You can imagine the confusion among The Australian’s editorial writers. Surely, they must have asked themselves, the coal lobby isn’t suggesting that coal generators get paid for electricity that they don’t actually produce?
Wouldn’t that be daft!
And so it was that in its latest desperate attempt to convince readers that coal generation is good, and should be subsidised, The Australian thundered in its editorial on Tuesday, titled Counting the cost of renewable power:
“Capacity payments inevitably involve paying for electricity that is produced but not used, which is wasteful of electricity and greenhouse gas emissions.”
If The Australian’s editorial writers were curious to know how capacity payments actually worked, they could look at the example of the Merredin diesel peaking generator in Western Australia, a state that has had, much to its own regret, a capacity market for many years.
And Merredin doesn’t get paid to generate electricity that doesn’t get used. This 82MW facility was built in 2012, at a cost of $95 million, and has been paid more than $10 million a year from capacity payments since then to do and produce … well, pretty much nothing.
It is paid to be there “just in case.” And yes, it was built by selling the idea that it could be there to back up renewables. It’s been a monumental waste of money, but that is mostly what capacity markets are, just as we predicted in 2012: Dumb and dumber energy choices in the wild West.
Capacity markets vary from place to place, but they essentially operate on the same principal – generators are paid to be there, and may not ever produce. They are not paid to produce stuff that is not used.
The Australian then went on to argue that capacity payments to coal generators are an “essential cost of the renewable transition …that must be factored into the total cost of wind and solar”. It is truly Orwellian. It is a subsidy to coal. Nothing else.
If you left the wind and solar markets to their own devices, they would quickly work out their own cleaner, cheaper and more reliable options, as explained in this excellent article from energy experts at The Conversation, and by the Clean Energy Council.
The focus needs to be on flexibility, rather than capacity, and that is not what is currently on the table. The Energy Security Board has not provided the details of how its capacity proposal would work, but it does recognise the potential of capacity payments to unnecessarily extend the life of coal generators, and admits it won’t guarantee the ageing and increasingly unreliable machinery will actually be available when needed.
Just for good measure, The Australian intoned gravely that energy minister Angus Taylor argues that capacity payments for fossil fuels are “not about ideology” but a “pragmatic focus on solutions” in relation to the transition. “Less ideology and more co-operation are what is needed,” it said.
This, from the most ideological of media publications, and the most ideological of energy ministers.