Renewable energy

In Australia, as Renewables Surge the Price of Electricity Doubles

Activist happy talk that transitioning to renewables will be cheap is entirely specious.

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AustraliaRenewablesAlexlmv
Alexlmv

The price of electricity is soaring in Australia largely because of mandated adoption of renewable power generation.

Yes, the price of renewable energy continues to fall, but mandating the installation of current wind and solar power technologies still boosts the price of electricity in countries pursuing decarbonization strategies as a way to mitigate climate change.

In an op/ed, "Green Madness: Australia Has Gone from Cheapest to Most Expensive Power," in The Australian, Flinders University economist Judith Sloan details what has happened to electricity prices as the government has enacted its Renewable Energy Target (RET) scheme.

AustraliaRenewables
Judith Sloan

Sloan observes:

The kicker is the fact renewable energy, with its preferential dispatch status and low operating costs, sends ­dispatchable power plants into early retirement and kills off the incentives to build new ones. Note that since 2011 nearly 6000 megawatts of coal-fired plant capacity has been withdrawn from the ­market, or close to 12 per cent of total capacity.

Now the point is often made that we have reached this appalling position — high-cost, unreliable electricity affecting, in particular, the competitiveness of our heavy industries — because of very poor government policy.

But whether the outcome was entirely unintended is not so clear-cut. From the time John Howard introduced the first version of the renewable energy target, it was a one-way street to more subsidised, intermittent renewable energy and an investment strike in dispatchable energy. This was the aim; it could not have been otherwise.

Australia's RET scheme has set a national renewable energy target of 20 percent by 2020. As of July, renewables accounted for about 18.8 percent of Australia's electric power generation, 41 percent coming from hydroelectric plants, 31 percent wind, 18 percent rooftop solar, and two percent from large solar farms.

Consider the cases of Germany and Denmark, two countries which have been aggressively mandating the switch to wind and solar power.

As Reuters reports Germany "has been getting up to 85 percent of its electricity from renewable sources on certain sunny, windy days this year." Overall, Deutschland got about 35 percent of its electricity from renewable sources in the first half of 2017. Rather stupidly, Germany is phasing out its no-carbon nuclear power plants which supplied 25 percent of the country's electricity in 2011, which has since fallen to 14 percent.

Interestingly, Germany still generates 43 percent of its electricity by burning coal, mostly lignite. In order to prevent manufacturers in search of lower energy prices from leaving, Germany charges very low wholesale prices for electricity, but has some of the highest retail rates in the world.

IEEE Spectrum noted that renewables provided about 56 percent of Denmark's power as of March, 2017.

In 2016, hydropower generated 6.5 percent of the United States renewable energy. Wind and solar accounted for 5.6 and 0.9 percent respectively.

I have concluded that the balance of the evidence suggests that unmitigated man-made climate change could likely pose significant problems for humanity as the 21st century unfolds. That said, activist happy talk asserting that mandating the adoption of current versions of renewable energy technologies as a way to transition from fossil fuels will be cheap is entirely specious. The trade-offs between using cheap fossil fuels now to spur economic growth and the risks of future climate change must be acknowledged.

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  1. This is nonsense. Wind and solar power are completely free, just hang your laundry outside to dry.

    /mtrueman

    1. Also free: hobo and orphan power.

  2. Australia: A bunch of dumb Commonwealth subjects with criminal heritage.

    And expensive power costs.

  3. The trade-offs between using cheap fossil fuels now to spur economic growth and the risks of future climate change must be acknowledged.

    If you price in how it makes me feel about myself, then it evens out.

    1. All prices are based on feeling.

  4. Germany “has been getting up to 85 percent of its electricity from renewable sources on certain sunny, windy days this year.”

    Heh.

  5. CO2 is a non-toxic trace gas necessary to life itself. Where does Ronny get this gloom and doom nonsense?

    1. One could follow the link provided.

      Or one could be a whiny bitch.

    2. Oh for fuck’s sake….you know that urge to breathe you get if you hold your breath? That’s your body telling you there is too much CO2 in your blood.

    3. What gloom and doom nonsense? Ron Bailey literally wrote a book called “The End of Doom”. Accusing him of being gloomy just reveals your own ignorance of his work.

  6. Is there a better chart showing the idiocies of the modern environmentalist movement? The EU average retail cost of electricity is DOUBLE that of the US.

    And the left thinks it should be worse!

  7. its okay because its for the planet and even though it hurts poor people most they can get subsidies from the government to pay the higher government mandated cost. win win

  8. Interestingly, Germany still generates 43 percent of its electricity by burning coal

    They’re like the sanctimonious nun who makes half her salary doing porn at night.

