February 25th 2017


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COVER STORY Don't grieve dumped TPP; rather, thank Trump

CANBERRA OBSERVED Splintering of support gets under PM's skin

EDITORIAL What future has Senator Cory Bernardi?

ENVIRONMENT U.S. Congress to investigate shonky climate report

ELECTRICITY Green policies threaten energy security and jobs

ELECTRICITY A solution to South Australia's power crisis

WATER POLICY 450 gigalitres upwater not feasible on Murray-Darling

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ELECTRICITY
Green policies threaten energy security and jobs


by Chris McCormack

News Weekly, February 25, 2017

If you feel like you’ve just received an electric shock the next time you open your power bill, you can blame it in part on the Renewable Energy Targets (RETs). The taxpayer subsidies now funding state and federal RETs amount to $3 billion per year[1] and if governments continue to increase these subsidies, electricity prices will keep rising, affecting consumers and driving industry to the wall, or offshore.

This perfect storm of spiralling electricity costs and unreliability in the delivery of constant power as a result of a lack of investment in low-cost, reliable coal-fired power generators is crippling Australian businesses. An article in Adelaide’s Advertiser on July 23, 2016, states: “The Australian Industry Group has estimated the cost of power price spikes in SA in three weeks in July, 2016, to be more than $150 million, and during that time some of SA’s largest employers – BHP, Arrium, Adelaide Brighton Cement – have raised serious concerns about the cost of doing business in South Australia.”[2]

Another case in point is Portland’s Alcoa aluminium smelter. A power outage in December left two-thirds of its 680-strong workforce in limbo after the smelter was left reeling at one-third capacity, costing the company $1 million per day.[3] Cheap, dependable electricity is essential to the survival of vital industry in Australia and the jobs they create. Alcoa’s aluminium smelter accounts for $842 million in trade. The closure of Alcoa would have affected around 2700 jobs, both directly and indirectly, in Portland and surrounds.

The federal and state governments in a belated deal eventually guaranteed the plant another four years contracted power supply. Victorian Treasurer Tim Pallas said the state’s contribution was “around the $50 million a year mark, which is about half the pre-existing transmission subsidy arrangements that had been put in place.” (The Age, January 20, 2017)[4]

The 300 per cent increase in royalties imposed by the Victorian Andrews Labor Government on coal no doubt played a role in Hazelwood power station’s impending closure, which will diminish the capacity of low-cost, reliable power for Victoria. The closure will also affect South Australia, which turns to cheap Victorian coal-fired power to make up its power shortfall due to its reliance on renewables. Renewable energy is not only susceptible to the vagaries of the weather but also is far more expensive to produce than coal-fired or gas-fired power generation.

There are many claims being bandied around that renewables are a cheaper source of power than coal-fired power generators. The Beyond Zero Emissions website, for example, claims: “In Australia, wind power is already cheaper than fossil fuels, and solar is right behind.”[5] However, the facts refute this claim, as the table below shows.

Source: Electricity production subsidies in Australia.
A policy paper commissioned by the Minerals Council of Australia. August, 2015.

Then there is this gem of creative thinking from Greenpeace, Australia: “Renewable energy is becoming cheaper than coal and gas power. Right now, the fossil-fuel industry is heavily subsidised and, if its subsidies were stripped away, then renewable energy would be cheaper than coal and gas power.

“Under the renewable energy target, household electricity bills will decrease by $50 a year by 2020. If the target is kept in place, Australians will see savings of up to $140 each year after 2020.” (Greenpeace website, “Renewable energy myths”, 2014)[6]

Clearly, the authors of this have taken a vacation from reality, with aggregate subsidies for solar 15.4 times that of coal and wind triple that of coal. Moreover, estimated subsidies in terms of $/MWh, are 479 times higher for solar and 48 times higher for wind than for coal. (“Electricity production subsidies in Australia. A policy paper commissioned by the Minerals Council of Australia”, August, 2015.)[7]

South Australia is a salient test case, revealing both the skyrocketing cost of electricity there (double the wholesale price in Victoria) and the unreliability of a renewables-heavy system.

South Australia’s energy generation is comprised of over 43 per cent renewables in the form of wind and solar. It has the highest share of renewable electricity of any large grid system in the world[8] and in 2014 the Weatherill Labor State Government announced a 50 per cent RET by 2025.[9]

Australian States electricity prices compared. Source: energyaction.com.au

The Victorian Labor Government wants a 40 per cent RET, Queensland’s Labor Government a 50 per cent RET, Federal Labor a 50 per cent RET[10] and the forced closure of Australia’s 24 coal-fired power stations,[11] and the ACT Labor Government a 100 per cent RET by 2020, which will add $290 to the average electricity bill in 2020.[12]

The high RETs imposed in some states – and proposed in others – are hugely expensive and fatal to economic growth. They are a completely unnecessary experiment as technology has now made possible much-cleaner coal-fired power stations that emit far less carbon dioxide.

