see that 100 million barrels of oil consumed holds 11,779,800 tonnes of carbon.

    ************************************

    So if you do a “back of the envelope calculation” using roughly, 10 barrels represents over 1 metric ton (tonne) carbon, then OPEC will be producing over 10 million tonnes carbon per day or 3.65 GT per year.

    In 2015 the figure was around 3.32 GT per year

    [see: Carbon Dioxide Information and Analysis Center’s “Global Carbon Budget” spreadsheet]

    This is a 10% increase in carbon emissions from this one source by 2020. If you do the more accurate calculation, using actual conversion factors, the increase is much worse.

    So in this context, obviously, all the steps taken by our politicians over decades of meetings, all the bookshelves of their reports, and the acres of academic papers, and millions of signatures on petitions and endless social-media screaming, have made no relevant impact on the future accumulation of CO2 in the atmosphere.

    So our future is, pretty much, locked-in by now.

  • Michael Reed says:

    One thing that is increasingly becoming apparent is the on going damage to the economy where already businesses are leaving the country to produce goods offshore where energy overheads are much cheaper.There seems to be little grasp of this fact in all of the so called energy “plans”.We no longer have comparative advantage in energy in this country.
    What this will eventually lead to is increasing unemployment rates and the associated drop in economic growth rate.
    With no plans to build any type of reliable
    power stations (and the lead time required to construct them), this is really like
    the old saying “shuffling deck chairs on the titanic”
    The underlying concept of energy security
    has also gone out of the window in this country where we cannot now even refine crude oil now.I would never have thought 10 years ago that I would be discussing these thoughts on a blog site.
    Mike Reed

  • spangled drongo says:

    When this is the level of intelligence that is increasingly influencing policies it is time, as Peter O’Brien says, to abandon all hope for our future:

    https://quadrant.org.au/opinion/doomed-planet/2017/10/meet-climate-girl-abandon-hope/

  • Aynsley Kellow says:

    The stupidity of all this is that HELE (ultra-supercritical) coal-fired stations achieve efficiencies in excess of 45%. The current efficiency of coal plant is 33%. For every 1% efficiency gain, GHGs are reduced by 2%. So a transition to HELE generation would produce a 24% reduction in GHGs – with dispatchable generation (not to mention nuclear, as Don said).

    • Boambee John says:

      Greens do not want despatchable power, even if it does reduce emissions.

      Greens want the end of western industrial society.

    • JimboR says:

      According to Turnbull one of the great features of his NEG is that it’s “technology agnostic”. They no longer talk in terms of renewables Vs fossil fuels but rather simply regulate the emission standards and the dispatchability standards, then stand back and let market forces decide how to best deliver that.

      • Boambee John says:

        “According to Turnbull … ”

        Your problem is in that phrase!

        • spangled drongo says:

          “According to Turnbull … ”

          Indeed, BJ!

          Spot the contradiction that simply proves that Turnbull hasn’t got a clue:

          Frydenberg on Insiders this am:

          Frydenberg declared: “Tony Abbott is not the prime minister, nor the government. What was very clear from the party room discussion was that there was strong support for this mechanism, recognising the emphasis … it puts on reliable power.

          “Renewables, which are becoming very low cost, can compete in that market, but they can do so in a way that doesn’t compromise affordability and reliability, and I have to point out that the Prime Minister through his support for Snowy 2.0 is investing in the biggest renewable energy project in the world.”

  • Neville says:

    Well after providing a lot of data over a long period of time it seems that some people have at last started to wake up. WHOOOOOOPPPPPEEEEEEE. An intelligent 5 year should’ve understood that the mitigation of their so called CAGW is just complete BS and fra-d.
    Kyoto wasted heaps for a zero return and now Paris COP 21 threatens to waste endless trillions $ until 2100 for no measurable difference to temp or climate.
    Adaptation, new technology and inventions are the only answer, but don’t expect the climate to change anytime soon or you’ll be very disappointed. Just simple maths and very simple logic and reason.

