While geniuses are bragging that the Australian grid survived two normal hot summer days without falling over, they don’t mention the flaming spectacle of the cost.
Tom Quirk and Paul Miskelly, after a couple of suggestions from me, have calculated the full staggering electricity bill at $119m for SA and $267m for Victoria, making it nearly a $400 million dollar bonfire — for two days that were neither the hottest ever, or records for peak electricity use. See their work and details below.
To put this in perspective, a whole new gas plant could have been built for around $230 million. Instead of vaporising this money, Australians could have constructed one whole new gas generation plant, paid it off, and had money left over to give away free electricity.
Every household of four in Victoria just lost something like $170 of productivity for two days of electricity, and in South Australia, $280. Respectively, $45 per Victorian and $70 per South Australian. While businesses also share this burden, ultimately companies are made of people, and this is productivity lost to both states. The losers are shareholders, customers, and employees. Some will be interstate, but the pain flows back. The price is also paid in higher cost items, lower investment, and fewer jobs. Coles and Woolies still have to cover the cost of keeping the fridges running. The money will be squeezed out of citizens one way or the other.
And this is not the total bill, it’s the excess electricity bill above and beyond the normal but inflated January prices of the last few weeks. Even normal prices now are twice what they were in 2015. Back then, the average price in Victoria and SA was $35 per megawatt hour and the average peak price was $49/MWh. Now the average on a January day are $82MW/h, and $87/MWh respectively.
But wait, it’s worse than that. Even above this excess electricity price, there is the price of buying the diesels (a secret ’til the $400m bill was revealed), plus the cost of all the businesses which bought their own diesel generators (aren’t we a first world country any more?), plus the cost of all the “Demand Response” — the mini blackouts required to stop the system breaking (more on that tomorrow).
Then, then, there is the awful cost of all the businesses that were affected — the stress, the lost production, the investments that won’t happen, and the bizarre spectacle of Australia not having enough electricity to keep the lights on at our hospitals. We are leading the way to the third world!
Ponder the bureaucrat brain that asked hospitals to turn off spare lights
Victorians were using nine billion watts of electricity at the peak on Friday. How much difference was it going to make to turn off some 100W lights at hospitals? (Aren’t they using the horrid blue-white sleep-destroying-LED’s, in which case, how many 18W globes do you need to turn off to save a state? It would take 2.7 million globes to get 50MW of safety margin). At this point, the people making decisions were either desperately afraid of a meltdown, or not very good with numbers. Either way, it’s bad. The message has gone out to the world that this leading vanguard of renewables doesn’t have enough electricity to run lights at hospitals. A “gift” to skeptics. (Yeah, thanks a lot).
Fergoodnesssake?! Why didn’t the SA government run those diesels — Could’ve saved millions?
Businesses everywhere were running their diesels. Yonniestone reports that ” Fairfax press rural Victorian factory had two shipping container sized diesel powered generators running complete with black exhaust smoke.” (They were probably printing newspapers telling everyone of the evil of fossil fuels, and advising they turn their air conditioners down.)
Can South Australia waste even more money? Yes. it. can.
Meanwhile, the SA Energy Minister seems proud that the diesels “weren’t needed”. Reader Andrew writes: What if they’re right, and while BHP et al turned on the diesel, Weatherill didn’t, to preserve his “battery miracle” story?? That would mean he has spent $400m on diesel – diesel that is purely decorative and he never plans to use! Electricity at $14,000 a MW? Not an emergency. Load shedding? Not an emergency. Businesses like smelters closed? Not an emergency. Economically, the diesel should be on whenever the price reaches $300/MW.
Stupid piled on stupid in the quest for virtue signaling. How much is too much to spend to “look green” and achieve nothing?
Who wants to run a business in South Australia?
Mark M writes about a story in the Advertiser:
More than 800 properties in North Adelaide were blacked out just after 5pm on Friday. Businesses and pubs in North Adelaide were forced to close their doors on a night owners say would have been one of their busiest of the week.
Co-owner of Lion Hotel Tim Gregg said it was hard to have to ask customers to leave after the lights went out. “It is disappointing when you have got people booked in for a meal and you can’t call them because their details are in a system which doesn’t work when the power is out,” Mr Gregg said, sitting in the darkened and empty restaurant area which would have been just starting to fill if the power was on. “We have to ask people to leave because of OH and S issues. It is lucky that it was between lunch and dinner service but the bar would be losing in the thousands of dollars. Mr Gregg said he had more than 40 staff who were at a loose end until the power comes back on.”
Never forget the point of all this suffering. All these householders, spending up to two or three hundred on electricity for two days, are paying to make the weather nicer in 100 years, according to a theory that no official ever did due diligence on.
Hands up, who thinks residents would pay this kind of money if the government knocked at their door and gave them a choice? Anyone?
