Another hidden renewables tax buried in complexity
Here in Renewables World we now have to pay companies to make less of the products we want. It’s a sign of how fragile and dysfunctional the Australian grid is.
“Big energy users like factories and farms will be able to earn money by saving energy during heatwaves and at other times when electricity prices are high,” the Australia Institute’s energy lead Dan Cass said.
They call it “wholesale demand response”. We call it planned blackouts. All over the country equipment will be switched off when its needed most so that our green grid doesn’t fall over, or create billion dollar price spikes.
With some of the most expensive electricity in the world, there is already a strong price signal driving companies to use electricity efficiently. This new “price signal” drives them to be less efficient. Because the grid is now incapable of providing regular reliable electricity whenever it’s most useful to companies, the government is adding a whole new layer of complexity to try to squeeze out the spikes they can’t handle.
This move will mean more people will have to be employed in account-management, but the products made will shrink, so the price of those products will rise. It’s not possible that this change would increase the Australian GDP.
It’s all being rushed in to start in October 2021*, presumably because no one has the confidence that the Australian Grid will survive the next two summers without either price bonfires or a major blackout.
Electricity users will get paid to cut energy use under historic new market reform
Electricity consumers will be paid for reducing their power demands under a radical change to the market that will be introduced next year.
The historic rule change announced today will allow what’s known as “wholesale demand response” — where the wholesale market can pay users for cutting electricity consumption, rather than paying electricity generators to increase supply, when the system is under strain.
Big conglomerate generators and retailers don’t want this change, because it’s partly aimed at them. They like the price spikes and this threatens their profits:
The shift, which will begin in October 2021, has been adopted by the Australian Energy Market Commission (AEMC) despite opposition from big energy generators and retailers, who were using the COVID-19 crisis to pressure for delaying the rule changes.
Instead of making the market fairer and more transparent by removing all renewable subsidies, and asking renewable generators to pay fair prices for transmission costs, stability costs and back up of their unreliable product, this is a desperate workaround that leaves former agreements in place but adds a new layer of complexity to try to get rid of the spikes so the generators can’t game the system.
This is a change to enable the forced transition to renewables.
Head of energy policy at the Public Interest Advocacy Centre Craig Memery said it was “a critical reform that will bring much-needed benefits to consumers, and a key part of a secure, zero-carbon energy system”.
The propaganda makes out this is a win for all:
[AMEC] argues it will reduce electricity prices for consumers and improve reliability on the network, by allowing demand response to compete with “peaking” electricity generators that typically receive very high prices for supplying additional electricity during times of heavy demand.
“The benefits of wholesale demand response will flow through to all households and businesses through lower electricity bills and improved network reliability.
Obviously, the ABC repeats the propaganda and doesn’t ask any hard questions about how Australian citizens get richer by doing less.
Nobody mention the real costs:
Instead of “earning money” consumers will pay via their shareholding and superannuation losses, and via the increased prices of products. Some consumers will gain jobs, but more will lose their jobs as the net efficiency of a Greener economy means companies produce less, move overseas, generate less profit and thus employ fewer Australians. Less profitable companies will also pay less tax. Meaning that individual taxpayers will have to make up for lost tax income or the government will have to offer less services.
And so yet again, the cost of a green economy is buried so deep not even a PhD can unravel “who pays”.
They call it a win for environmental groups, which tells us it’s there to prop up the renewables industry, but of course, the only parts of the “environment” that will benefit from this are the unintended parts. Wind Turbines are the new top predator in the ecosystem. So lizards living under wind farms will be happy because predatory birds will be killed off.
Complexity breeds corruption:
Somehow we have to estimate what customers would have used to pay them for what they didn’t. This is a market of nullities again.
Under the change, large electricity users (such as big farms, factories and commercial enterprises) will be able to bid reductions in demand into the wholesale market and get paid for taking their demand out of the system.
Over time, demand response is expected to be extended to households and smaller businesses who sign up with companies that “sell” power reductions from thousands of customers into the market at times when wholesale prices are high.
Obviously all complexity comes at a price and provides more loopholes for dishonest players to profit just as China and others did when naive Western governments started paying companies to “save carbon” based on guesstimates of infrastructure changes they wouldn’t have done otherwise. Hands up who thinks companies will adjust their useage to game the system and imply they are taking out more demand than they actual did?
h/t David B
*Corrected, thanks John Hultquist. Not 2020 but 2021