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That coal, gas and uranium rich Australia is in the midst of an energy crisis is mind-boggling to most.

Destroying an electricity grid and power market is very easily done. All it takes is to $3-4 billion a year in subsidies to weather dependent wind and sunshine dependent solar. That pricey and petulant pair have all but destroyed Australia’s economic competitiveness, across an entire range of energy dependent businesses and industries. One of those is agriculture.

Lower energy costs the priority: Rod Sims

The Australian

Glenda Korporaal

28 March 2018

Australia should focus on lowering energy costs rather than guaranteeing reliability, Australian Competition & Consumer Commission chairman Rod Sims said yesterday, as he declared high ­energy prices to be the biggest crisis facing the nation.

Mr Sims said Australia should not “overdo” its focus on ensuring the reliability of energy supply, because of the high cost implications.

“Let’s make sure that we keep the energy focus on affordability,” he told The Australian and Visy’s sixth annual Global Food Forum in ­Sydney yesterday. “We want to make sure that we don’t overdo the conversation about the reliability of electricity because the more you try to take any outage out of the equation — and that’s what we’ve seen in the past with the high network costs. Most of those increasing network costs are due to concerns over the system not being reliable enough.”

Mr Sims said the electricity ­industry needed to be able to run with some risk of a blackout.

“To have no risk of a blackout is too expensive,” he said.

Mr Sims’ concerns were echoed by Sunny Verghese, co-­founder of Singapore-based global food company Olam International, who said Australia had the highest ­energy costs of any of the 70 countries in which Olam operated.

Mr Verghese, whose company is the biggest producer of almonds in Australia, said Australia’s ­energy production system was “broken”.

Mr Sims said the ACCC would be delivering its report on how to get electricity prices down by the end of June. The ACCC is also undertaking a three-year review of the gas industry, which it started last year.

Mr Sims told the forum energy retailers were raising concerns about the market power of the big three energy retailers — AGL, Origin and EnergyAustralia — in their discussions with the ACCC.

“We have a lot of the retailers who are not part of the big three, talking to us quite a lot. (They) are very concerned that the three big retailers were so vertically integrated,” he said.

“When you have to buy ­energy, (and are also concerned about) emission reduction and ­reliability, the more levers you have got, the better placed you are,” he said. “The more advantaged you are, if you’re vertically integrated.”

Mr Sims said the issue of ­energy policy would be discussed at the next meeting of the Council of Australian Governments meeting, which would look at a paper from the Energy Security Board on the Coalition’s national energy guarantee.

He said most of the increase in costs in the electricity network were a result of spending “due to concerns over the system not being reliable enough”.

“I would hate to do that again with generation,” he said.

He said it was too early to give a view on what the ACCC’s recommendations would be.

Mr Sims said the New Zealand dairy industry, which is dominated by food giant Fonterra, had the advantage of significantly lower labour costs and “significantly lower electricity costs”.

“That matters in the dairy industry,” he said.

Mr Verghese said the high cost of electricity was one of the main problems facing the Australian agricultural industry.

“We have had a 50 per cent increase in electricity costs from 2012 to today,” he said.

“Among the 70 countries we operate in, in Australia we pay the highest electricity costs.

“The power transmission, power production, energy ­production system in Australia is broken.

“Fifteen per cent of the costs of production of our almonds is power and energy costs.”

He said the company was “completely helpless” to do anything about the situation.

The Australian

Rod Sims seems to have some kind of mental block, preventing him from coming to grips with the real cause of Australia’s power pricing and supply calamity. For Rod’s benefit we’ve included a picture (see above). See if you can join the dots?

And we’ll cross to Alan Moran who is as astonished as we are, that someone of Sim’s calibre is still blaming network ‘gold’ plating for Australia’s power market chaos.

Is this a dream or just a hallucination?

Catallaxy Files

Rafe Champion

29 March 2018

It seems that someone just said that it is too expensive to go for reliable power. We should aim for cheaper power. Can someone explain this?

Australia should focus on lowering energy costs rather than guaranteeing reliability, Australian Competition & Consumer Commission chairman Rod Sims said yesterday, as he declared high ­energy prices to be the biggest crisis facing the nation.

Mr Sims said Australia should not “overdo” its focus on ensuring the reliability of energy supply, because of the high cost implications.

Does this guy have any idea of the cost of blackouts? Can someone recall the cost of a blackout in an Aluminium smelter in SA? This is the story from Alcoa in Victoria, maybe that is what I was thinking about.

“To have no risk of a blackout is too expensive,” Simms said.

DONT MISS THE TESLA STORY IMMEDIATELY AFTER THE VICTORIAN ALCOA STORY!

The Alcoa story.

Alcoa said on Friday it will immediately begin work to restart production of the lost capacity, a process that would take around six months, with A$30 million ($23 million) provided by the federal government. Once work is completed, the smelter will be restored to the 85 percent capacity it was operating at prior to December 2016, Alcoa said. The government’s financial aid is dependent on the smelter remaining an operational until at least until 2021 and output remaining at least 90 percent of pre-blackout levels.

This is the Tesla story which comes up on the computer but not on my phone.

Update. Jo Nova on the joy of electric cars and the push for big spending on infrastructure to support them. Only $3Bill what the heck, scarcely more than petty cash in the accounts for the NBN and the NDIS.

Catallaxy Files

Alan could have also pointed to wind ‘powered’ South Australia’s September 2016 statewide blackout, which cost businesses more than $367 million; and its biggest miner, BHP Billiton, $137 million when SA’s wind power operators deliberately shut down their turbines during a typically vigourous spring storm: South Australia’s September Wind Power Blackout Cost Businesses & Households $367 Million

Rod Sims probably thinks that that kind of money is small beer. That he blames grid operators for rocketing power prices means he should get out more.

If he did he might pick up on the fact that wind powered South Australia and Victoria watched average wholesale prices double in less than 12 months:

SA’s went from $84.26 to $168.90 and prices more than doubled in Victoria, $62.04 to $139. Those eco-zealots claiming ‘it’s coal what dunnit’ might take a closer look at coal-fired Queensland and New South Wales.

Remarkably, both states enjoy wholesale power prices within a bee’s whisker of each other at $75.65 (QLD) and $75.36 (NSW) – with those prices having fallen since 2016. Those prices compare rather favourably with wind powered SA, where the wholesale price is 2.25 times higher; and wind powered Victoria, where the wholesale price is more than 1.8 times higher.

Queensland has virtually no wind power generating capacity and NSW a piddling 826 MW; the generation capacity of both states is dominated by coal-fired power plants (the stats for fossil fuel generators by state are available here).

The reason that Queensland’s wholesale price was running at $197 per MWh in 2016 was that its generators are owned by the State government which, looking to reduce its rising deficit and burgeoning debt, directed those generators to milk the power market for all it was worth. Facing an election last year, and rocketing retail power prices, the Labor government decided to pull the plug on what was a State-backed extortion racket.

What’s set out above, is the average price paid by retailers to obtain electricity from generators. The differences have nothing to do with network costs.

Victoria and SA are paying the price for killing off their coal-fired generators: SA blew up its last plant last December; Victoria killed off its Hazelwood plant last year and its out-of-control Labor government is hellbent on wrecking the balance. And the whole country is paying the price of the Federal government’s Large-Scale RET.

With people like Rod Sims in their corner, Australian farmers looking for respite are going to be sorely disappointed. Those trying to grow stuff, build stuff and mine stuff can expect a whole lot worse to come.