Farewell CET:
Energy Minister Josh Frydenberg has all but ruled out a clean energy target, saying the transition to lower greenhouse gas emissions cannot come at the expense of the reliability and affordability of our electricity system.
Mr Frydenberg told the National Energy Summit in Sydney that emissions in the electricity sector had fallen over the last two quarters as a consequence of the closure of coal-fired power stations and flatlining demand, but said this could not continue if it made power less reliable or affordable.
“As Minister for both Energy and Environment, the first time these responsibilities have been brought together, I am acutely aware of this delicate balance.
Should reliability and affordability be compromised, public support for tackling climate change will quickly diminish and previous gains will be lost. This is in nobody’s interest.
…It is against this backdrop of a declining cost curve for renewables and storage, greater efficiencies that can be found in thermal generation and the need for sufficient dispatchable power in the system that we are considering the Finkel Review’s 50th recommendation to which we’ll respond before the end of the year.
It is important to not lose sight of the fact that we accepted and are now implementing 49 out of the 50 Finkel recommendations through the COAG Energy Council.
Many of the recommendations will have a profound impact, with new requirements around notice of closure, generator reliability and security being long overdue.
…This is because in an energy only market, large amounts of wind and solar produce low wholesale prices when they are running, but very high prices when they are not.
This volatility creates an uncertain investment climate and makes it more difficult for synchronous generators to recover their fixed costs and remain commercially viable.
As these generators are pushed out, liquidity in the contract market is reduced, not only because there are fewer participants who can provide firm hedging, but also because new entrants are deterred by the greater volatility risk.
To take this point to the extreme, the Grattan Institute has pointed out that, for a system with 100 per cent renewables, the wholesale price cap would need to lift more than fivefold to between $60,000 and $80,000 to ensure a sufficient revenue stream.
No jurisdiction could be expected to embrace such extremes and in many other countries they have not.
…It’s high time that the states and territories accepted that by going it alone and frustrating a truly national approach, they are driving prices higher, reliability lower and making the smooth transition to a lower emissions future that much more difficult.
By sanctioning the uncompetitive bidding practices of government-owned generators or appeals under the Merits Review process for networks, state governments have prioritised profits over lower energy prices.
Indeed in Queensland over the last few months, the wholesale electricity prices have gone down by 25 per cent, following a belated state ministerial direction.
And in the ACT and New South Wales had the Limited Merits Review process been abolished sooner, citizens of those jurisdictions would have had power bill savings of more than $5 billion.
…This policy did not anticipate or adequately deal with the situation where there would be a particularly high penetration of renewable in a single region, namely South Australia, where storage and stability services would be at a premium.
While renewable energy advocates quickly seek to justify their subsidies by pointing to emissions as a costly externality it is only fair to point out that renewables without storage are also a costly burden.
The best illustration is the experience of South Australia, where the spot price increased by 84 per cent between 2015-16 and 2016-17, following the closure of the Northern coal-fired power station last May and the rising cost of gas-fired generation.
With wind on any given day providing between zero and 100 per cent plus of the state’s needs and only limited and more expensive gas left to balance the variability, the markets quickly priced in this risk.
Nearly all politicised rubbish in complete contradiction with the scientific advice coming from the government’s own Finkel Review and the Australian Energy Market Operator. The CET is part of the answer to all of the problems outlined, as it accelerates the uptake of storage and many other grid stabilising solutions.
The only problem with the energy transition has been the price of gas, as those occasional slack renewable moments have driven peaking power gas plant prices to the moon. That is the result of the cartel that has taken control of gas reserves not the renewables.
And so Coalition chaos in energy policy sinks to a new low:
- it wrecked the carbon price which charged companies for pollution;
- sanctioned the RET and Direct Action which charge consumers for pollution;
- did nothing as gas prices skyrocketed and has done far too little after the fact;
- commissioned white elephant solutions like Snowy and Hele;
- commissioned scientific studies then ignores their recommendations;
- scraps the CET.
Each new transgression is designed to create a political wedge to derail Labor, not to benefit the national interest. The latest being about support for coal as base load power instead of fixing the real problem in gas prices.
Why Australians vote for this at all is beyond me.
