Subsidised Wind & Solar Debacle Delivers Massive Power Price Shock

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Every country that’s tapped into the grand wind and solar transition has left power consumers suffering from Post Transition Stress Disorder – where households and businesses are being pounded with power prices at unprecedented rates.

Australia, is no exception.

At the minute Australians are being bombarded by media attempts to convince a wholly non racist Australian public to embed racist division in their Constitution, providing a tiny number of elites claiming Aboriginal ancestry with unparalleled power over the 97% of the population who do not share that ancestry. Think Apartheid, in reverse.

The upcoming referendum for the so-called Voice to Parliament has dominated the print and broadcast media for months and will continue to do so until the vote is taken on October 14. STT’s tip is that it will fail dismally, simply because Australians are the least racist group of people, on earth.

In the meantime, however, the hubbub provides perfect cover and distraction for an even greater calamity: Australia’s self-inflicted, subsidised wind and solar calamity.

Households and businesses have been receiving power bills over the last month which are the highest ever experienced in this country.

In South Australia, Australia’s wind and solar capital, peak rates are running at 50 cents per kWh, the highest in the country, and right up there with Germany and Denmark, who suffer the highest prices in Europe.

Across Australia, retail rates have risen between 20 and 30% since February, when rates jumped between 10 and 15% on those prevailing in the last half of 2022. Meanwhile, ordinary Australians are left seething, while their political betters squabble over the Voice to Parliament, which at its heart is a naked Marxist power grab.

All that would be bad enough, but, behind-the-scenes, Australia’s notional energy market regulator (how do you ‘regulate’ utter weather-related chaos?), has determined to lift the wholesale market price cap from its current $16,000 per MWh to $22,800 per MWh.

To explain a little of what that means, here’s an extract of an STT post from August 2018:

The last thing Australia needs is another MW of intermittent power generation, which means slashing subsidies to wind and solar, right now.

Thankfully, the new Energy Minister, Angus Taylor is determined to do just that.

Taylor’s shortest route home is to fix the power market dispatch rules, which give preference to intermittent wind and solar.

Once upon a time, those rules required electricity generators to tell the grid manager when and how much power they intended to deliver, and over what time-frame.

Demand was forecast in advance, based on seasonal variations, time-of-day and day of the week, with allowances made for extreme weather conditions, when the use of air conditioners (either for heating or cooling) would lead to spikes in demand. Supply was organised according to schedules to match forecast demand.

Generators hoping to participate in the National Electricity Market were required to offer power according to scheduled demand, in a manner that would satisfy all power consumer’s needs.

Then, along came wind power.

With their output determined by the weather, wind power generators determined to rewrite the rules, they could never satisfy.

After Kevin Rudd’s Labor government took power in 2007, the Renewable Energy Target was jacked up ten-fold to 45,000 GWh: 41,000 GWh of wind and large-scale solar (LRET) and 4,000 GWh of domestic rooftop solar (SRES).

Under the dispatch rules that then existed, wind power was designated “non-scheduled”, which meant that wind and large-scale solar power outfits had no right to dispatch power to the NEM, unless the grid manager, the National Electricity Market Management Company (NEMMCO) permitted them to do so. The alternative was to try and meet the requirements set by the definition for “scheduled” generators: namely, guaranteeing delivery of set volumes of power, over a pre-determined time-frame. Obviously, the fickleness of Mother Nature meant wind and solar generators could never satisfy that definition.

Moreover, the grid manager hits “scheduled” generators with substantial financial penalties, in the event that they fail to deliver power according to the pre-ordained schedule.

Unable to satisfy the dispatch rules, the wind lobby did the next most obvious thing: it rewrote them.

The Australian Energy Market Commission was inundated with complaints about how unfair it was that wind power outfits were unable to ‘compete’ in a market where customers had this pesky habit of demanding power as and when they needed it, rather than having it delivered at crazy, random intervals.