    1. Or Al Gore.

  9. It’s surprising to see a libertarian site doing so much heavy lifting for crony capitalists trying to use regulatory capture to hold onto rigged markets.

    As I understand it, the high electricity prices in Australia are mostly due to high natural gas prices coupled with market manipulation by some generators in wholesale power markets. Basically, when ng was dirt cheap in Australia, ng generation got hugely built out and a lot of coal was displaced. Now that ng export capacity has caught up with local supply, local ng prices have skyrocketed to match worldwide prices. To make matters worse, there also seems to be some Enron-like cartel activity that’s causing artificial power shortages and crazy price spikes in wholesale power markets.

    The cartel operators are trying to deflect blame onto renewables, but the high electricity prices seem to be more from market manipulation. This exact same thing happened in the US with Enron. We learned long after the fact that Enron was secretly coordinating with generators to take certain plants offline at just the right time to manipulate wholesale markets and spike profits. What’s happening in Australia looks a lot like a repeat from this old Enron playbook.

    1. ^ VERY strong stench of ‘renewable’ apologist here.

      “The cartel operators are trying to deflect blame onto renewables, but the high electricity prices seem to be more from market manipulation. This exact same thing happened in the US with Enron”
      What ‘happened […] with Enron’ was a CA typical gov’t disaster, where the energy market was half-privatized, leaving Enron as the sole supplier often enough.
      Now if you want to claim that renewables are actually cheaper, well, turn ’em loose without subsidies.
      I’m calling lefty bullshit.

      1. “Now if you want to claim that renewables are actually cheaper, well, turn ’em loose without subsidies.
        I’m calling lefty bullshit.”

        No BS here. Everything I said is backed up by data. See link to Lazard cost info below…

        1. Plenty of bullshit there; see my responses.

          1. Actually, still no BS.

  10. Also, anytime you hear baseload or dispatchability in an energy article, you’re most likely reading talking points from crony capitalists trying to get regulators to give them a handout or an unfair market advantage.

    Modern grid operators are phasing out these terms in favor of the more important concept of flexibility. Flexibility captures what modern grid operators need much better than baseload or dispatchability.

    Baseload was a useful concept when inflexible resources like coal and nuclear had the lowest marginal operating cost. When these resources were always the cheapest to run, they always got scheduled first. After the cheap baseload got scheduled, more expensive but more flexible sources would get layered in on top to handle demand peaks.

    Today though, inflexible coal and nuclear are more expensive than natural gas, wind, and even unsubsidized solar PV in some markets. Grid operators prefer to schedule cheaper resources first, then layer in more expensive coal and nuclear only when they’re needed. The problem is that coal and nuclear are so inflexible and expensive that it’s cheaper to schedule even more expensive but more flexible generators like jet fuel turbines instead. Better to run an expensive turbine for 2-3 hours to cover a peak, than to commit to run a coal plant for a whole week when its high cost power is only needed for a few hours.

    1. magellannh|9.18.17 @ 2:43PM|#
      “Also, anytime you hear baseload or dispatchability in an energy article, you’re most likely reading talking points from crony capitalists trying to get regulators to give them a handout or an unfair market advantage.”

      I see an assertion. I see no evidence
      ———————–
      “Modern grid operators are phasing out these terms in favor of the more important concept of flexibility. Flexibility captures what modern grid operators need much better than baseload or dispatchability.”

      OK, new jargon. Got to keep up to date; irrelevant
      ————————–
      “Today though, inflexible coal and nuclear are more expensive than […] even unsubsidized solar PV in some markets.”

      Cite missing
      ————————–
      “Grid operators prefer to schedule cheaper resources first, then layer in more expensive coal and nuclear only when they’re needed. The problem is that coal and nuclear are so inflexible and expensive that it’s cheaper to schedule even more expensive but more flexible generators like jet fuel turbines instead. Better to run an expensive turbine for 2-3 hours to cover a peak, than to commit to run a coal plant for a whole week when its high cost power is only needed for a few hours.”

      (Selective) assertion; cites missing.

      1. This oilprice.com article describes how natural gas is killing off coal:
        http://bit.ly/2n1znPI

        There is no dispute among anyone who follows this stuff that coal is dying because it can’t compete.

        The only question left is the rate of the decline and how much taxpayer and ratepayer money will get poured into supporting the crony capitalists behind the coal industry as coal’s slow death unfolds.

        1. “There is no dispute among anyone who follows this stuff that coal is dying because it can’t compete.”

          I see you addressed one specific while ignoring all else.

