Why Electricity Prices Have Risen So Much
Richard Morgan has again managed publication of an advertisement by his Climate Study group, this time to even a half-pager in today’s Australian and titled REALLY DANGEROUS, GLOBAL CLIMATE CHANGE, THE NEXT ICE AGE. Readers of this Commentary are familiar with the argument by the group that “ the dangerous global warming threat is …not supported either by failed climate models or evidence from past global climate experience”. But note that it also says that “past levels of CO2 were at least four times the present level without dangerous global warming” and that “the next ice age should be the most serious climate event for humanity to fear.“ Having regard to all this, it said “there is an urgent need to bring power costs down” (see full ad with title of Ice Age Possible).
The Australian also published today the average wholesale energy prices in each state and it shows that Victorian and South Australian “have more than doubled since this time last year, as experts warn that blackouts and supply issues are likely to increase as state governments chase aggressive renewable energy targets”(see Vic/SA Energy Prices Double). The basic reason for this doubling is the reduced usage of cheaper coal-fired power (including the premature closure of a number of generators) and the substitution of usage of the more expensive and less reliable wind and solar power. What is emerging is that the larger that wind and solar are used as power “fuels” the more that some form of additional back up is required (adding to expenditure) and/or the more that higher prices will be required when electricity is in short supply because there is no wind or sun. In this regard, note the view expressed by a former US Energy Secretary under Obama (and Nobel Prize Winner) that batteries are too expensive to be a major source (see Batteries as Source of Electricity).
The recent heat wave on 18/19 January illustrates what can happen when a “short supply” problem develops in circumstances where a significant “fuel” supply is normally provided by wind/solar. An analysis of electricity prices for those two days by Dr Tom Quirk and Paul Miskelly (see Analysis of Electricity Prices for 18/19 Jan Heat Wave) shows that the price of electricity in each of Victoria and S Australia jumped in the afternoon of each day and they calculate the total extra cost as being some $400 million. There were no reports of blackouts. In short, when a significant supply normally comes from wind/solar, the “back-up” will have to include an increase in prices charged to consumers.
When a similar situation arose on 28/29 January reports of blackouts also emerged in each of the two States but have been denied in Victoria as being due to “shortages of supply”. The explanation (sic) in Victoria by Premier Andrews is that “there were distribution and localised network problems in individual neighbourhoods”, whatever that means (see Andrews on Electricity Prices Jan 29). Andrews also suggested that the distributors may have to pay compensation as they are responsible for supply.That is what is normally called “passing the buck”.
The bottom line is that the states of Victoria and SA are now so reliant on wind/solar as “fuel” that, when heat wave conditions occur, they are exposed to additional costs on top of the additional costs that renewables incur anyway. Energy Minister Frydenberg goes along with Andrews in accepting that “the weekend power outages were the result of distribution rather than supply issues”, but without explaining what “distribution” exactly means in this context. He is right, though, in “calling upon the Andrews government to drop its reckless state-based renewable energy targets and mindless bans on gas”. One might have hoped here that Frydenberg would also take the lead by, at a minimum, reducing the Federal government’s “reckless” renewable and emissions targets.
Warming Up for Resumption of Parliament
Parliament resumes on 5 February but there already signs of leaks which seem to be directed at alleviating any further decrease in polling for Turnbull that might occur at next Monday’s Newspoll and thus increase support for Abbott (see Warming Up for Next Parliament). Somebody leaked to the ABC an item for consideration by the expenditure review committee established by the Abbott government in 2014. One of the options for consideration by the committee (but rejected for consideration by Cabinet) was the possibility of preventing anyone under 30 from accessing income support. The ABC dutifully gave this a run in last night’s 7.30 report but it didn’t seem to do more than draw attention to the fact that Abbott remains a candidate for PM.
Strangely, Turnbull judged it necessary to comment today on another leak to the ABC, this time about the performance of Scott Morrison when he was immigration minister in the Abbott government and when as PM Abbott played a leading role in establishing the border protection policy. Turnbull said the Coalition made no apologies for sending the clearest message to people smugglers, which he in fact he did shortly after he became PM.