In any bargain, those stumping up their own cash, tend to ask what they’re getting in return. When it comes to the billions in subsidies thrown at windmills and solar panels, the answer is: not much.
Including domestic, rooftop solar annual subsidies to wind and solar add up to a staggering $4 billion. The cost of which is added directly to retail power bills. The greatest government mandated rort in the history of the Commonwealth, started in 2001 and runs until 2031.
Now, the value minded might forgive the scale and duration of that forced ‘largesse’, if there were a commensurate increase in the output said to be drawn from nature’s wonder fuels, sunshine and breezes. Except, as David Bidstrip points out, the combined contribution of wind and solar generation to Australia’s energy demand remains risible, and little more than a rounding error.
Money for nothing
20 April 2018
Ex-Nationals senator Ron Boswell wrote in “The Australian” today, (19 April 2018), making the point that the RET is failing us and forcing electricity prices through the roof, putting ordinary folk in energy poverty and destroying businesses.
His solutions echo my thoughts and I suspect those of many others where he advocates long term contracts with organisations that are able to supply reliable power, also known as dispatchable power as it is available when needed rather than be subject to the vagaries of the wind and the sun.
I have trawled through the statistics provided by the Australian Government Department of Environment and Energy to look at the contribution of renewables to total consumption over the period 2000 to 2017. These statistics are released each year around about August and cover the preceding financial year as well as giving historical data on consumption and generation.
Total consumption for 2000 to 2017 was around 3,860,000 GWh. (A GWh is 1,000 Megawatt hours). In percentage terms generation figures become:
- Coal: 72
- Gas: 16
- Oil and “other”: 2
Total “fossil fuel”: 90.
- Bagasse, biogas and geothermal: 0.8
- Wind: 1.9
- Large PV: 0.02
- Small PV: 0.68
- Hydro: 6.4
Total Renewable: 10.
Excluding Hydro capacity, which existed long before “renewables” became fashionable, the “new” renewables of wind and solar contributed just over 2.5% of the total generation for the period and coal, gas and hydro total 94.4% of the total.
We pay a subsidy for the privilege of having intermittent sources like wind and solar. For the purposes of this exercise wind attracts $80.00/ MWh, hydro the same and solar $40.00.
Total renewable MWh for the period and the associated subsidies are:
- Wind: 74,100,000 at $80/MWh = $5.93 billion.
- Hydro: 245,800,000 at $80/MWh = $19.7 billion
- Large PV: 614,000 at $40/MWh = $24.5 million.
- Small PV: 25,300,000 at $40/MWh = $1 billion.
The total extra cost to consumers is about $27 billion for 9% of the total consumption. This is in addition to whatever those generators manage to get on the very flawed “market”. If they have some spare power when the real gouging is happening, it might be in the thousands of dollars per MWh.
If we consider the average load on the system in the first quarter of 2018, gleaned from AEMO data, it is about 22,200 MW which gives 533,000 MWh per day. This is an average so there are peaks and troughs but it should not be that hard to set a minimum rate of generation to cover the demand. It needs a bit more digging to find the limits to set and I do not have the expertise to do this however it can be done. There can be a “minimum” base load and the additional “peaking” plants to manage this in a way where the power is reliable and reasonably cheap compared to the prices people pay today.
Contracts for power would be set up as long term “take or pay” arrangements with the appropriate prices for the different types whether they are base load or peaking power.
Lots of people get their knickers in a knot about ideological/economic purity and froth at the mouth about “socialism” but the facts are that the “market” as it is fails to provide the best outcome for citizens, which should be the focus for government. We need to remember that electricity production and distribution was once in public ownership and the systems were designed and managed to produce the lowest cost/best reliability outcome. These assets were “sold” to fund government budgetary shortfalls, (remember the State Bank collapse in SA?), not because they were inefficient. I hear the economists now asking “what would he know?”
In order to maintain ideological purity for the “free market” people I am not suggesting nationalisation, although it is my personal preference. I would like to see generators operating in a regulated market where the opportunities for “unconsciable” conduct are limited. This is not the case now and it needs to be fixed. The current Banking Royal Commission is an object lesson in regulatory failure and corporate bastardry and the electricity “industry” is not far behind.
I find it infuriating to watch as politicians attempt to have us believe they can get the square peg into the round hole with a big enough hammer and the expenditure of lots of our money.
Finally, my research on average wholesale power prices in $/MWh for Q1 2018 shows the following:
- Cheapest: QLD $72.16
- Next: NSW $73.65
- Middle range: TAS $91.18
- Second most expensive: VIC $120.71
- Most expensive: SA $147.21.
Can someone explain to me how this happens in a market that is supposed to deliver electricity at affordable prices?
STT covered the Ron Boswell story, mentioned by David Bidstrup here: Economic Mercy Mission: Monash Forum’s Drive for Reliable & Affordable Power Gets Steamed-Up
To close the show, we’ll hand over to a guitar virtuoso called Knopfler, with a fair summation of the RE ‘bargain’ – from the rent-seeker’s perspective.