If a wind power outfit wanted to guarantee regular participation in the NEM, it effectively had to build an equivalent capacity in fast-start up gas (Open Cycle Gas Turbines) or diesel generation to match whatever wind power capacity it built.

AGL did just that back in 2001, when it built its Hallett Power Station (200 MW of OCGTs that it runs on diesel), in order to match the wind power capacity, it was then planning to build between Jamestown and Hallett.

The cost of building utterly unreliable wind power capacity – as well as being forced to build additional reliable plant to compensate for the inherent intermittency and unreliability of weather-dependent wind – was viewed with contempt: operators like AGL determined that it was much fairer to pass the true cost of intermittent wind power generation to somebody else; namely, Australian power consumers.

The AEMC (packed with Big Wind friendlies) willingly obliged: under its Rule Determination issued in May 2008 it created an all new category of generator defined as “semi-scheduled”, tailored to suit the chaotic delivery of wind and solar. Masters of the English language might scratch their heads at a linguistic concept that sounds a lot like the idea of being half pregnant.

The new dispatch rule came into force in January 2009 and the rest, as they say, is history: from that point forward, more than 1,600 wind turbines were speared across four states and connected to the Eastern Grid.

Over the last three or four years, plenty of large-scale solar has been rolled out across southern Queensland and northern New South Wales, enjoying the same care-free classification: “semi-scheduled”.

From 2009, semi-scheduled wind and solar were then, and thereafter, entitled to dispatch electricity to the NEM, whenever the wind and sun permitted.

Critically, the failure of a semi-scheduled generator to deliver power to the grid has no consequences at all for the wind or solar power outfit concerned. Consistent with their general manner of operation, it was all care and no responsibility for the wind and solar industries, from then on.

The conventional generators (coal, gas and hydro) are still designated “scheduled” generators: a failure to deliver according to the agreed schedule results in the imposition of very substantial financial penalties. True it is that their operation isn’t dependent on the time-of-day or whether the wind is blowing, which makes them unlikely to be hit by those penalties. However, they still need to schedule, well in advance, if they wish to participate in the market, at all.

Once a coal or gas-fired plant is scheduled to deliver, that plant must remain online at all times, irrespective of whether it’s able to dispatch power to the grid.

When the wind is blowing and the sun is up, wind and large-scale solar generators use the value of their Renewable Energy Certificates – they receive one REC for every MWh dispatched, with a REC currently worth $85 – to undercut coal and gas generators. Those generators (forced to remain online because they’re scheduled and would face penalties if they didn’t) continue to burn fuel, pay wages and overheads, but are unable to dispatch electricity and earn revenue.

So, the scheduling rules that Angus Taylor is about to tackle involve a double whammy for conventional generators: they suffer financial penalties imposed by the grid manager if they fail to deliver power according to the grid manager’s pre-ordained schedule; and they suffer financial losses because they can’t deliver power when the sun is shining and the wind is blowing, even though they continue to burn coal and gas and run up other costs.

If anyone studying the operation of markets is looking for an example of an unequal playing field, Australia’s electricity market is it.

While there’s been plenty of talk from Liberal and National MPs about refurbishing Australia’s existing fleet of coal-fired power plants and building new High Efficiency Low Emissions coal-fired plants, unless and until the dispatch rules are returned to what they were in 2008, conventional generators will suffer the same disadvantage that’s making them unprofitable, now; and which has done so, since 2009.

The first and most obvious step towards restoring reliability to Australia’s power grid and affordable power to Australian power consumers, is redefining wind and large-scale solar as non-scheduled generators. By that definition, wind and solar power outfits would no longer be able to participate in the NEM, without the permission of the grid manager. Scheduled generators, on the other hand, would be able to dispatch electricity according to the schedule, without interference from chaotically intermittent and heavily subsidised wind and solar.

