Solar panels eat the profits of the reliable generators for lunch
The system is reaching a crisis point and April is turning out to be the month of confessions
His speech was the sound of an industry being tortured. The transition is going backwards. Big projects are stalled. Costs are rising and reliable old assets are being closed too quickly. It’s like we are disassembling the plane as we fly it…
A couple of weeks ago in Australia the chief of Alinta Energy admitted in a big speech that the industry needs to be honest with the public about the costs of the transition. This marks a big shift from the “cheaper and cleaner” misinformation which the renewables industry was practically built on. Jeff Dimery had a stark warning — his company bought a large old coal plant in Victoria for a billion dollars in 2018, and it powers one fifth of Victoria. But to replace that today with renewables would cost $10 billion.
But he also laid bare the crushing effect subsidized rooftop solar PV panels are having on the transition. No news outlets seemed to appreciate the implications of this. Fully one in three Australian homes now has solar panels, but they are all dumping power on the grid at the same time pushing wholesale prices into negative territory that burns the other generators. The midday solar glut, as he calls it, means no one wanted to invest in large scale renewables. But as night follows day, surely that which ruins the market for large scale renewables would also ruin it for large scale fossil fuel plants too? The subsidized solar panels are vandalizing the whole market.
Skeptics who have been predicting this all along, note that the same people who cheered every time a coal plant was struck down are now wading through an impenetrable swamp of their own creation. The same subsidies that hurt coal and gas power, now wipe out the large (subsized) wind and solar plants too. It’s takes some chutzpah to complain about solar subsidies ruining the market for other generators which are also subsidized.
Someone let a plague of solar-locusts on our grid. They eat the profits out of all the reliable providers, which close down. We are actively sabotaging the entire grid — killing off the parts that made it work.
Australians to pay more for their energy as transition accelerates, Alinta Energy says
By Colin Packham, The Australian
Australians face higher bills as the country struggles to build adequate replacements for coal with soaring costs for new sources of green power and transmission, Alinta Energy chief executive Jeff Dimery has warned.
The stark comments, described by the energy boss as “truths and straight talking” comes amid growing concern about the toll of Australia’s energy transition.
Mr Dimery said Australian energy stakeholders must be honest with the public about the toll of the transition.
Mr Dimery complains he can’t build anything profitable at $58 a megawatt hour.
“When I sat down to write this speech, the future Victorian energy price for the 2026 calendar year was $58 a megawatt hour,” said Mr Dimery.
“At $58, I can’t build anything to meaningfully prepare for coal to come out of the system. I can’t build more solar, because we already have a glut of solar in the middle of the day, which is sending spot prices deeply negative. If I was just looking at the forward price, I would also be very wary about building new wind, because the margins would be slim to non-existent, and any curtailment – which is a growing problem – could be disastrous.”
If only the energy commentators of Australia could read the same AEMO reports that unpaid bloggers do? Then they’d know that this time last year old brown coal plants were still selling electricity for $15 a megawatt-hour. But Mr Dimery probably knows this, since he owns one of those coal plants, and he didn’t mention it either. (Perhaps he believes in the transition, or perhaps the Hong Kong owners of Alinta might not appreciate that?). He’s being more honest than the other energy chiefs, but Australians need the whole truth. Just what are we giving up by blowing up the old coal plants?
The renewables transition was like a gold rush, but quickly projects started to fail… as Big Government plans do:
11 minutes: I also want to explain what’s caused the drop in investment for large scale renewables. … In the last 5 years the top three gentailers [combined generator-retailers] in this country have collectively written off in excess of $10 billion of shareholder funds. There’s a race to Net Zero but it’s supposed to be for emissions not for profit.
In the early era of renewables Australia had the perfect investment climate for wind solar and pumped Hydro. It could have been seen as the gold rush for renewable generation and certainly we saw no shortage of companies trying to get a piece of the action, but very quickly projects started to fail, loss factors increased and investment cases started to crumble. With a lack of planning and proper infrastructure we quickly found the grid overwhelmed…
Costs are rising rapidly:
15 minutes: Let me tell you why higher cost and uncertainty about recovering those costs that’s why in 2017 Alinta energy developed and built the first big battery in Australia for around $1.5 million per megawatt. Right now we’re building another one that will cost roughly $1.7 million per megawatt . In 2020 it cost around $850,000 to insure a gas fired power plant. Today it’s around $1.75 million — that’s up 40%. I shocked people when I spoke at a conference two years ago and said that it would cost $8 billion to hypothetically replace our Brown Coal fired power station which was acquired for $1.1 billion. Replacing it with pumped hydro and offshore wind today would now cost in excess of $10 billion. That’s up two billion in a mere two years. Developers rightly are afraid to lock in high costs in case they can’t be recovered.
