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Australia’s mainstream media occupy a fact and consequence free zone, where the sun always shines and the wind always blows. How else can their cult-like veneration of wind and solar power be explained?

With a growing group of National and Liberal MPs joining the Monash Forum, and dictating the terms about Australia’s energy future, those wedded to the idea that you can power an entire country, entirely on sunshine and breezes, have just had their comfy confidence in their intellectual and moral superiority, permanently shattered.

Here’s Alan Moran helping to smash their esteemed, and hitherto entrenched, sense of smugness.

Can the backbench energy revolt steer us back low cost electricity?

Catallaxy Files

Alan Moran

4 April 2018

It all came so suddenly.

Over the Easter break a ginger group of Coalition backbenchers, the Monash Forum, was announced. Chaired by Craig Kelly, one of the few MPs who has really studied the economic disaster that greenhouse policies are causing, it counts at least 20 MPs as members including Tony Abbott, George Christensen, Eric Abetz and Kevin Andrews.

The forum’s manifesto states opposition to all subsidies and argues that no private company will now invest in coal given the risk that government policies have imposed. It proposes a new government owned 2000 MW Victorian brown coal power station (about the size of Loy Yang A).

If nothing else, at one stroke the Forum has changed the agenda. The PM has joined Energy Minister Frydenberg in calling for a neutral technology policy which he says the National Energy Guarantee (NEG) provides. Maybe it does if you forget about

the on-going wind/solar subsidies that give small scale roof top facilities a subsidy of $40 per MWh (the full commercial cost of coal in those far off days of 2015) and wind farms $85 per MWh; plus in both cases state government support and direct support from the budget – in all over $5 billion a year.

the $4 billion plus that is to be spent by the Commonwealth on Snowy 2.0

increased coal royalties especially in Victoria

a gaggle of groups financed by governments who decry fossil fuel power as archaic and maintain- as they have for the past 30 years – that renewable power will in any event soon be cheaper.

Moreover the NEG itself is just a gossamer thin veil for a carbon tax. It comprises two components. The first is to ensure Australia meets its Paris Agreements commitments, ratified by Turnbull the day after Trump’s victory so he could argue we have a commitment and Australian keeps to its commitments, hence there can be no turning back. This component requires a continuing and growing level of renewable energy and an increasing level of the de facto carbon tax favouring renewables which has destroyed the industry so comprehensively.

The second component is a bone thrown to the commercial suppliers. To counter the intrinsic unreliability of wind and solar by requiring technologies that are not dispatchable – and wind systems can guarantee to be available only five per cent of the time – they must have firming contracts.

Turnbull, while a green energy warrior, is not entirely stupid and recognises that the poisonous policies he has championed are causing soaring power prices. He backgrounded the Australian’s Geoff Chambers to say that he has always sought the sale by AGL of its 2000 MW Liddell power station rather than the firm closing it to boost its profits from other generation assets. And Alinta, the recent buyer of Victoria’s 1000 MW Loy Yang B, has come out with a tentative purchase proposal.

Paul Kelly, suddenly finding his inner support for “market based” government non-intervention in energy markets, railed against the group’s proposal for a government power station, while maintaining support for renewable subsidies, adding that a new brown coal station would be useless as it would take 4-6 years to build. “There are no perfect answers anymore”, he says.

Judith Sloan totally debunks his and others’ confused statements drawing attention to the other subsidies, the international popularity of coal power and the disingenuous statements about the alleged neutrality of the NEG.

Over at the AFR, Ben Potter continues his campaign for renewables, selectively cited those supporting his view. Unaware of the Alinta developments, he quotes an unnamed EA spokesperson, the AGL CEO Vesey, now a supposed climate expert (“It is very simple: We are overloading the atmosphere with heat-trapping gas and the rest is details,”), and the Grattan Institute. Elsewhere the AFR sees the Monash Forum as another topple-Malcolm push (as does Paul Kelly).

A challenge to the PM may well be the outcome though his love of the job is already seeing him compromise with reality. The political elite, egged on by media praetors and vested interests, have created a situation where pursuit of a fashionable anti-fossil fuel agenda has destroyed the world leadership that Australia formally enjoyed in energy competitiveness. The rebound on general living standards is unavoidable.