The alternative is to classify all generators as “scheduled” generators; thereby requiring wind and solar power generators to actually compete in the power market and to suffer the same financial penalties that apply to every other generator in the market. Either way, the characters who keep claiming that wind and solar are truly competitive would get the opportunity that they fear the most: a head-to-head with coal, gas and hydro.

For Taylor to meet his objective of getting power prices down, his other target must be an immediate end to the subsidies directed to wind and solar (currently worth more than $3 billion a year) that created the mess, in the first place.

The direct cost of those subsidies is added to every Australian power bill; namely the cost to retailers of purchasing the mandated number of Renewable Energy Certificates each year: 28 million this year, with the mandated requirement rising to 33 million in 2020, with that number needed each year until 2031. The alternative for retailers is paying the shortfall penalty, a $65 per MWh fine imposed for failing to meet the LRET’s mandated targets, set by the Federal government’s Renewable Energy (Electricity)(Large-Scale Generation Shortfall) Act 2000.

The indirect costs of intermittent wind and solar are also born by power consumers, which include: power market gaming around wind and solar output collapses, that send the spot price all the way to the regulated market cap of $14,200 per MWh, for power that costs less than $50 from coal-fired plant; and escalating distribution costs, the result of building networks to take spurts of ‘occasional’ power from hundreds of very remote locations.

Needless to say, nothing much has changed in the last 5 years. Indeed, with a rapid increase in wind and solar generating capacity, the situation has become a whole lot worse. So much so that the ‘regulator’ is arguing that the regulated wholesale market price cap (currently $16,000 per MWh) be amped up to $22,800 per MWh.

Bear in mind that our remaining coal-fired power plants are still capable of dispatching power, profitably, at less than $60 per MWh, all day, every day, whatever the weather, without batteries and without backup.

Those plants have ceased to be profitable for precisely the reasons set out above.

Those reasons remain, hence the regulator’s efforts to up the price cap so that the owners of fast-startup Open Cycle Gas Turbines and diesel generators can rake in even more easy cash, whenever high demand coincides with sunset and/or calm weather.

Simon Benson lays out the propaganda pitch from the Energy Market Commission below (with some helpful STT comments provided).

Power prices set to go up another three per cent after rule change by energy market regulator
The Australian
Simon Benson
15 September 2023

Electricity prices are set to rise further over the short term under a draft ruling by the Australian Energy Market Commission to raise the existing market price cap to drive urgent new generation as households and businesses face the prospect of blackouts.

The AEMC on Thursday announced draft changes to the National Electricity Rules that it says were needed to prevent an electricity reliability failure as ageing coal-fired generation plants were retired amid the transition to more renewable ­energy. [STT: These plants are not anywhere near decrepit, they are simply unprofitable because they are being undercut by subsidised wind and solar when the sun is up and the wind is blowing – see above.]

The AEMC modelling revealed that the proposed move to raise the wholesale price ceiling from $16,000/MWh to $22,800/MWh by 2027 would result in retail electricity prices rising by a further 3 per cent. [STT: don’t believe a word of it; retail power prices will skyrocket. Anyone backing energy market ‘modelling’ hasn’t been paying attention.]

This would come on top of the more than 20 per cent increase to retail electricity prices consumers are already facing. [STT: 20-30% starting in July, on top of 10-15% increases last February, with Australian power prices now among the highest in the world.]

The move to reset the pricing rules is the first permanent change in more than a decade amid warnings that without the new investment, retail prices could eventually rise by significantly more. “This proposed change is about improving reliability and decreasing prices for households and businesses over the long term,” a spokesperson for Climate Change and Energy Minister Chris Bowen said. [STT: wrong. Throwing petrol on out-of-control fire, more like.]

It is the second alarm bell for the Albanese government over its drive to transition the energy market to renewables amid warnings raised in August by the energy market operator that a lack of investment in new generation would lead to a reliability crisis. [STT: wrong again. It’s the deliberate destruction of the reliable generators that ran perfectly well, for almost a century that’s done the damage.]

