For 140 years, Australians had access to inexpensive and reliable energy.
Now, suddenly, we find that the cost of electricity and gas is soaring, while reliability can no longer be guaranteed, despite the availability of almost inexhaustible quantities of coal and gas.
The grim march of the Wind Turbines.
The shocking truth is that only one new coal-fired power station has been built in Australia over the past decade (near Collie, Western Australia), while older, less efficient power stations have closed down. Electricity prices are rocketing upwards.
Over the past year alone, 20 per cent of Victoria’s (and 5 per cent of Australia’s) power generation has been lost with the closure of the Hazelwood Power Station. South Australia’s last coal-fired power station closed in 2016, contributing to two large power blackouts, one affecting the whole state.
How did this transformation come about, particularly as governments have established an integrated national energy grid to ensure it does not happen?
The short answer is that the Commonwealth Government and the states have made the construction of new base-load power stations uneconomic through the introduction of lucrative incentives for “alternative energy” sources such as wind and solar, and taxes on coal.
These have been introduced as part of these governments’ policy of “greenhouse gas” abatement.
Incentives
Let’s look at the incentives available for solar and wind power. They cover both the capital cost of small-scale solar and wind energy generators, and operating costs.
If you install a solar-power system, you receive a generous discount on the purchase price, depending on the size of the system installed. For example, a typical five-kilowatt system (approximately 20 panels) attracts a discount of about $4,000 off the cost of the system.
Separately, every unit of electricity a home solar-power system produces and consumes is free, and the electricity retailer will also purchase any surplus electricity the solar system generates. This may include a contribution from the state government.
The subsidies for solar and wind power contrast with the taxes imposed on coal-fired power stations.
These include both direct royalty taxes on coal, and a circuitous device, known as Renewable Energy Certificates, which electricity companies are required to purchase, to meet the Federal Government’s Renewable Energy Target.
These certificates effectively mean that electricity companies – not governments – are being forced to pay the cost of installing solar panels. Hence, this cost, which for households typically amounts to a subsidy of $4,000, is ultimately paid by those consumers without solar panels, who have to pay more for their electricity.
Base-load power generated from coal is subject to a state royalty tax. In Victoria, it is levied at a rate of 82¢ per megawatt/hour, in Queensland at 77¢/MWh, and in NSW at 91¢/MWh.
The 300 per cent increase in Victoria’s brown coal royalty, taking effect from the beginning of 2017, undoubtedly contributed to the decision by Hazelwood’s operator, Engie, to shut down the power station in March.
The effect of recent closures has been to triple the wholesale price of electricity, up to about $90 per megawatt/hour in South Australia, and $80 in Victoria, and with flow-on increases to about $70/MWh in the other states.
These trends will continue into the future. The forward market price now being negotiated for the next financial year puts the South Australian price at $135/MWh, $120/MWh for Victoria, and comparable increases for the other interconnected states.
The increased cost to consumers is staggering. Delta Electricity, an Australian company that runs the Vales Point Power Station in New South Wales, has estimated for the next financial year alone the additional price for consumers will be “approximately $1.08 billion for SA, $2.8 billion for Victoria, $4 billion for NSW and $2 billion for Queensland”.
It said that these increases were “a direct consequence of the closure of these two base-load coal-fired power stations”.
Delta said that the increased wholesale price of electricity arising from the earlier loss of 1,330 MWh of power, following the closure of the Wallerawang (NSW), Anglesea (Victoria) and Collinsville (Queensland) power stations should have sent the market a clear signal that new base-load capacity was required.
“However, with governments mandating and subsidising renewables by law, and the media and education sector creating a ‘renewables obsession’ as a populist cause”, Delta added, no rational business would invest in new base-load power generation.
Delta Electricity said that the actions of governments in permitting the demolition of coal-fired power stations capable of an extended economic life, while low-cost coal is available, was “an act of economic vandalism”.
The result of all this is that ordinary consumers and businesses are faced with soaring prices for electricity, to subsidise renewable energy sources such as wind and solar.