The way forward is to scrap all renewable energy subsidies – not just those to future facilities. In addition, as governments have demonised and threatened coal so convincingly, there may now be no alternative to a government built or at least formally guaranteed power station development regime. In this respect at least Paul Kelly may be right in saying “There are no perfect answers anymore”.

Catallaxy Files

In a you’d hardly believe they’re on the same team moment, the Treasurer, Scott Morrison launched an astonishing tirade against the Monash Forum, making utterly false claims about the cost of power from coal-fired HELE plants, and claiming that massive subsidies gifted to wind and solar power outfits are a thing of the past.

Here’s Judith Sloan slamming Sco Mo’s trip down the rabbit hole.

Just how pathetic is ScoMo?

Catallaxy Files

Judith Sloan

4 April 2018

If you are in any doubt about how pathetic is our Treasurer, Scott Morrison, just read the following. Whose side is he on? springs to mind.

Where is he getting this stuff from? Andy “the rest is details” Vesey, carpetbagger from the US who now runs AGL.

Yes, it will take a while to build a HELE power plant but less time than the highly dubious Snowy 2.0, which no doubt he supports because his Dear Leader is infatuated by pumping water uphill to create less power than it takes to do the pumping.

And even if an HELE plant is charging $60 or $70 per MWh, this is much less than unreliable wind or solar with attached firming capacity. He really needs to do his homework.

That the LRET should have been allowed to continue until 2020 and then roll onto 2030 really is a disgrace. And the SRET certificates are placing ongoing pressure on household electricity prices. But actually ScoMo wouldn’t have a clue about any of these details.

And what about this howler from him:

“The days of subsidising energy are over whether it’s for coal, wind solar, any of them,” he said.

“That’s how you get the best functioning energy market with the lowest possible price.”

Oh please. The ongoing subsidies for renewables are massive, including the above but also direct grants from CEFC and ARENA and the priority given to renewables in terms of dispatch as well as the obscene subsidies being doled out by the states and territories.

And the “best functioning energy market”? Surely this is a joke when Snowy 2.0, at a cost of at least $4 billion, possibly more, will simply be insinuated into the market. Give us a break.

Give us a break. Here’s the AFR piece in which Morrison reveals his astonishing ignorance of his own government’s policy.

Scott Morrison blasts coal rebels, says new coal power twice as expensive

Treasurer Scott Morrison has blasted a call by Coalition MPs for the government to build a coal-fired power station, saying it would not provide cheap electricity as claimed, but power that could be twice as expensive.

With a ginger group of Liberal and Nationals MPs called the Monash Forum demanding the government invest up to $4 billion to build a High Efficiency, Low Emissions (HELE) coal-fired plant in Victoria, Mr Morrison said such a project would take many years to build and the electricity it produced would be far more expensive than that being generated by existing coal-fired power stations.

“There’s a difference between old coal and new coal. Old coal bids into the energy grid at about $30 a megawatt hour, it could be up to $40,’ he told The Australian Financial Review Banking & Wealth Summit.

“A new HELE plant five, six, seven years down the track is estimated to be bidding at around $70 or $80 so it is false to think that a new coal-fired power station will generate electricity at the same price as old coal fired power station for the obvious reason that the asset has already been written off.

“You just don’t open one up down the road and all of a sudden it’s producing power at the same price as Bayswater or any of the others. That’s just an economic fact.”

Mr Morrison said this was why generators such as Alinta Energy and Delta Electricity were interested in buying the Liddell power station from AGL Energy and keeping it running for up to seven more years until a generation shortfall that would be caused by its planned closure in 2022 is made up for by the expansion of the Snowy Hydro scheme.

“I’m not surprised Alinta and others are looking to buy an existing one, not build a new one,” he said.

“What they do in looking at a new one is they need to pay back over 15, 20 years, and so they’re going to need to have a guaranteed lock-in price at that much higher level for a much longer period of time.

“So the risk of that is consumers are going to have to pay more or taxpayers are going to have to pay more in higher subsidies.”

“And that was not going to happen.”

“The days of subsidising energy are over whether it’s for coal, wind solar, any of them,” he said.

“That’s how you get the best functioning energy market with the lowest possible price.”

An expression of interest by Alinta has increased pressure on AGL to sell Liddell with Prime Minister Malcolm Turnbull calling on the AGL to consider the interests of its customers, its shareholders and the public.