The AEMC says the current wholesale price was too low to drive more generation investment into the system and consumers would ultimately benefit from greater competition, resulting in greater reliability and lower retail prices of 1.6 per cent over the long term. [STT: opportunistic price gouging is not competition, it’s crony capitalism, and its worst.]

The draft determination by the AEMC says “price settings in the wholesale electricity market are currently set too low to ensure there is enough generation and battery storage to keep the system reliable as it transitions”. [STT: the transition they’re talking about is one where power is routinely rationed and so expensive that low income households and low margin businesses will never afford it.]

“The AEMC sets the rules for the National Electricity Market and provides independent expert energy advice to Australia’s state and federal governments,” the AEMC said. [STT: the experts in question have no engineering or electricity market expertise; they’re are arts/law grads who haven’t a clue about how electricity grids are run and operated. The engineers were shown the exit, years ago.]

“It is strongly focused on providing a framework for a reliable electricity system and affordable electricity prices, particularly in light of the current cost-of-living concerns. [STT: that would involve maintaining coal-fired power generating capacity, adding to it and ditching intermittent wind and solar, altogether.]

“An essential part of this work involves implementing arrangements to make sure there is enough electricity supply in the wholesale electricity market to meet the needs of households and businesses over the coming years and reduce the risk of outages. [STT: see above.]

“Analysis from the AEMC has shown that price settings in the wholesale electricity market are currently set too low to ensure there is enough generation and battery storage to keep the system reliable as it transitions.” [STT: battery storage is a complete myth; at its best, battery storage involves short bursts of power being delivered to maintain frequency. Grid-scale storage electricity is impossible using batteries for reasons both economic and physical.]

The AEMC said the proposed new price settings would have “no impact on wholesale electricity prices over 99 per cent of the time” and would kick in only in extreme or emergency settings. [STT: more propaganda, it all depends on the weather now and time of day. Increasing reliance on wind and solar means increasing opportunities for price gouging by the owners of fast start gas and diesel generators.]

However, they would deliver additional capacity into the system by driving new investment “that will have substantial benefits in reducing the risk of outages and ensuring our electricity system remains reliable for households and businesses”.

“As these price settings apply rarely, the proposal is expected to result in a relatively small impact on retail electricity prices,” it said. [STT: perhaps, they can put up some kind of financial guarantee behind that statement? But we doubt it. Talk is always cheap.]

“The Reliability Panel’s modelling predicts a small increase in retail electricity prices by 2027, but ultimately the adjustment will lead to lower long-term prices for consumers than would otherwise have been the case.” [STT: These are the same modellers that predicted Australians would already be enjoying the lowest power prices on earth.]

The modelling also showed extra investment stimulated under the rule change would ultimately result in lower prices and better reliability because of the effect the investment would have on driving competition in the market. [STT: utter twaddle. The last 20 years proves just the opposite.]

AEMC chair Anna Collyer said adjustments needed to be made to manage the transformation and “support decarbonisation of the electricity sector. These changes would encourage more generation and battery storage into the system when we need it most, reducing the risk of damaging outages for electricity consumers and keeping the system stable as we rapidly transition to higher levels of renewable energy and decarbonise our economy,” she said. [STT: spoken like a true ideologue. If she was serious about reducing carbon dioxide gas emissions in the electricity generation sector, she would be out there promoting nuclear power generation, as if this country’s future depended upon it. But don’t hold your breath.]

Opposition energy spokesman Ted O’Brien said the proposed rule change would force consumers to pay for the transition to renewable energy.

[STT: correct. Households and businesses are already on the hook for tens of billions in subsidies and are suffering the world’s highest power prices all thanks to an obsession with intermittent wind and solar. Welcome to your wind and sun powered future!]

[STT: correct. Households and businesses are already on the hook for tens of billions in subsidies and are suffering the world’s highest power prices all thanks to an obsession with intermittent wind and solar. Welcome to your wind and sun powered future!]
The Australian