It’s Santa’s happy hour in electricity land
Finally, No really, renewables are so cheap we can switch to them and change the global climate for free.
This is a new study by the kind of “independent” group that is totally dependent on Big Gov handouts. It compares Australian prices to other obscenely expensive countries and finds that “renewables push down prices”. Compared to what? Not compared to nations with cheap electricity. And not compared to most of the last thirty years in Australia before we added all the unreliable gear.
The tricky graphs clearly baffled Peter Hannam. If only he were a journalist, he could have asked some hard hitting questions and shown this study to be the concocted vaporous PR exercise that it was.
‘No trilemma’: Study finds increased renewables push down power prices
Peter Hannam, Sydney Morning Herald
Renewable energy drives down wholesale power prices well in excess of subsidy costs and a further expansion of wind and solar would likely push them lower still, a study of Australian and European markets shows.
If renewables actually reduced average prices, this would be a first. Around the world, the more intermittent generators you have, the more you have to pay for electricity.
Figure 1 The Y-axis shows residential electricity prices for the second half of 2014 from Eurostat. The X-axis installed wind + solar capacity for 2014 as reported in the 2015 BP statistical review normalised to W per capita using population data for 2014 as reported by the UN. Source: Euan Mearns.
Say it again: there is no country on Earth with lots of solar and wind power and cheap electricity.
We don’t need a tricky model, we just need a graph.
Compared to what?
The findings come as Neoen, owner of the world’s largest lithium battery, claimed the storage unit in South Australia had saved the wholesale market about $40 million in its first year of operation.
The battery, whose capital costs have been reported as $90 million, had saved almost $40 million a year in Frequency Control Ancillary Service, benefiting SA and other regions.
Saved the market how much and compared to what? FCAS or Frequency control service charges hit a record high of $73 million last quarter (AEMO Q3 report, p 16). Has the battery saved us any money at all, or is it just that insanely expensive services could have been insane + $40m more? Wasn’t FCAS essentially free when we just ran with big coal plants?
The renewables research by the Victoria Energy Policy Centre, a hub set up by the Victorian government, examined the wholesales electricity market in South Australia from 2013-18 and compared it with the high-cost energy markets in Denmark, Germany, Italy and Britain.
Plum choice. None of these four nations have cheap electricity. Don’t we want to be cheap compared to… our competitors instead?
It’s a magical time of free money. Finally you can have cake, eat cake, and stabilize the grid with cake
Bruce Mountain, director of the centre and the lead author of the report, said there was no longer an industry trade-off between power prices, reliability and greenhouse gas emissions.
This group could have called itself the “Renewable Energy Industry Lobby Group”.
The Victorian Energy Policy Centre (VEPC) was set up by an organization that says climate change is real and we should spend billions on it. That organization has pegged its bets (and staked its reputation) entirely on a forced renewables transition. It also consumes more than a quarter of the entire state GDP.
The VEPC calls itself “independent” which is the luxury of government funded groups that are permitted to ignore the largest vested interests in their state and pretend it is not a vested interest.
This subsidy we don’t need, shouldn’t stop, and other Soviet bed time stories
The Prof says they don’t need subsidies, but the subsidies “pay for themselves” so therefore the government should do it more and faster. I think we’ve heard this before somewhere…
But Professor Mountain said if the objective is to bring prices down, “you ought to be hastening the entry of cleaner sources more quickly than otherwise would happen”.
“There is no doubt that the market left to itself will bring in wind and solar but if you bring it in more quickly and it can pay for itself so handsomely why would you not seek to do it?” he said, adding that the SA experience would be mirrored in other states such as Victoria, NSW and Queensland.
Indeed, in the non-communist-world, paying for something in advance to earn a greater return is known as “investing”. Since this is supposedly guaranteed free money, obviously Australia does not have entrepreneurs anymore. Either that, or Mountain is spinning a sales job, advertising lemons that don’t sell in the real world, because they don’t work, aren’t competitive and go out of business when the subsidies are cut off.
But who could blame him, Bruce Mountain is in a sense, a de facto employee of The Victorian Government, if he said anything less, they might have to shut down the centre, or at least, cancel next years grant. I’m sure everything he says is true (in a limited sense), and it just didn’t occur to him to compare us to countries with cheap electricity. Sure.
