Doug Sheridan says….
Judith Sloan writes in the Australian, the idea that Australia can become an energy superpower is impossible to square with taxpayers stumping up billions of dollars to subsidise renewables. If renewables are really the cheapest form of generating electricity as claimed, why would operators need a guaranteed flow of funds from taxpayers? That's not how markets work.
Australians have been sold a pup when it comes to the energy transition and the benefits that would flow from it. The notion that it would be good for the economy, the climate and consumers is disingenuous—and that's the best you can say. What has been obvious for some time, but has dawned on politicians only recently, is that the govts' grand plan to have 82% of electricity generated by renewable sources by 2030 has become unachievable.
The real tragedy? The failure to appreciate the complicated features of the electricity grid and how gov't intervention generally worsens rather than improves outcomes. In particular, the downside of large proportions of intermittent generation has been vastly underestimated. There is a willful ignorance of the vital role played by dispatchable 24/7 generation.
What has emerged is essentially two markets—a day market and a night market. During the day, it's common for electricity prices to be negative, mainly as a result of the widespread and somewhat unexpected expansion of domestic rooftop solar panels. At night, prices are much higher and it's when dispatchable power comes to the fore, particularly if the wind is not blowing.
Another important change is interest rates. When interest rates were extremely low, investors' cost of capital to investors was extremely low as well. Now that interest rates have returned to more normal levels, the cost of capital has increased markedly, particularly for renewable energy installations carrying a lot of debt. Add the escalation in the cost of hardware and the shortage of workers, and the result has been an uncongenial backdrop to large-scale renewable energy investment.
This combined with the fact several coal-fired stations are heading towards closure has led to a degree of panic by state energy ministers. The mistakes made in managing and attempting to transform the east coast grid are too many to list. Mainly driven by politics rather than engineering and economics, the result has been a fiasco.
Take the Marinus Link connecting Tasmania and Victoria. Because of huge cost overruns, the link has been halved and won't be completed until the next decade. The federal gov't has agreed to take on a larger share of the cost, relieving the Tasmania gov't from some of the burden. We are told six wind farms in Tasmania now won't be viable with this smaller link
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