Green Aussie PM Caves, Offers Subsidies for Coal and Gas

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Essay by Eric Worrall

Australia has embraced a worst of both worlds energy policy, in which both renewables and fossil fuel providers will receive generous subsidies to maintain their services.

‘Stakes never higher’: energy board releases capacity market blueprint

Energy Security Board says fossil fuel generators might need to be paid to stay in business to retain capacity

Peter Hannam Mon 20 Jun 2022 03.30 AEST

Coal- and gas-fired power plants could be paid to stay in business to bolster the stability of the main electricity grid and attract enough investment to build the equivalent of 50 times the original Snowy Hydro scheme by 2050, according to a high-level design paper released by the Energy Security Board.

The fossil fuel generators would be required even as Australia continues to decarbonise the electricity sector, the paper released on Monday said.

The report by the ESB backs payments for not just supplying power but also retaining the capacity to do so, as one of the most viable options to reform the faltering energy market after 2025.

It also recommends that states be able to pick technologies suited to their carbon-cutting ambitions, in a bid to mollify anticipated opposition from some regions to the inclusion of fossil fuel plants in a new capacity market. The imperative, though, would be to improve investor certainty and incentives to fund a major revamp of the market.

“Designed well, the capacity mechanism will enable a swifter, less risky and more orderly transition to a net zero emissions energy system,” the paper argues.

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On one hand, this offer of subsidies hopefully reduces the risk of blackouts. The government is effectively directly paying for maintenance required to keep fossil fuel power plants operational.

But this offer of subsidies is a commercial disaster, in terms of cost to taxpayers. Every power provider, fossil fuel or renewable, will have their hand out.

It could all have been so different. There was a time Australia had a technology agnostic electricity market, in which suppliers competed on price, rather than jockeying for handouts. All politicians need to do to restore this low cost market, is to provide a credible bipartisan commitment that they won’t play favourites anymore.

But our politicians have chosen to meddle and favour renewables.

If renewables worked, if they were a viable replacement for fossil fuel, our politicians might have gotten away with their meddling. In a few short years renewables would have replaced fossil fuel, and everyone would have settled into the new arrangement.

But renewables don’t work – Australia will for the foreseeable future require reliable, dispatchable fossil fuel backup to prevent blackouts, for when the wind stops blowing and the sunlight is blocked by clouds.

Fossil fuel providers have their hand out, and have no motivation to show restraint in their demands for government payoffs to keep operating.

Every Australian will pay, and pay dearly, for maintaining the political fantasy that renewables can add value to our electricity grid.

via Watts Up With That?

June 20, 2022

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