Thanks to suicidal renewable energy policies, Australian power prices are amongst the highest in the world. The mandated targets and massive subsidies for intermittent wind and solar, central to those policies, are wrecking the ability of coal-fired generators to remain profitable, which was precisely what they were designed to do.
The imminent closure of more large baseload coal-fired generators, heralds another staggering 35% increase in already punishing power bills.
Power bills set to blow out by 35pc
Greg Brown & Perry Williams
10 October 2022
Australia faces a new cost-of-living shock, with power prices forecast to soar by at least 35 per cent in 2023 as the early closure of coal-fired electricity generators creates a rocky energy transition.
With households already reeling from six consecutive interest rate hikes and double-digit food inflation, the nation’s fourth largest electricity retailer has predicted a steep hike in electricity tariffs amid a global supply crunch.
“Next year, using the current market prices, tariffs are going up a minimum 35 per cent,” Alinta chief executive Jeff Dimery told an energy conference in Sydney.
The huge jump in electricity and gas costs echoes soaring prices in the UK, which prompted protests and consumers to burn their energy bills.
Alinta said a painful crunch awaited households.
A 35 per cent tariff increase is horrendous, it’s unpalatable. Nobody wants that. We don’t want energy consumers tearing up their bills and setting fire to them,” Mr Dimery said.
“That’s the reality of where we’re headed, unfortunately. And I don’t have a short-term solution. There are real issues around energy pricing that we’ve got right now. And I think the public are going to get more attuned to that.”
AMP chief economist Shane Oliver said if Alinta’s predictions were realised, it would add an extra 0.6 per cent to inflation and put pressure on the Reserve Bank to be more aggressive in raising interest rates.
One of the big three retailers, Origin Energy, said wholesale prices indicated a leap in electricity prices was likely to hit the market once new tariffs were set in July 2023.
“Based on current wholesale prices, those orders of magnitude sound familiar to me,” Origin chief Frank Calabria said.
“We saw through winter and I think we’ve seen through price outcomes and through extraordinary events that we are already on the path of a roller coaster right now, and we really need to get going on it.”
EnergyAustralia said wholesale prices had soared, which would flow through to household bills. “Just go back a year; wholesale electricity prices are up four times from $60 per megawatt hour to $240MWh. Gas is up from $10 a gigajoule to $50 on the current ACCC netback,” EnergyAustralia chief executive Mark Collette said.
“That’s four or five times and it’s massive. It’s putting a lot of upward pressure on tariffs.”
Second-tier retailer Momentum Energy said there would be price hikes. “I think we all see there are going to be big increases next year,” Momentum managing director Lisa Chiba said.
Energy Users Association of Australia chief executive Andrew Richards said large commercial and industrial customers “will be bracing for impact in anticipation of a significant increase when they re-contract”.
“They are also powerless to avoid increases in network charges and other pass-through costs – such as the cost of state and federal programs and AEMO intervention,” Mr Richards said.
“Regardless of contract status, these cost increases will begin to hit in the coming 12 or so months. There doesn’t appear to be a viable escape route.”
Origin Energy said the UK, where 40 retailers had collapsed, had underlined the scale of the problem where price caps were put in place to limit the damage.
The market metrics driving the exponential rise in retail power prices are very simple: when you attempt to replace the 24 x 7 reliability of coal-fired power plants with the chaotic (and weather-dependent) delivery of wind and solar, in aggregate, overall supply necessarily falls and, when the sun sets and/or calm weather sets in, there are very substantial and absolute shortfalls in what’s available to power consumers.
All the while, demand from households and businesses continues unchecked. This is why the grid manager is (under the euphemistic term “demand management”) rationing power, literally paying heavy energy users, like mineral processors, to shut down and stop producing the thing that provides them with a profit. Those who aren’t in that category, simply get chopped from the grid. This summer, Australian households can expect more of the power rationing that took place last summer.
The State of Queensland, renowned in tourism circles for being beautiful one day and perfect the next, apparently didn’t get the memo set out above.
Its Premier, Annastacia Palaszczuk – who mixes red carpet swagger with bumbling incompetence – is determined to wreck her State’s power supply in a few swift and maniacal moves.
The Australian’s Economics Editor, Judith Sloan reports.
Sunshine State’s woolly energy plan doesn’t hold water
10 October 2022
The Queensland government has released its latest energy plan. The headline announcement was the state would exit coal-fired power by 2035 even though some of its plants, virtually all government-owned, are relatively new.
Annastacia Palaszczuk gave a lengthy speech outlining the plan, although some aspects remained vague. There was also some confusion, with the Premier claiming the state would be out of coal but would still be in coal. She seemed to be suggesting the coal-fired plants would not be blown up – as happened in other states – but energy hubs would take their place.