The Alinta chief admits his biggest problem is the glut of solar panels at midday
Everything he says about the problems with massive solar input at lunchtime is true for all the original baseload generators on the grid too. In full honesty he would admit coal plants were not retired because solar and wind were cheap, they were driven out of the market by the subsidy on an essentially irrelevant unreliable form of extra generation that always turned up when we didn’t need it:
The solution to the solar panel glut is battery storage
(What did I say? One reason for the EV mandate is so they can make you buy the backup battery to store the useless intermittent watts in?) Dimery doesn’t want to offend 3 million solar panel owners, but he is quietly saying “they must pay”:
I know how much households love their solar and how important solar is to the transition, but as with any of the intermittent technologies on its own it has pluses and minuses. … the daytime production from rooftop solar needs to be stored and shifted to when it’s required. We’ll need household batteries but they’ll fill up quickly. We’ll need big batteries, and they’ll also fill up quickly too. EV’s will take time to build up to critical mass and for vehicle-to-home and vehicle-to-grid models to alleviate some of the imbalances of homeowners dominating solar and battery installations. We’re exploring other options too like inviting retail customers to be co-investors in wind farms and giving them a portion of the output offset against their bill as well as providing better insights about their appliances via itemized bills that show what’s being spent on heating and cooling and refrigeration.
It’s a solar death spiral
He points out that solar PV owners themselves don’t care about the negative wholesale prices at lunchtime (but in a real market they would).
Rooftop solar is contributing to low energy prices at various times in daylight hours but it isn’t affected by price signals in the same way large scale generators are. It’s a problem we need to solve.
So we subsidize lunchtime solar we don’t need, which makes electricity more expensive for those without solar. Eventually everyone feels they have to buy solar panels, but at the same time the solar glut is driving out the generators we need the other 75% of the day. This is a spiral that only goes down. The end is coming. The subsidy game can’t go on forever.
We need to put real prices on solar panels now, and if that stops all new solar being installed (except in remote locations) so be it. Then we then need to rejig the billing system so those who installed the panels aren’t being subsidized by those who couldn’t afford them. It will take years to unravel this mess.
The land of truth is arriving at the magic renewable tree.
BACKGROUND INFORMATION
Jeff Dimery was alwys a renewables guy, Oh the irony, that he is now the one saying we need to keep coal running a bit longer:
Jeff was a founding member of Australia’s Clean Energy Council, and previously served on the boards of The Renewable Energy Generators of Australia, Australian Energy Council (including as both Chair and Deputy Chair), and the Australian Wind Energy Association.
Alinta Energy from Wikipedia
Alinta owns 3GW of power, gas, wind, coal, and “co-generation” in NZ, and has about 1.1 million retail customers.
Alinta Energy is an Australian electricity generating and gas retailing private company owned by Hong Kong-based Chow Tai Fook Enterprises (CTFE). The sale for $4 billion was approved by Treasurer Scott Morrison in 2017.[2] Alinta Energy has an owned and contracted generation portfolio of up to 1,957 MW, approximately 1.1 million combined electricity and gas retail customers and around 800 employees across Australia and New Zealand.[1]
Alinta Energy’s approximately 3,000MW electricity generation portfolio includes:[8]
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- Port Hedland Power Station, Western Australia
- Newman Power Station, Western Australia
- Pinjarra Power Station, Western Australia
- Wagerup Power Station, Western Australia
- Goldfields Gas Pipeline, Western Australia
- Reeves Plain Power Station (Proposed), South Australia
- Braemar Power Station, Queensland
- Bairnsdale Power Station, Victoria
- Loy Yang B Power Station, Victoria
- Glenbrook Power Station, New Zealand
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