  • David says:

    Here we have a energy policy designed by a bunch of technocrats that both the center right and center left are in broad agreement with. Seems to me the policy might be reasonable in the short to medium term. As far as I know the only people who oppose the policy are Tony Abbott, Malcolm Roberts and Don Aitkin.

    “And there simply is no sign that renewables are the future, however dear they are to you. Just look at that diagram again.”

    Don I just looked at that diagram again. AS far as I can see its represents present energy consumption, not future energy consumption.

    • Don Aitkin says:

      David, we’ve had a Mandatory Renewable Energy Target since 2001, sixteen years ago, and in that time alternative energies have achieved very little as source of grid power. Moreover, they require back-up from fossil fuels. So what you see in the diagram today is very likely what you’ll see in another sixteen years. Coal will continue to provide the base-load electricity for Australians. Its demonisation simply makes everyone’s energy costs much higher than they would be otherwise, for no positive effect that is discernible.

      • JimboR says:

        “So what you see in the diagram today is very likely what you’ll see in another sixteen years. ”

        That’s a big call, given how many of the big coal generators are scheduled for decommissioning due to old age. In fact that diagram is already out of date, given that Hazelwood has shut since 2015. There are plans afoot to build several gas fired power stations, but I don’t know of anyone planning to build any coal fired power stations. Unless you think the NEG will convince investors to start building them (but you seem to have ruled that out above)? Where do you think these replacement coal fired generators are going to come from?

        • Don Aitkin says:

          Jimbo, first of all, for ‘electrocyte’ read ‘electricity’. For the moment (probably because it is Sunday, and no one is fixing up glitches) I seem unable to do edits on my own work.

          It’s not really a big call at all. We seem headed for a real smash in electricity. There’s no way that alternative sources can make up the difference. Maybe we’ll have more gas, but there is an intersection point not far ahead where the country will give a collective shudder at the idiocy we have been going through, and do something about it. It will be difficult, because building any large power station takes time.

          As I wrote above, I see the NEG as the end of the beginning. We may move in time towards nuclear energy, perhaps because so many of those who remember WWII are dying. But nuclear power stations take even more time. Rooftop solar will help those who have them, but it’s the hospitals, industries, suburban transport traffic lights, and all the rest of what we take for granted that are at risk with unreliable power.

        • JimboR says:

          “Maybe we’ll have more gas”

          That would be my guess. In some ways SA has already played out your scenario. Northern got decommissioned, volatility went up, prices went up and the lights went out. Even after all that pain nobody down there of import is proposing a new coal fired station. They’re going with two new gas stations and the world’s biggest battery at an extended wind farm. I think the coal part of the Origin donut above is only going to head in one direction. Although the Qld LNP might give it a boost if they get elected.

          • Don Aitkin says:

            South Australia has coal at Leigh Creek, and perhaps a dozen or more years for that resource. Unless coal were to be transported to Port Augusta from NSW or Qld, the coal-fired station at Port Augusta would have to close anyway. But NSW and Old have abundant black coal.

            As for coal in Australia, it will still be a major player in fifty years time unless there is some amazing technological breakthrough elsewhere (not in wind or solar). Batteries can’t do it, as they are only storage facilities, with replacement costs. Again, rooftop solar plus batteries may be the way the suburbs will go, but as the diagram shows, their contribution to the grid is tiny.

    • Neville says:

      SD linked to Alan Moran’s article at Quadrant. Boy I wish I could write half as well as Alan ( and Don),But I think it should be listed here so perhaps some of the sillier, fantasist types may even read some of it.

      Alan Moran

      “A Low-Wattage PM’s Useless ‘Guarantee’

      According to Malcolm Turnbull, his National Energy Guarantee ‘will lower electricity prices, make the system more reliable, encourage the right investment and reduce emissions without subsidies, taxes or trading schemes.’ Every word is a lie

      rat wheel IIThe dust is yet to clear so we can judge how the National Energy Guarantee (NEG) will operate, but there is now enough clarity to be certain that the Wow!!!-infused exclamations of delight it received from sections of the mainstream media is totally unwarranted. The wailing from the green lobby stems from its bringing down the curtain on new large scale wind and solar investments post 2020.