Mr Morrison said: “I would be hoping AGL will be giving this proposal every possible consideration.”

“I would be expecting them to act not only in their own interests but in the interests of the broader Australia economy and not be misusing any market position they have to prevent what is potentially a very good arrangement proceeding.”

Catallaxy Files

Having trouble comprehending that Australia’s Treasurer actually uttered these words, before we set him straight, we have to set them out again:

“The days of subsidising energy are over whether it’s for coal, wind solar, any of them.”

Er, not quite, Scott.

The subsidies for large-scale wind and solar under the Federal government’s Large-Scale RET will total more than $60 billion over the life of that scheme: the Renewable Energy Certificates issued under the LRET have already added more than $15 billion to power bills, so far.

And then there’s the billions in taxpayer’s money ladled out by the Clean Energy Finance Corporation in soft loans to wind and solar power outfits, as well as billion dollar gifts and grants from the ARENA fund, eagerly lapped up by renewables rent seekers.

Contrary to Scott Morrison’s deluded belief that subsidies to wind and solar have already been cut. And contrary to the propaganda dished up by others in the Coalition government, and those that spruik for RE outfits, the subsidies doled to wind and solar out under the LRET DO NOT END in 2020. Far from it.

The LRET target is set by s40 of the Renewable Energy (Electricity) Act 2000 (here).

Under the LRET the greatest single industry subsidy scheme of all time really only hits its straps in 2020, as the target reaches 33,000 GWh of mandated renewable energy – it runs at that rate until 2031:

Year Target in MWh (millions) REC Subsidy @ $85 REC Subsidy @ $93 2018 28.637 $2,434,145,000 $2,663,241,000 2019 31.244 $2,655,740,000 $2,905,692,000 2020 33.85 $2,877,250,000 $3,148,050,000 2021 33 $2,805,000,000 $3,069,000,000 2022 33 $2,805,000,000 $3,069,000,000 2023 33 $2,805,000,000 $3,069,000,000 2024 33 $2,805,000,000 $3,069,000,000 2025 33 $2,805,000,000 $3,069,000,000 2026 33 $2,805,000,000 $3,069,000,000 2027 33 $2,805,000,000 $3,069,000,000 2028 33 $2,805,000,000 $3,069,000,000 2029 33 $2,805,000,000 $3,069,000,000 2030 33 $2,805,000,000 $3,069,000,000 Total 423.731 $36,017,135,000 $39,406,983,000

At the present time, RECs are trading at $85 each: one is issued to a wind or large-scale solar generator for every MWh dispatched to the grid.

Retailers are forced to purchase RECs, with their alternative being a fine (referred to as the “the shortfall charge” – a ‘stealth tax’ on power consumers directed to general revenue) set at $65 for every MWh the retailer falls short of the annual LRET target. The fine is not tax-deductible (where the REC as an expense is), meaning that the true cost of the shortfall penalty is $93, assuming a corporate tax rate of 30%.

It’s that relationship that led to forecast prices for RECs of $93: it would make sense for retailers to pay that amount to avoid the shortfall penalty, which would effectively cost them the same figure.

In the table above, we’ve tallied up the cost of the REC subsidy using both the current $85 and predicted $93 figures. Each year, from 2020 until 2031, 33 million RECs must be issued and surrendered to avoid the fines under the LRET.

While Malcolm Turnbull spruiks his Snowy 2.0 pumped hydro white elephant, and his hapless sidekick, Josh Frydenberg promises Nirvana under his National Energy Guarantee, the cost of the LRET (in terms of REC subsidy alone) will push $40 billion between now and the end of the greatest scam in Commonwealth history.

The full cost of the REC Subsidy to wind and solar generators is born by retail power consumers: one reason for rocketing power prices; the other being the market distortions created by intermittent and unreliable renewables (see our post here).

And Judith Sloan is spot on: attempting to compare power generated on demand with power generated by the dictates of the weather is utter nonsense.

The reason the Monash Forum has fired into action, and the reason that it will continue to gain traction, is that there is no comparison between weather dependent wind and sunshine dependent solar and dispatchable power generation sources, like coal, gas, hydro and nuclear.

For people like Scott Morrison, still struggling with that reality, here’s a picture – the output from every wind turbine connected to Australia’s Eastern Grid (with a notional capacity of 4675 MW) during January: