Who knew it would cost a lot to change the climate?
It’s crisis time in Australia. Electricity bills have doubled, and the fallout is just starting to feed through to consumers. Not only does electricity cost more, but so will nearly everything else. Large businesses, economists, and miners are warning that Australians will be paying so much more it will push our inflation figures up.
Major packaging and brick makers, supermarkets, soft-drink bottlers and poultry producers said yesterday the bill shock would chip away further at profit margins and could push up consumer prices…
Economists, including National Australia Bank chief economist Alan Oster, warned the power bill shock was expected to show up in national inflation figures as early as next month.
He predicted headline inflation would increase 0.6 per cent for the July-to-September quarter, purely from energy price rises.
Paul McArdle from WattClarity makes the point that for most of the last 16 years our electricity prices didn’t even rise with inflation. In this graph, since the start of the NEM (National Electricity Market) in 1998 the spot price of electricity was about $30 per MWh, barring major drought, carbon tax and the last two years. Currently, prices are $100/MWh.
Graph: Paul McArdle, WattClarity (with editing of the labels by JoNova) | Click to Enlarge this!
Why have things “gone seismic” in the last two years? It looks like we’ve reached the tipping point — the tolerance limits of the system. Renewable penetration has been increasing since 2006 or so. The RET (Renewable Energy Target) started in 2001, but has been rising ever since. In the last two years we’ve had the closure of Hazelwood and Port Augusta coal, broken interconnectors in South Australia and Tasmania, had major blackouts, got stung by rising gas prices and the sudden awareness of ‘uncertainty’. The system has lost its buffer — previously if gas prices rose, we had cheap coal to rely on. But with so much intermittent wind and solar power and with the closing of coal power plants we are now unable to escape high gas prices (and that demand is feeding the gas price rise too). It’s positive feedback of the ugly spiral kind. Coal can’t ramp up and down with the coming and going of wind power, only gas or hydro can.
The record electricity prices aren’t just about the percentage of renewables, but the correlation is inescapable. There are no nations with high wind and solar penetration and cheap electricity. Australia is also one of the few advanced nations with no nuclear power generators. The EU interconnected nations get access to a mix which is about 25% nuclear.
The NEM was designed at a time when supply of electricity was reliable, but demand varied. Now both supply and demand are volatile, and traders have more opportunity to game the system.
How much should we pay to slow storms in 2100?
The only point of wind and solar is to change the climate. In Australia, where we are the worlds second largest exporter of coal, so it’s not about “energy independence”. It’s not about pollution either. Our coal generators meet strict standards. It’s not about us being “world leaders” in exporting solar panels or wind turbines, we are buying these from China. The sole reason we destroyed our cheap power base is because we hope the weather will be nicer next century. We are doing this for our unborn great grandchildren, the same people who will be laughing at our primitive climate-alchemy, our bizarre superstition and delusional fixation that we can hold back the tide, stop floods and droughts and windy days.
It’s like a hidden carbon tax on every item that needs to be heated, cooled or moved in Australia.
BlueScope Steel chief executive Paul O’Malley warned the nation was facing an “energy catastrophe”. “If it hits the point where people can’t make money then the industry will start to shut down,” he said.
The government made cheap energy uneconomic with weather changing schemes. The solution is not for the government to buy up the (oxymoronic) uneconomic-cheap-generators, but to axe the RET, the CET, and any and all Clean Energy targets, tarrifs, and committees. It’s a red-tape market disaster. We need a free market.