Climate policy shambles, power prices up

    One energy company executive, who asked not to be named, said the industry was beside itself.

    “One of the most concerning developments in politics is that the quality of an argument no longer matters,” he said.

He went on to say that they all knew we needed to head for zero emissions. They just wanted to know what the rules would be on the way.

That was from the AFR article Labor backs the NEG as political mess sends power prices up. The print edition carried it as a front page headline story:

Political power price hit

Here’s what has happened on prices:

Opposition energy spokesman Mark Butler pointed to the Energy Security Board modelling which showed an annual saving of around $150 a year for the NEG which would be due largely to investor certainty. That is quite apart from the cost of energy production and I think can be attributed to sentiment and cheaper money because of reduced risk.

The modelling also showed that having no policy would add another $300 to bills over a decade.

The article goes on to say:


    “I can’t see how the death of the NEG will have helped suppress future prices. Future contracts represent the market’s consensus view of where electricity prices are headed,” Energy industry expert Paul McArdle, who is the chief executive of energy software company Global-Roam, said.

    Future prices in most states started heading north from mid-August in most of the 36 contracts as investors saw the Coalition’s signature NEG slowly being dismantled, according to Global-Roam.

    Future prices for 2019 have jumped to $86.77 per megawatt hour in NSW, $92.93/MWh in Victoria, $72.42/MWh in Queensland and $96.71/MWh in South Australia, according to ASX Energy.

PM Scott Morrison has separated responsibility for energy and climate. Senior cabinet members simply assert that we will meet our Paris commitments of a 26% reduction in emissions “in a canter” (it was actually 26-28% across the board), from the cherry-picked starting point of 2005, as against the more usual starting point of 1990 used by serious countries. For a good example of how they handle this question, see Stephen Long’s There’s a certain Trump-like quality to Australia’s discourse on emissions reductions:

    The PM reckons we’ll meet the targets “in a canter”.

    “We’re on track to achieve them,” the new Environment Minister, ex-mining industry lawyer and mining executive Melissa Price, also reassured radio listeners, adding that she supports the construction of new coal-fired power stations.

    Foreign Minister Marise Payne — back from meeting Pacific Islands leaders whose nations literally face an existential threat from climate change — joined the chorus, as did Energy Minister Angus Taylor.

    Australia is on track to “meet and exceed” the Paris commitments, according to Trade Minister Simon Birmingham.

    “We are already more than meeting the 26 per cent that was set down in the Paris agreement,” National Party leader Michael McCormack confidently told David Spears on Sky News, though when pressed, he was a bit unsure about what information that claim was based on.

    “Well it’s er, based on, er, the figures that er, the data that is, er, produced by those people who measure emissions, as far as I’m aware,” he said.

Unfortunately:

    these reassurances are at completely at odds with the Government’s own official advice.

    Australia’s commitment to the global community is to cut greenhouse gas emissions by 26 to 28 per cent below 2005 levels by 2030.

    Just before Christmas last year, the Australian Government published a report which suggests that — without significant policy change — Australia will miss that commitment by a long way.

    Emissions in 2020 will be just 5 per cent below 2005 levels, according to the official projections and — without further measures to cut them — emissions will grow by 3.5 per cent on 2020 levels in the 10 years to 2030.

    In other words, we’ll go backwards in the coming decade.

As seen on this graph, when reality is inconvenient you just draw a dotted line to where you want people to think you are going:

In truth climate minister Melissa Price has been tasked with coming up with the necessary plans, but it looks like mission impossible with the energy sector policies in shambles.

Problem is, we don’t just have inaction, we have an erratic government that seems capable of just about anything. The AFR article says:

    The Australian Competition and Consumer Commission’s 56 recommendations on the electricity market were predicted to bring electricity prices down by an average of $409 by 2020-21, but the Coalition cherry-picked a handful of market interventions, including setting a default contract price and the federal government helping underwrite new generation, rather than all, the recommendations.

There is much hand waving and threats of using a “big stick”, meaning breaking up companies and compulsory divestment. Tony Wood from Grattan:


    “People will still invest in things, but there are big questions about whether the government is going to start bashing up AGL again about keeping Liddell open, will the new government stick with the ex-prime minister’s nation building project Snowy 2.0. There are so many moving parts and we don’t know what’s going to happen.”

We have full-scale sovereign risk.

Killing the NEG has set Labor free. It had been inclined to support the NEG for the sake of achieving bipartisanship. Now Mark Butler says:

    Labor was talking to stakeholders “about a policy that will pull through the investment we need to renew a system that is getting old and increasingly unreliable, will cut pollution, drive jobs, and particularly put downward pressure on power prices once and for all”.

    He all but ruled out carbon price schemes such as an emissions intensity scheme because they “require a level of bipartisanship”.