Jo
h/t also to Pat, Dave B.
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Analysis of electricity costs for 18 and 19 January heat wave
Guest Post by Paul Miskelly and Tom Quirk
The cost of electricity for the 18 and 19 January two day heat wave may be found from data on the AEMO website. For January there are half hour demand and price tables for each day. The extra cost of 18 and 19 January can be estimated by finding the cost differences from the average daily costs over the period 1 to 17 January after adjusting these costs to match the higher demand on 18 and 19 January.
The changes in prices can be clearly seen in the figure below with South Australia and Victoria having price spikes at the same time (AEMO data). New South Wales and Queensland had no such trouble.
….
The table below shows an estimate of the extra cost; The AEMO website dashboard gives average daily prices that are not weighted by the change of demand and price during the day. There are high prices with high demand and low prices with low demand. The costs have been calculated using the weighted electricity prices.
| State | South Australia | Victoria | |||
|
24 Hour averages |
From 30 min data |
AEMO* |
From 30 min data |
AEMO* |
|
| 18 January | Average MW |
2,016 |
6,444 |
||
| Average price/MWh |
$1,404 |
$1,074 |
$1,210 |
$905 |
|
|
Total day cost |
$68,015,878 |
|
$187,279,332 |
||
| 19 January | Average MW |
2,091 |
6,878 |
||
| Average price/MWh |
$1,195 |
$1,012 |
$648 |
$523 |
|
|
Total day cost |
$59,917,331 |
|
$106,777,887 |
||
| 1-17 January week day average | Average MW |
1,409 |
4,865 |
||
| Average price/MWh |
$91 |
$87 |
$84 |
$82 |
|
|
Total day cost |
$2,865,478 |
$9,817,774 |
|||
|
Total day cost |
Scaled to 18,19 January demand |
$4,177,600 |
|
$13,450,111 |
|
|
|
|||||
| 18-19 January | Extra costs |
$119,578,009 |
|
$267,156,997 |
|
The total extra electricity cost is some $400 million. This is an amazing example of the problems resulting from the introduction of too much renewable energy and the closure of coal burning power stations.
___________________
UPDATE: Alan Moran discusses these costs at Catalaxy and argues that with extra coal back up, the loss of any one unit would not cause a price spike. As I mentioned, looking at those forecast graphs, the AEMO was predicting prices to hit the peak cap of $14,200 in SA, and $8,500 24 hours before the single generator failure at Loy Yang B.
Commenter David Bidstrup asks some valuable questions about the way our electricity bidding system works:
- Why does the market call “bids” every 5 minutes instead of contracting for firm power over a longer period, say a year?
- Who decides that “bids” of 160 times the going rate should be accepted when it is clear that they are just predatory bids made when the generators know the market is caught with its pants down?
- When are those who “lead” us going to realise that their policies are destroying the country and making ordinary folk electricity paupers?
- When will the leaders realise that renewables are the problem and not the solution, and when will they realise that there is no climate change problem to “fix”?
- When will the realisation hit that the electricity crisis is a creation of stupid policy decisions and is a technical problem requiring folk who actually know something about power generation. It is not one to be fixed by intellectually challenged politicians, economists and pet scientists who push their own agendas, egged on by renewable rent seekers and rabid left wing greenies.
- The physical market (i.e. the NEM) is set around 5 minute dispatch due to the need for supply to meet demand instantaneously. Contracting for longer periods of time occurs in financial markets either via over the counter agreements between counter parties or via the ASX electricity futures exchange. These markets are settled purely financially and while they influence what happens in the physical market, they are not a direct component of it.
- The market decides. A true market however would not place price controls like in the NEM. High prices provide information to entrepreneurs to direct capital investment in the market (i.e. where to build more poles and wires and/or power plants). Labelling the behaviour of generators as predatory seems to imply they should be prevented by force from doing so. This will simply distort the market and lead to adverse outcomes.
Jo says:
The market is already hugely distorted by the RET and other subsidies. It’s not a free market, and will not act like one, and will not send useful price signals anyway. It’s predetermined to send the signal to close coal and open wind farms. It is “succeeding” for bureaucrats and renewables companies, but failing for consumers.
At the moment all the successful bidders are paid the price of the highest successful bidder. So it is in every bidders interest to have price spikes, and for the low cost supply to be insufficient. Why do we have that system? Is there any disadvantage in paying only the successful bidders exactly the price they bid?
*Correction: The per capita cost in SA is $70 per head, not $80 as first written. (Though for lots of reasons the real cost is far larger, but specifically, for these two days, it is $70pp. Thanks to Stephen H).
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*AEMO estimates: These are the official AEMO costs, but they assume each hour is equivalent during the day. Quirk and Miskelly instead weight the charges according to the load each hour of the day to reach a more accurate average cost.