The focus by Labor and the Greens on the merits and desire of renewable energy appears to have hit a sore spot in the Coalition, but even those in the government ranks presumed to be supporters of wind and solar are sending mixed signals about the technologies.
Energy minister Josh Frydenberg, among others, have been highly critical of Labor’s more ambitious renewable energy policy, and they have been attacking it with the full and vocal support of the Murdoch media, desperate to link growing renewables to economic catastrophe.
South Australia has highest renewable energy share. Highest electricity prices. Highest unemployment. Join the dots. #ausvotes
— Chris Kenny (@chriskkenny) May 26, 2016
Environment minister Greg Hunt meanwhile, was quoted in the Fairfax Media “spruiking” a rebound in renewable energy, at the same time as he was quoted in The Australian warning about the cost of more ambitious targets.
In Fairfax Media, Hunt was claiming credit for 1,100MW of new renewable energy projects that he said would help meet the 6,000MW of new capacity required to meet the pared down renewable energy target for 2020.
But that is not true.
This is the list provided to Hunt’s office by the Clean Energy Regulator, and expanded from its interim report into the RET released earlier this month.
Nearly half the capacity is being built because they have received long-term power purchase agreements from the ACT government under its successful reverse auction scheme. These projects do not contribute to the RET, because while the ACT government is aiming for 100 per cent renewable energy by 2020, it is not doing it so that other states can do less.
Those projects include Mt Saphhire wind farm (100MW), Hornsdale Phase 1 wind farm (102MW), Hornsdale Phase 2 wind farm (100MW), the Ararat wind farm (80MW of its 240MW capacity), the Mugga Lane solar farm (13MW) and the One Sun Solar farm (10MW).
And here’s another irony of that list. It includes a bunch of projects – the Barcaldine solar farm, the Normanton solar farm, the Juwi Degrussa solar PV plant, the Coober Pedy wind diesel hybrid, the Epuron Uluru solar project, and the RayGen Newbridge CSPV project – that are only going ahead through grant funding from the Australian Renewable Energy Agency.
This is the very agency that the Coalition has tried to dismantle, but will now keep in name, only, while removing its ability to make grant funding in the future and killing its legislated uncommitted funding of $1.3 billion.
The remaining projects in the list will be the first to be built after a three-year investment drought caused by policy uncertainty over the Coalition changes to the RET.
(We’re being generous with the Clare solar farm, which certainly got a PPA from Origin, but as David Leitch has pointed out, the price of that was probably influenced by the amount of subsidy the developer, FRV, got from its ARENA and CEFC funded Moree solar farm. Ararat also got financing from the CEFC, another agency that the Coalition was trying to kill, although it has since changed its mind.)
And while Hunt was keen to take credit for the projects funded by the ACT government, he was quoted in The Australian on Friday talking of the high cost of that very same ACT plan, which he used as an example to egg on the Murdoch media’s attack on federal Labor’s proposed 50 per cent renewable energy target by 2030.
In response to Bill Shorten’s newly announced initiative of sourcing half of all the government’s direct electricity needs through long-term contracts for renewable energy, Hunt was quoted as saying:
“He expects the Australian people to believe that switching to 50 per cent renewables for the public service will cost taxpayers nothing – when a similar policy cost the ACT government up to $89.10/MWh in their last auction,” Hunt was quoted as saying.
In the Daily Telegraph, which has also declared war on wind and solar, as well as the Greens, Hunt’s comments were reported this way: “Environment Minister Greg Hunt claimed when a similar project was introduced in the ACT the cost of power increased by $89.10 per megawatt hour.”
That’s simply not true either. The ACT government auction is based on a contract for difference, which means that it is only agreeing to pay the difference between the wholesale price and the bid price in the auction ($89.10).
If that wind contract was in effect this week, the ACT government and its residents wouldn’t have had to pay a single dollar because the average price on the NSW coal-heavy grid in recent days has been ranging from $92/MWh to more than $160/MWh.
Only once in the last six days has the price averaged less than $89 – last Sunday when it averaged $76/MWh.
The ACT government expects the cost of its scheme to be minor, and will be largely offset by energy efficiency measures, and savings to the network from the installation of 5,000 battery storage systems funded by its wind and solar auctions.
Another point to be made is that the ACT auction price is fixed for 20 years. It does not rise with inflation, and it carriers no commodity price risk.
Hunt’s favourite advisor, Danny Price from Frontier Economics, the man credited as an architect of Direct Action and Hunt’s appointee to the Climate Change Authority, has also been talking down renewables and the terrible cost impacts of closing down coal-fired power stations.
He has reportedly published a report noting that the forward contracts of the electricity price in South Australia has nearly doubled from $49/MWh to $91/MWh since the Northern brown coal power station closed.
“The price rise can only be explained by the imminent closure of the Northern Power Station,” he was quoted as saying.
But let’s get one thing straight; Northern was closed because it could no longer compete. Its owner, Alinta, said the wholesale price was not high enough for it to continue operations. Why? Because wind and solar had pushed the wholesale price down, not up.
The futures price has rebounded. Why? Not because of wind and solar, but because of the price of gas. And in South Australia, two big players dominate the market. Not only that, but gas prices are expected to soar, as this graph below from the Australian Energy Market Operator’s gas consultancy report last year show.
The bidding patterns and wholesale electricity price movements are a situation that has worried, and continues to worry, the Australian Energy Regulator, which is monitoring the situation and which last year pinged the two dominant generators in Queensland for bidding the wholesale price higher.
Wholesale prices have been high right across the National Electricity Market this week, partly because a lot of coal-fired capacity has been idled by scheduled maintenance, or because the owners have simply chosen not to switch them on.
And here is another graph that should put Price’s comments in context, and to which the Murdoch media should pay some attention.
Yes, South Australia has high forward contracts (it pretty much always has, thanks to its reliance on gas as marginal cost of generation), but there has been no huge movement in the last three months, and South Australia is closely followed by Queensland, which has no large-scale wind or solar, but also relies heavily on gas.
Another bizarre statement from Hunt came in the Fairfax report that said prime minister Malcolm Turnbull’s “morale boosting” rhetoric around the renewable energy sector “has been interpreted as helping trigger a rise in the prices of renewable energy certificates.”
Say what? Which rhetoric would that be? That Labor’s 50 per cent renewable target, indeed any rise above the current target that ends in 2020, would impose “enormous” cost on the economy, a line he has repeated on many occasions?
As most market analysts will explain, the price of renewable energy certificates has risen because there is increasing realisation that the industry will not meet the RET in time, a situation blamed almost entirely on the uncertainty in the market caused by the Coalition policy changes.
“If the market really saw Turnbull as a positive for project development, if anything it would negatively impact LGC prices,” said one analyst.
