The Citizens Electoral Council explains Australia’s electricity market, and how it’s doomed to failure if it follows South Australia’s example:
South Australia’s electricity crisis is a green market failure
Australia must scrap the delusional Renewable Energy Target (RET), the National Electricity Market, and electricity privatisation, or follow guinea-pig state South Australia into an energy disaster that harms vulnerable people and productive industries alike. South Australia is now suffering a power crisis that threatens to shut the doors of numerous businesses and destroy much of what’s left of the State’s ailing economy. In just the past three weeks the Australian Industry Group has estimated electricity price spikes to have cost in excess of $150 million. Some of SA’s largest employers—BHP Billiton, Arrium, Adelaide Brighton Cement and the Nyrstar smelter at Port Pirie—have raised serious concerns about the cost of doing business in the State. Many small businesses wonder how much longer they can survive. Welfare groups cite rising power prices as the number one issue being raised with their financial counsellors.
On 9 May 2016 Alinta Energy closed its 544 megawatt (MW) Northern Power Station near Port Augusta, following the mothballing of its nearby 240 MW Playford B Power Station in 2012. Leigh Creek Coal Mine that supplied these power stations is closed and now South Australia has no coal-fired power stations at all.
Spot prices on the electricity market have soared. The average daily spot price in May, according to the Australian Energy Market Operator (AEMO), was $46.82 per megawatt hour (MWh) up until the Northern Power Station was turned off, before jumping to $80.47/MWh for the remainder of the month. The June average of $123.10/MWh was more than double the value for the year prior. And the July average, as of 26 July was $262.97/MWh.
During the 2015 financial year, gas accounted for 37 per cent of the electricity generated in South Australia, wind 34 per cent, coal 23 per cent, and solar 7 per cent. Additionally, the State imported around 10 per cent of its total power from Victoria via an interconnector, to meet demand when there was not enough local capacity—a frequent occurrence when relying on intermittent “renewables”.
South Australia is the largest producer of wind energy in Australia and with an installed capacity of 1,473 MW; under ideal conditions wind power could meet 100 per cent of electricity demand. But wind power mostly provides only a small fraction of demand and on some days no power at all. On 7 July, in calm weather, all wind farms in South Australia produced a miserable 190 MW between 6:00 AM and 7:00 AM. By early afternoon the energy generation was in deficit as the turbines consumed more power than they produced (!); at 2:20 PM, energy generation by all wind farms was -2 MW. As a result, wholesale electricity prices on 7 July averaged a crippling $1,251.86/MWh and major businesses threatened to shut down.
Electricity price hikes are smashing small and medium businesses. South Australian components manufacturer Alfon Engineering’s CEO Fred Moore said power prices had increased by almost 50 per cent in the business’s latest contract. Its monthly electricity bill until the end of May was about $3,000, and last month it increased to just under $4,500/month. “I don’t know how long the company is going to be able to afford it,” Mr Moore said. The 12-month contract will see the company’s bill skyrocket from about $36,000 last financial year to about $54,000.
A Frontier Economics report published last July foreshadowed such problems, warning that if the State shut down the Northern Power Station, “South Australia may face load shedding events and potentially even a statewide blackout”. “The people of South Australia are increasingly likely to bear increased electricity costs as wind makes up a greater proportion of South Australian generation,” the report said.
An August 2014 report titled “South Australian Disconnection Project”, prepared by public-policy consultancy Urbis for the South Australian Council of Social Service, highlighted the crisis even at that time: “South Australia has the highest rate of disconnection from electricity in Australia. The disconnection rate is increasing, and the number of residential electricity disconnections in South Australia has more than doubled in the last four years.”
The Renewable Energy Target—implemented by the Howard government on April Fools’ Day of 2001—that compels electricity companies to purchase expensive “renewables”, must be scrapped. Electricity generation and the distribution network must be returned to public ownership. Even Australian Competition and Consumer Commission boss Rod Sims now admits what most Australians have always known: electricity privatisation is a disaster. State-run power stations delivered cheap reliable electricity not subject to market manipulation; we must restore this proven model, and invest in generation capacity that exceeds demand. Then we will never risk running short, and will have surplus power to accommodate industrial expansion. Click here to recommend this to your friends
[…] Moving on I see the CEC is still in existence – and have a new report out “Time for honest discussion about energy in South Australia”. At first glance looks a shocker too. They claim ” There is a very strong correlation between wholesale electricity and gas prices in South Australia.”
I would say – Post the closure of coal generation on 9 May 2016 – and at times of poor wind output – gas generation and imports are relied upon to meet demand. Increasing gas consumption in electricity generation will have a consequence of putting upward pressure on gas prices. Not the other way around as CEC claims.
Just watch out for the CEC and CEC difference. Clean Energy Council which is not the Citizens Electoral Council