          1. Others covered below.

    2. Capitalists aren’t cronies. Cronies are cronies whether they’re capitalists, socialists, communists, anarcho-syndicalists, etc.

      It’s just crony. And it never matches up with any of those stated above.

  11. m: Wind and solar are not dispatchable and will always need backup – that must be included in any reasonable analysis of overall costs. This New York Times article is a pretty good introduction to the problem.

  12. Ron – Thanks for replying. First, every generation source needs backup. Almost once a month in the US, a nuclear plant scrams offline due to some failure. Grid operators have to always have enough backup to handle a nuke plan scram or the sudden unavailability of any other generation source. The backup argument is a red herring.

    The fact that renewables aren’t dispatchable is also noise. Grid operators have been adjusting market rules to handle renewable intermittency and they’ve learned that the most economic solution usually involves scheduling some combination of hydro, low cost natural gas, and storage.

    Mostly, grid operators don’t feel they need to price dispatchability at all. Determining exactly what price signals are needed is still a work in progress, but mostly they’re settling on letting real-time price signals do the heavy lifting to arrive at the optimal mix of various generation sources. When wind and solar aren’t available, wholesale market prices climb and higher marginal cost generators come online to cover the gap.

    The inflexibility of coal and nuclear, coupled with their high marginal cost means they can’t compete in this environment against cheaper and more flexible alternatives so they never get scheduled. This is markets doing exactly what they’re supposed to do, so I’m surprised to see you arguing against it.

    1. “First, every generation source needs backup. Almost once a month in the US, a nuclear plant scrams offline due to some failure. Grid operators have to always have enough backup to handle a nuke plan scram or the sudden unavailability of any other generation source. The backup argument is a red herring.”

      Speaking of red herrings, comparing a nuke scram to the unreliability of wind or PV is far beyond that; you need to get honest if you expect to sell your ‘story’ here.
      ———————————-
      “The fact that renewables aren’t dispatchable is also noise. Grid operators have been adjusting market rules to handle renewable intermittency and they’ve learned that the most economic solution usually involves scheduling some combination of hydro, low cost natural gas, and storage.”

      So it’s not ‘noise’, but the operators have learned to put up with it?
      ———————————–

      1. “Mostly, grid operators don’t feel they need to price dispatchability at all. Determining exactly what price signals are needed is still a work in progress, but mostly they’re settling on letting real-time price signals do the heavy lifting to arrive at the optimal mix of various generation sources. When wind and solar aren’t available, wholesale market prices climb and higher marginal cost generators come online to cover the gap.”

        Wind and solar ‘market prices’ are nothing of the sort; quit bullshitting.
        ———————————-
        “The inflexibility of coal and nuclear, coupled with their high marginal cost means they can’t compete in this environment against cheaper and more flexible alternatives so they never get scheduled. This is markets doing exactly what they’re supposed to do, so I’m surprised to see you arguing against it.”

        More innuendo (BS) regarding wind and solar costs.

        1. As I mentioned below, the Lazard LCOE analysis has good cost data:
          http://bit.ly/2hVU109

          This may come as a shock, but currently, unsubsidized onshore wind is the lowest cost generation source in most of the world. After wind, unsubsidized utility scale solar PV is fighting with natural gas as the next lowest cost source.

          In the US, thanks to fracking and the (temporary) lack of ng export capability, natural gas generation is usually a tad cheaper than solar PV. Most analysts think within a couple of years, solar will be significantly cheaper than ng even in the US due to falling solar costs and rising ng prices (from expanded LNG exports).

          Still, we’ll need plenty of natural gas for years or even decades to cover the intermittency of renewables. But since renewable power is so cheap, it’ll always make sense to schedule it first. It used to be inflexible coal and nuclear that were scheduled first because they were the cheapest, now it’s wind and solar that get scheduled first.

          Natural gas is and will remain cheaper and more flexible than coal or nuclear, so when renewables aren’t available, the next choice will be natural gas, at least unless battery storage costs drop.

          Meanwhile, there’s just no role for expensive and inflexible coal and nuclear. They just can’t compete anymore.

          Here’s one article about coal unable to compete despite lots of subsidies…

          http://on.wsj.com/2qgQDCd

          1. Most analysts think within a couple of years, solar will be significantly cheaper than ng even in the US due to falling solar costs and rising ng prices (from expanded LNG exports).

            The Sun God will be good to us and he will provide by His Grace. All Hail The Sun God!