Meanwhile Giles Parkinson points out in his piece in the price hikes that the large coal burner Loy Yang A has just tripped four times in five days:

Old coal is neither dispatchable nor reliable.

This week’s Essential Report (whole report here) shows that voters want action on reducing carbon emissions to the tune of 69-23. Even Lib/Nat voters favour action 62/32.

Meanwhile Morrison has pulled a number from somewhere (there is a rude explanation for this which seems the most likely) by claiming that:

    “Labor will legislate a 45 per cent emissions reduction target that will push power prices up by $1400 a year.”

I searched and all I could find was this – Coalition’s national energy guarantee predicted to drive up power prices:

    New modelling forecasts Labor’s 45% target will force down Australian prices but government’s 26% will not.

On Friday 20 July Reputex modelling showed;

    Over the life of the Turnbull government’s scheme, wholesale electricity prices are forecast to fall initially, reflecting the entry of already committed renewable capacity, then rise above $70 per MWh after the Liddell coal plant in New South Wales closes, then climb to $80 per MWh after the expected retirement of Yallourn in Victoria 2028.

    But RepuTex says if the emissions reduction target was higher, at 45%, the policy would impose a constraint on emissions from coal-fired generators, and drive more new investment in large-scale renewables, adding more than 22GW of solar and wind capacity.

    “Similar to the price decline under the 26% scenario prior to 2020, the competitive pressure from higher solar and wind energy is modelled to push wholesale prices lower, eventually resulting in the closure of excess coal capacity,” the analysis says.

    The modelling assumes the AGL-owned Liddell plant closes in 2022, with other coal plants retiring closer to 2030. It then assumes renewables will displace some dispatch of gas generation during the day, which increases the opportunity for energy storage of excess renewable energy.

    “As a result wholesale electricity prices oscillate around $60 per MWh through to 2030, rather than rise above $80 per MWh as seen under the low investment scenario under a 26% Neg,” the analysis says.

Stephen Long is right, there is a Trump-like character to this government.

6 thoughts on “Climate policy shambles, power prices up”

  1. In yesterday’s AFR is an article by Mark Ludlow headlined Clive Palmer says he is serious about building new coal-fired power station in Galilee Basin. The article includes:

    Former politician and Queensland businessman Clive Palmer’s plans to build a $1.5 billion ultra supercritical coal-fired power station in the Galilee Basin, about 500 kilometres from the coast, have been met with a mixture of disbelief and cynicism about whether the unlikely project will see the light of day.

    The Conversation June 27 article headlined New coal doesn’t stack up – just look at Queensland’s renewable energy numbers by Matthew Stocks and Professor Andrew Blakers, includes:

    Virtually all new generation being constructed in Australia is solar photovoltaics (PV) and wind energy. New-build coal power is estimated to cost A$70-90 per megawatt-hour, increasing to more than A$140 per MWh with carbon capture and storage.

    Solar PV and wind are now cheaper than new-build coal power plants, even without carbon capture and storage. Unsubsidised contracts for wind projects in Australia have recently been signed for less than A$55 per MWh, and PV electricity is being produced from very large-scale plants at A$30-50 per MWh around the world.

    And the South Australian concentrated solar thermal (CST) 150MW with 8 hours storage Aurora project is capped at $78/MWh. But that’s a one-off generator unit – larger (say 200 – 220 MW capacity per generator units) with more energy storage (say 16 to 17 hours energy storage each at max power output) to increase capacity factor (to say 65 to 70%) and multiple concurrent-built (say five) generator units, delivering electricity over a 20-year supply contract period, would likely be significantly cheaper. The question is: Could this strategy push CST (dispatchable solar) energy supply costs below $70/MWh or lower (even low $60s/MWh)?

    The interesting thing to see is whether Queensland electorate constituents will be duped by Clive’s promises for a coal-fired power station. I suspect wily Clive has his eye on the Commonwealth Northern Australia Investment Facility (NAIF) to fund it at tax-payers’ expense. Will the Queensland Government veto NAIF funding? We’ll see.

  2. Today’s SMH article headlined More Australians fear climate change as Morrison government dumps emissions legislation, by Nicole Hasham, begins with:

    Voter concern about climate change has surged and about half of Australians want new coal mines banned, according to new research that suggests the Morrison government’s relegation of emissions reduction is at odds with public sentiment.

    The article refers to new research by The Australia Institute published today.

  3. Yes, TAI have taken over Climate of the Nation from the Climate Institute, which went defunct last year.

    I’ve promised myself to do three posts I’ve been wanting to do for some time, then I might get back to looking at it.

  4. On September 3, BZE Community Radio Show produced a podcast titled Rise Up For Climate, link here. It includes interviews with:

    Ian Dunlop, Member of the Club of Rome, from time interval 02:24 through to 20:04;
    Louise Fraser, Member of 350.org, from time interval 20:23 through to 26:15;
    Sarah & Tim, Members of Frontline Action on Coal, from 26:15 through to 34:15; and
    Giles Parkinson, Editor of RenewEconomy, from time interval 34:45 through to 53:10.