      The Prime Minister said,

      The National Energy Guarantee will lower electricity prices, make the system more reliable, encourage the right investment and reduce emissions without subsidies, taxes or trading schemes. It is truly technology-neutral, offering a future for investment in whatever technology the market needs – solar, wind, coal, gas, batteries or pumped storage.

      Unlike previous approaches, we are not picking winners, we are levelling the playing field. Coal, gas, hydro and biomass will be rewarded for their dispatchability while wind, solar and hydro will be recognised as lower emissions technologies but will no longer be subsidised.

      None of this is true. The new policy has two arms: an emissions guarantee and a reliability guarantee.

      The emissions guarantee

      The NEG rejects the Finkel proposals that would have required a 42% renewable energy share by 2030. Instead it entails a continuation of the Renewable Energy Target involving 23.5% renewables in 2020 (33,000 GWh, or about 15 per cent subsidised and 8-9% from commercial hydro). As at present, retailers will be required to increase levels of non-commercial renewables within their product mix. The program will continue to expand until 2020 (in 2016 about 8% of electricity, 18,000 GWh, came from large-scale wind and solar) with subsidies paid each year until 2030.

      Hence, the PM’s claims that there is now “a truly technology neutral” and a “level playing field” are incorrect.

      Wholesale prices have doubled since 2015 as a result of the renewable requirements forcing out coal and are now at around $90 per MWh. Short of a collapse in demand, there are no prospects of this price declining. In addition to wind and solar obtaining the market price, the RET provides them a subsidy payment of $85 per MWh.

      There are those in the renewable sector who claim that wind generation is now possible at a cost of under $60 per MWh and that no subsidies are required. Tellingly, none of those making such claims are following them up with advocating the end of those subsidies. Despite that fabled renewables’ cost reduction and the doubling of the wholesale price, renewables in the forward market will still command an additional consumer subsidy of around $45 per MWh in 2022.

      The reliability guarantee

      The other arm of the policy involves a requirement that retailers give assurances they can meet their customers’ demand even if their intermittent power is not available.

      Retailers currently contract with customers to supply on demand whatever electricity is required. They ensure that this is available by contracting with suppliers (including in-house suppliers) for parcels of energy, adjusting this on a minute-by-minute basis using the forward and spot markets. Retailers place a low reliability standard on intermittent energy. In the Western Australia market this is set at 8% of nominal capacity, and in the rest of Australia each company makes its own assessment and contracts reserve insurance in line with this. Very high penalties can be incurred by retailers failing to match customers’ demand with supply. Any wind operator with a contract of supply with a retailer — virtually mandatory to ensure financing — is therefore accompanied by a “firming” contract to cover its non-availability.

      The new proposals will require the authorities pre-verify the availability of each retailer’s supply by time of day and market. This is an infinitely complex process and must lead to a massive new bureaucracy, plus the introduction of costly, inflexible requirements.

      The supposed bonus in lower consumer prices

      The Prime Minister, quoting his favoured “experts” estimate the new proposals will bring about a $115 per annum reduction in household bills. Even if true this is scant compensation for $300 increase the renewable policy has caused.

      However, the lowered bills can only come about if the policy stimulates considerable new investment or if there is a collapse in demand. It is suggested the policy will bring investment certainty and new plant but new coal or gas facilities are unlikely while the renewable subsidies are in place and the prospects of fresh measures remain.

      The “reliability guarantee” merely regulates what prudent profit-maximising businesses are already doing and will do little to encourage new investment in what is now called despatchable energy. The (overdue) guillotine on subsidies for new wind will curtail investment in that supply source.

      Lower household prices are possible as a result of a collapse in demand. Regulations favouring renewables have had a far more severe effect on business customers than on households because of their effect boosting wholesale prices, which comprise a large slice of businesses’ bills and overheads. Smelters, for instance, comprise some 16% of electricity demand; most smelters were attracted to Australia by what were formerly low energy prices. Government policies have eradicated that advantage. To see the farce that energy policy has become, consider the aluminium smelter in Portland, Victoria, which is being kept alive only by government subsidies to offset the cost-boosting consequences of the government’s renewable regulations. You can’t get more absurd than that.