          2. Here’s a direct link to the full report pdf for the Lazard LCOE Analysis:

            http://bit.ly/2gV6fBw

            Scroll down to the chart on page 2

            1. Yes, the micro-power ones are cheap; all we need to do is extend the grid to every backyard blast furnace!
              Mao beat you to it.

              1. Not exactly sure of your point. The report shows costs for utility scale solar.

          3. “The cost of generating energy from renewable sources other than solar, such as onshore wind, geothermal, and biomass, declined only at the margins from last year, reflecting both the maturing of technology in those areas and a relatively low level of investment.”

            Low level of investment, regardless of huge subsidies? What was your point?

            1. The “relatively low level of investment” has to do with R&D spending. Onshore wind is mature tech and is already the cheapest power source so there’s not nearly as much R&D money going into onshore wind compared to solar and off-shore wind.

              With solar and offshore wind, the technology is less mature and still undergoing very dramatic cost reductions with each new generation.

          4. “This may come as a shock, but currently, unsubsidized onshore wind is the lowest cost generation source in most of the world. After wind, unsubsidized utility scale solar PV is fighting with natural gas as the next lowest cost source.”

            “Unsudsidized” meaning the marginal costs are covered? How about “unsubsidized” meaning capital and land costs are market rate?
            Put simply, I’m not in the market for bullshit, and if it were as you maintain, there would be no need of subsidies, so, ipso facto, I know you are lying.

            1. The Lazard report uses a methodology called Levelized Cost of Energy. This includes all capital costs, operating costs, and financing costs, all adjusted for the time value of money.

    2. Re: magellannh,

      First, every generation source needs backup.

      *Every* generation source?

      Liar.

  13. Some good resources for background reading on this topic are listed below
    RTO Insider
    Power Magazine
    Utility Dive
    Bloomberg New Energy Finance.

    Also, check out the Levelized Cost of Energy (LCOE) Analysis from investment banking firm Lazard.
    (google Lazard LCOE analysis).

  14. Also, another good reading resource I’ve found is a free market think tank called R Street Institute
    http://www.rstreet.org/tag/energy/

    (I don’t know much about them, but they seem to have good articles on this topic)

    1. That’s all nice, but if you want to provide cites, those aren’t them
      Link to specific evidence to support your claims, please.

      1. In addition to the Lazard cost report, this Bloomberg article has a good outlook for where power generation is likely headed:
        http://bit.ly/2stdV7C

        Also, people complaining about solar and wind subsidies have a point, but renewable subsidies pale in comparison to what conventional power sources get. Below is a recent Cato report on energy subsidies. Solar and wind get plenty, but add up all the nuclear subsidies and prepare to be surprised. Based on this report, between yucca, DOE loan guarantees, and other programs, nuclear gets almost 10x what wind and solar get.
        http://bit.ly/2xuwpHv

        1. “In addition to the Lazard cost report, this Bloomberg article has a good outlook for where power generation is likely headed:”
          Yes, subsidized costs drop. What happens when those goods are no longer subsidized? More bullshit.
          —————————–
          “Also, people complaining about solar and wind subsidies have a point, but renewable subsidies pale in comparison to what conventional power sources get. Below is a recent Cato report on energy subsidies. Solar and wind get plenty, but add up all the nuclear subsidies and prepare to be surprised. Based on this report, between yucca, DOE loan guarantees, and other programs, nuclear gets almost 10x what wind and solar get.
          http://bit.ly/2xuwpHv

          Nice cherry picking.

          1. The report shows unsubsidized costs.

  15. Oy, Bailey. Speaking as someone who got flooded in (by an overflowed publicly-owned bridge “someone” built 5 feet below flood level) during Harvey, here’s a headline idea for you:

    “Thanks To FAA Regulation, Companies Couldn’t Send Cheap Drones To Help Flooding Victims”

    4 days without Pizza Hut hurts, Mr. Bailey.

  16. “In order to prevent manufacturers in search of lower energy prices from leaving, Germany charges very low wholesale prices for electricity, but has some of the highest retail rates in the world.”

    Sorta like ‘free medical care’, it’s really cheap if there was any.
    What happens when those ‘sunny windy days’ don’t happen and BMW needs to cast engine blocks?
    https://www.youtube.com/watch?v=-fnSnCGQZKk&t=14s
    They go where when you flip a switch, you get power.

  17. I may not be the first to talk about the conspiracy theory but I also won’t be the last if the government keeps treating people like this. This is just not fair. I recently have read an article about the installing of the solar panels in the house is going to benefit the household and it is strange that more and more people are changing the ways they are using electricity these days, still, the prices for the electricity are still rising. I think that in order to find what’s best for your household is with the help of the BestReviewer.com.au service.

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