The European experiment with subsidising renewable energy has had a catastrophic effect upon power prices there. In 2016, the Manhattan Institute released a report entitled, “Energy politics and electricity prices: Cautionary tales from the EU”. Author Robert Bryce states: “According to Eurostat, during 2005–14, residential electricity prices in the EU increased by an average of 63 per cent. In Germany, those rates grew by 78 per cent; in Spain, they increased by 111 per cent; and in the UK they rose 133 per cent. Over the same period, residential rates in the U.S. rose by 32 per cent.”[13]

According to Brendan Pearson in The Australian (July 29, 2016), the result of subsidised renewable energy government intervention in the energy market was clear, Bryce found that those European nations with the highest renewables – Germany, Spain, and Britain – had seen their electricity costs increase the fastest.[14]

An oft-claimed argument of renewable energy adherents is that Asia is rapidly moving away from fossil fuel generated power and wholeheartedly embracing renewables. An article on Bloomberg.com on April 6, 2016, “Wind and solar are crushing fossil fuels” claims: “In China, coal power has also flattened.”[15]

A fact check blows this claim out of the water. The International Energy Agency (IEA) in its World Energy Outlook 2015 Special Report, says: “China is, and is projected to remain, the world’s largest consumer and producer of coal through to 2030.” While China’s coal demand growth is expected to plateau in the 2020s, it shows “no notable sign of decline by 2030”.[16]

The Minerals Council of Australia notes: “This projection is consistent with the IEA’s World Energy Outlook 2014, which saw China’s imports in 2040 remaining above current levels and accounting for 18 per cent of world coal trade.

“Around 95 per cent of China’s existing coal capacity is projected to still be in operation in 2030, and 345 gigawatts of net new coal-fired capacity installed by that year – more than six times Australia’s existing total capacity for all energy types.[17]

In relation to India, a Department of Industry and Science 2015 report states: “Coal is expected to play a major role in alleviating energy poverty in India. India’s installed coal-fired electricity capacity has doubled in just six years (2008 to 2014) and around 113 gigawatts of new capacity is under construction or approved – more than twice Australia’s existing total capacity for all energy types. India’s installed coal capacity is relatively new and has many years of operational life remaining.

“… there is even greater investment already under way into coal-fired electricity generation, which indicates that India’s coal consumption is likely to rise for some time” … and renewables “supplied 5 per cent of total generation.”[18]

Japan has committed to building 45 new coal-fired power stations as it plans to diversify its power generation away from nuclear. It tried renewables but it caused a 20 per cent rise in the cost of electricity so the plan was abandoned.[19]

Apart from the prohibitive cost, another factor in the viability of switching to renewable power is the area necessary to accommodate wind turbines or solar panels. According to the Minerals Council of Australia, for Australia to transfer its current fossil-fuelled power generation to wind power would require wind turbines to be installed over an area larger than the state of South Australia and for solar, panels to be erected over an area greater than Ireland.[20] Hardly practical stuff!

At the current rate of installation of wind and solar power generators, it would take 230 and 470 years respectively to replace existing coal-fired power generation.[21]

Australian consumers are hurting at the hip pocket and business and industry are collapsing as RETs and a lack of investment in cheap base-load power conspire to force costs up to unsustainable levels. Without low-cost electricity, local jobs and revenue will contract as business moves offshore to survive, giving more pain to an already under-employed populace.

If governments are serious about tackling rising unemployment and the resultant suicide and crime rates, cost-of-living pressures and declining government revenue, measures need to be adopted that don’t just pander to the shrill cries of environmental activists and the climate-change industry rent-seekers with their media lap-dogs panting breathlessly in tow, but ensure a return to the low-cost, dependable power supply Australia had previously enjoyed for decades.

 

References:

[1] Simon Benson, “Bill to prop up green power hits $3bn a year”, The Australian, February 6, 2017.

[2] Lucy Griffiths and Jake Gailberger, “Explaining why South Australia has very high electricity costs”, The Advertiser, July 23, 2016.

[3] Royce Millar and Ben Schneiders, “Alcoa workers urged to take leave to save damaged Portland smelter”, The Age, December 10,2016.

[4] Richard Willingham, “Portland smelter’s future secured after four-year power supply deal struck”, The Age, January 20, 2017.

[5] Jeff Spross, “In Australia, wind power is already cheaper than fossil fuels, and solar is right behind”, Think Progress, February 10, 2013.

[6] Renewable Energy Myths. http://www.greenpeace.org/australia/en/what-we-do/climate/renewable-energy-myths1/

[7] “Electricity production subsidies in Australia. A policy paper commissioned by the Minerals Council of Australia”, August, 2015.

[8] South Australian Renewable Energy Report. Australian Energy Market Operator (AEMO). December, 2016.

[9] Giles Parkinson and Sophie Vorrath, “South Australia sets 50 per cent renewable energy target for 2025”, reneweconomy.com.au, September 23, 2014.

[10] Josh Frydenburg, Minister for the Environment and Energy, 2GB radio interview with Ben Fordham, February 9, 2017.

[11] Josh Frydenburg, Minister for the Environment and Energy, “It’s time Labor came clean on cost of renewables”, The Australian, January 29, 2017.

[12] Kirsten Lawson, “ACT commits to 100 per cent renewable energy target by 2020: Simon Corbell”, The Canberra Times, April 29, 2016.

[13] Robert Bryce, “Energy Policies and Electricity Prices: Cautionary Tales from the EU”. Manhattan Institute, March 24, 2016.

[14] Brendan Pearson, “Latest studies show reality check is needed on renewables”, The Australian, July 29,2016.

[15] Tom Randall, “Wind and solar are crushing fossil fuels”, bloomberg.com, April 6, 2016.

[16] “Has China’s coal demand peaked?” Coal Hard Facts, 2nd Edition, Minerals Council of Australia.

[17] Ibid.

[18] “More renewables and more coal: India”, Coal Hard Facts, 2nd Edition, Minerals Council of Australia.

[19] Andrew Follett, “Japan to build 45 new coal power plants; green energy too expensive”, The Daily Caller, February 1, 2017.

[20] “What would it take to replace fossil fuels?” Coal Hard Facts, 2nd Edition, Minerals Council of Australia.

[21] Ibid.




























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