    Ian Dunlop says (from time interval 14:31, bold text my emphasis):

    We [i.e. Australia] benefit by exporting a vast amount of fossil fuels, and if you include our exports, then we are the sixth largest carbon polluter in the world, after basically China, the US, Russia, and just behind Saudi Arabia [cough] – pardon me – umm… just behind Saudi Arabia basically, and, and the problem… And India, sorry. And the, the problem is that if we… What we do matters. I mean, Australia’s ah… total emissions, including exports are very substantial indeed, and it is, it’s basically completely irresponsible, and a crime, basically a crime against humanity, in my view, for us to sit here and say, well we can keep expanding our exports. I mean, even today, what we’ve locked-in in terms of expansion of LNG exports, for example, is going to mean that within a year or two, we’re going to become the fourth largest carbon polluter in the world. Now, if we do nothing, then why should anybody else do anything?

    From BP Statistical Review of World Energy – 67th Edition, published June 13:

    On page 28: Production of natural gas in year-2017 in descending rank order: #1, USA (20.0% global share, 734.5 Gm3); #2, Russian Federation (17.3%, 635.6 Gm3); #3, Iran (6.1%, 223.9 Gm3); #4, Canada (4.8%, 176.3 Gm3); #5, Qatar (4.8%, 175.7 Gm3); #6, China (4.1%, 149.2 Gm3); #7, Norway (3.3%, 123.2 Gm3); #8, Australia (3.1%, 113.5 Gm3)

    On page 38: Production of coal in year-2017 in descending rank order: #1, China (46.4% global share, 1747 Mtoe); #2, USA (9.9%, 371.3 Mtoe); #3, Australia (7.9%, 297.4 Mtoe); #4, India (7.8%, 294.2 Mtoe); #5, Indonesia (7.2%, 271.6 Mtoe); #6, Russian Federation (5.5%, 206.3 Mtoe); #7, South Africa (3.8%, 143.0 Mtoe); #8, Colombia (1.6%, 61.4 Mtoe)

    On page 11: Global coal consumption in 2017 fell to 27.6% primary energy share, and natural gas accounted for 23.4% of global primary energy consumption. Renewable energy hit a new high of 3.6%.

    Giles Parkinson laments the lack of knowledge most journalists display when reporting on energy technologies, and suggests most of them allow mistruths/lies to remain unchallenged.

    I recommend you listen to interviews with Ian Dunlop and Giles Parkinson in full.

  5. Late yesterday in the SMH is an article headlined Industry calls for NEG resurrection to end ‘cycle of hope and despair’ by Nichole Hasham. It includes:

    Senior Labor sources have confirmed the opposition is seriously considering resurrecting the National Energy Guarantee, subject to discussion with stakeholders, believing it could achieve the bipartisan support needed to broker an enduring ceasefire in Australia’s climate wars.

    I can’t see why Labor is spending effort on resurrecting the NEG. It certainly needs to be extensively reworked to encourage more renewables into the NEM.

    As Professor Andrew Blakers testified under oath earlier this year (on page 53, bold text my emphasis):

    The key point that I would like to get across is that the game is up—wind and solar photovoltaics [PV] have won the race. It is a lay-down misere. The number one new generation technology being installed around the world is solar PV, number two is wind, and coal is a distant third. This year, roughly 200 gigawatts of PV and wind new generation capacity will go in around the world, while only 50 gigawatts of coal will go in. That is a difference factor of four between PV and wind and coal. In Australia, virtually all new generation capacity is PV and wind. The reason for this is that PV and wind are decisively cheaper than coal, even when one adds the additional costs to stabilise a variable renewable energy supply, such as storage, primarily in the forms of batteries and pumped hydro; stronger interconnection; and some spillage of wind and PV. That is the basic message I have. If you want cheap electricity you push renewables as hard as you can.

  6. Climate and energy policies are inextricably linked.

    Yesterday, posted at crudeoilpeak.info is an article headlined What happened to crude oil production after the first peak in 2005? by Matt.

    Fig 13: Cumulative crude production changes since 2005 shows only Iraq and the US provide for global growth in oil production.

    Matt’s conclusion:

    Assuming that the balancing act between declining and growing countries continues (from Mexico through to Canada) the whole system will peak when the US shale oil peaks (in the Permian) as a result of geology or other factors and/or lack of finance in the next credit crunch and when Iraq peaks due to social unrest or other military confrontation in the oil producing Basra region. There are added risks from continuing disruptions in Nigeria and Libya, steeper declines in Venezuela and the impact of sanctions on Iran.

    The sooner Australia transitions away from petroleum oil dependency the better.

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