      Closure of smelters would reduce electricity demand and prices. Some would welcome such deindustrialisation and the elimination of highly productive assets. After all, aren’t we always hearing the naïve claim that renewables create more jobs than traditional power stations. An analogous claim — that we would create more jobs if the carrying capacity of trucks were to be reduced by four-fifths — would be recognised in an instant, even by members of Australia’s political class, as untenable and insane. Yet many back the same destructive logic with regard to electricity generation.

      The future

      Josh Frydenberg must understand these deficiencies of the energy policy he is marketing. Presumably his nightmare is that unless the present situation is stabilised, the renewables share will be further boosted, and the economy ruined, by the high prices and diminished reliability this entails.

      But in stabilising the renewable energy at its present and 2020 projected level we can be certain that Australia’s former comparative advantage in energy costs — the very same advantage present policies have destroyed — will not be restored and our living standards will be very much lower than they would otherwise be.”

      Alan Moran is the author of Climate Change: Policies and Treaties in the Trump Era.

  • Don Aitkin says:

    Further about the future. AEMO has urged the Government to slow down the departure of coal-fired plants. AGL (owner of Liddell) says it is getting out of coal, but the principal reason is that the price is now too high, because of steadily increasing royalties. So that is a further and likely possibility, giving us time to put in place a real energy policy that doesn’t start off with the need to curb greenhouse gas emissions (whose effect so far has been to green the planet and assist in agricultural production).

    But we sure have made a mess of this area over the last twenty years.

    • Neville says:

      So Don how much has this idiocy cost OZ over the last 20 years? We know that there has been a zero return on our “investment” over that period, but with all the S&W lunacy now locked into our crazy electricity grid this mess will continue for many more decades to come.
      Why didn’t we just update our older coal fired plants and refuse to build the S&W BS and fra-d? Even Germany is building new lignite (brown coal) power stations and they to have behaved like imbeciles for at least the last 20 years.

    • JimboR says:

      “AGL (owner of Liddell) says it is getting out of coal, but the principal reason is that the price is now too high”

      Really?

      https://content.agl.com.au/

      I dare not risk a second link but search hard enough and you’ll come across:

      “As Australia’s largest emitter, we have an important role to play in mitigating the effects of climate change. AGL’s Chief Economist Dr Tim Nelson explains how, as we make the transition from coal to renewables.”

      After the you’ve convinced the pollies, you can start on the all the corporate boards and pension funds where the decisions actually get made.

      • Neville says:

        Gosh Jimbo would you please tell us how we in OZ or the rest of the world can mitigate the “effects of climate change,” by moving to renewables?

  • David says:

    Don, you seem pessimistic about this policy.

  • spangled drongo says:

    So, while the climate gatekeeping establishment is so corrupt that it won’t publish papers from sceptical climate scientists who have got very good scientific evidence of their corruption, it is nevertheless nervous enough to start making alibis and excuses for the lack of warming and the dodgy GCMs:

    https://www.spectator.com.au/2017/10/climate-excuses/

  • spangled drongo says:

    Jo spells it out very plainly why intermittent renewable energy will always be an expensive, unreliable problem:

    http://joannenova.com.au/2017/10/only-10-of-people-allowed-to-use-solar-in-broome-wa-to-stop-grid-fluctuations/

  • […] to confess at once that there will be almost as many abbreviations in this essay as there were in last week’s essay about our inadequate energy policy. And I do have a declaration of interest: I don’t want the NBN […]

  • spangled drongo says:

    When there have been 900 peer reviewed scientific papers published in the last 2 years with a growing volume of evidence that undercuts the mindless “consensus science”, one would think the Australian govt wouldn’t find it too difficult to get their policy ducks more in line:

    http://notrickszone.com/2017/10/23/400-scientific-papers-published-in-2017-support-a-skeptical-position-on-climate-alarm/#sthash.CdJrZTby.dpbs

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