From a low base, in part because of its modern coal-fired plants, the Queensland government is targeting a figure of 50 per cent renewable energy generation by 2030, 70 per cent by 2032 and 80 per cent by 2035. By 2035, it is expected there will be 22,000 megawatts of renewable energy installed in the state, 100,000 jobs will be created and household electricity bills will be lower by $150 a year. To achieve the plan, it is estimated at least $62bn will need to be spent and the government is committing $6bn across the next four years. Queensland already has government debt of more than $120bn.
The government already had announced its commitment to build a publicly owned wind farm near Kingaroy costing more than $700m. According to Palaszczuk, “this project with up to 150 turbines could generate 500MW capacity, enough clean electricity to power up to 230,000 homes. It’s investments like this that will ensure we deliver on our net-zero ambitions and our promise to Queenslanders to become a global renewable energy superpower.”
Why the government thought it necessary to use public funds is not clear given the surplus of private funds for these types of subsidised investments.
When announcing the state’s energy plan, Palaszczuk made the valid point that “we can’t reach net zero without storing renewable energy to make it reliable. Put simply, the sun sets and the wind dies down. And with climate change there will be more unseasonal rain and other weather events that impact on the reliability of renewables. These events can last for days; current battery technologies can’t at scale (last days).”
The recognition affordable, large-scale and long-duration battery technology doesn’t exist is refreshing. It contrasts with the Victorian government’s stance that vast investment in grid-scale batteries can overcome the intermittency of renewable energy. The Victorian government is predicting batteries will provide the state with 6000MW of storage by the middle of next decade.
Where Queensland’s energy plan becomes Pythonesque is the inclusion of the sketchiest of outlines for two pumped-hydro projects, one that will have a 5000MW capacity and the other 2000MW. It is expected both projects will be able to generate power for 24 hours before the higher dams needs to be refilled.
The larger of these is the Pioneer-Burdekin project outside Mackay. It was the first the locals had heard anything about it and there is bound to be considerable opposition given the existing dam is required to meet the domestic water and irrigation requirements of the region.
In light of the experience of the Snowy 2.0 project, any initial estimates of the costing and timeline of the project will be grossly inaccurate. Even with the best possible outcome, there is the issue of the construction of transmission lines to the south from a cyclone-prone area. Any break in transmission could mean blackouts in Brisbane and the Gold Coast.
There will be inevitable delays in obtaining the necessary easements for these new transmission lines. The shortage of workers and materials, particularly given the energy plans in other states, is another consideration.
None of these practicalities discouraged Palaszczuk from waxing lyrical about the project. “I prefer to call the (Pioneer-Burdekin project) the battery of the north. It will be the largest pumped-hydro energy storage in the world with the potential for stage one to be completed by 2032.”
The experience of the Kidston pumped storage project in far north Queensland is illustrative of the problems. By chance, the old goldmine had two dams at different heights. But the $800m project has taken many years to progress, with the federal government providing huge subsidies. When it is finally completed, it will provide just eight hours of storage, which will make it a very expensive means of backup.
As for the “we are out of coal, but we’re in coal” proposition, there is woolly thinking in Palaszczuk’s speech about “continuing to use the large spinning turbines at the power stations to provide strength for the energy system to take more renewables”. What the source of energy of this will be is not clear, although the sun, wind and hydrogen are mentioned. But we are assured “we won’t convert coal power stations until there is replacement firm generation”.
Once, the engineers were in charge of planning our electricity grids. They tended to be cautious, placing emphasis on reliability. There were always challenges for a state such as Queensland with its geography and dispersed population as well as the fact some areas have always been affected by cyclones and heavy rain.
Today, the vibe seems to count more than the engineering and economics of providing affordable 24/7 electricity to households and businesses. The trouble is the vibe tends to discount long periods of weather that are inconsistent with electricity generation from renewable energy sources. What this means is that the assumed capacity factor of renewable energy – actual output relative to nominal installation rating – is too high relative to reality, leading to an underinvestment in firming capacity.
The underlying assumptions, particularly in relation to the number of windless days, are critical to the conclusion of the CSIRO that “wind and solar are the cheapest source of electricity generation in Australia, even when considering additional integration costs arising due to the variable output of renewables, such as energy storage and transmission”.
Under more realistic assumptions on the capacity factor, this conclusion is turned on its head, with coal, gas and potentially nuclear all cheaper than renewable energy.
What the Queensland experiment suggests is it’s always wise to fully interrogate the assumptions of any energy plans and to address the practicality, costs and timelines of any proposed projects. By the time the problems arise the current crop of politicians will be mostly gone, so we deserve nothing less.
via STOP THESE THINGS
October 15, 2022, by stopthesethings