As for subsidies, we all know they prop up inefficient business and destroy jobs. Firstly jobs vanish thanks to the opportunity cost as other businesses close because they can’t afford electricity, then, secondly when the subsidy bubble bursts. The Germans have been cutting their subsidies, and it’s a bloodbath with 80,000 solar jobs gone. In Australia, when there were threats to review the RET scheme 90% of new large scale investments dried up. In China when $15 billion dollars of solar subsides were suddenly axed in June this year, solar stocks fell up to 30% the next day.
Notably, a Chinese academic explained at the time that the Chinese government was cutting the subsidies to make electricity cheaper — the exact opposite of what the Australian academic says. Who to believe? Should the government make investments or leave it to the market? See the Soviet Union versus USA, 20th Century.
One day, Australians hope to be as advanced as the Chinese in free market thinking for our electricity grid.
Back when Australian electricity was $30 a megawatt hour…
Renewables are so cheap that our wholesale electricity prices have tripled. For years the Australian NEM kept around a middling price of $30 per megawatt hour. Now it’s $90.
So try to make sense of this sentence:
In 2018, average wholesale spot prices in SA were $38 per megawatt-hour cheaper because of renewables, easily triple the $11/MWh cost of subsidies, the report found.
Cheaper than what? That’s a cost savings supposedly larger than the total cost used to be.
But when you are on a flimsy analogy, run with it!
“We estimate that expanding wind generation will reduce wholesale prices at the rate of around 9¢ per MWh, per one MWh of additional wind generation,” it said. “For solar – almost all of which has so far been on household roofs – we estimate the wholesale price reduction at the rate of around 26¢/MWh, per one MWh of additional solar production.”
Don’t believe your lying eyes:
Australian Wholesale Electricity prices, NEM 1999 –2017 | Click to enlarge | Graph from WattClarity.com.au.
Same for retail prices in Australia
Electricity prices were stable for a quarter of a century. Then we introduced renewables in a big way. Must be a coincidence…
Indexed Real Consumer Electricity Prices, Australia, 1955-2017.
The Sydney Morning Herald obviously serves its readers so well that subscriptions have gone through the roof, I hear the historic masthead was bought out and handed over to Channel Nine today.
It’s stories like these that get them there.
Note the disclaimer on the VCEP report: Scientific research may be incomplete
Disclaimer: The Victoria Energy Policy Centre and Victoria University advise that the information contained in this publication comprises general statements based on scientific research. The reader is advised and needs to be aware that such information may be incomplete or unable to be used in any specific situation. No reliance or actions must therefore be made on that information without seeking prior expert professional, scientific and technical advice. To the extent permitted by law, the Victoria Energy Policy Centre and Victoria University (including its employees and consultants) exclude all liability to any person for any consequences, including but not limited to all losses, damages, costs, expenses and any other compensation, arising directly or indirectly from using this publication (in part or in whole) and any information or material contained in it.
Publisher: Victoria Energy Policy Centre, Victoria University, Melbourne, Australia.
No kidding.
Handy questions journalists could’ve asked
- Is there any country around the world which has a high penetration of intermittent renewables and cheap electricity? Name them…
- Why didn’t the VEPC study compare Australia to the USA? The chief of BlueScope steel says energy costs are ten times less in the USA.
- If renewables are so cheap, why do so few companies invest in them without subsidies? (See subsidy withdrawals in Germany, China, Spain, UK and Australia).
- If renewables are so cheap, why is China secretly building more coal power plants?
- Australian electricity wholesale costs were around $30 per MWh for years on the national grid, then we added renewables. Shouldn’t the prices have gone down?
- If this study was supposed to calculate the comparative cost of renewables why did the VEPC ignore decades of our electricity price history. It seems like such an obvious thing to do?
- Did the VEPC take into account the hidden costs of intermittent power — how the irregular supply affects other generators and raises their costs? eg.Stacy, 2015, showed wind generation makes gas power 30% more expensive.
REFERENCE:
Associate Professor Bruce Mountain, Dr Steven Percy, Dr Asli Kars, Adjunct Associate Professor Hugh Saddler and Farhad Billimoria (2018) Does renewable electricity generation reduce electricity prices? Victoria Energy Policy Centre.
AEMO Quarterly Energy Dynamics, Q3, 2018
Stacy, T. Taylor, G. (2015) The Levelized Cost of Electricity from Existing Generation Sources, Institute for Energy Research (IER), based on EIA figures in the USA.