Antinuclear

Abbott does not understand the role of renewable energy in reducing manufacturing costs

Coal power stations are suffering lower prices because of excess generating supply.

Why Abbott has got it all wrong on green energy, Crikey, by Tristan Edis 18 Dec 13, In a press conference yesterday about improving prospects for manufacturing, Prime Minister Tony Abbott made a statement that appears ominous for the renewable energy industry:

“And the RET [Renewable Energy Target], well look again, we support sensible use of renewable energy and as you know it was the former Howard government which initially gave us the RET, and at the time it was important because we made very little if any use of renewable energy. We’ve got to accept though, that in the changed circumstances of today, the renewable energy target is causing pretty significant price pressure in the system and we ought to be … an affordable energy superpower … Let’s make the most of the comparative advantages we’ve got and cheap energy — affordable energy — ought to be one of our comparable advantages.”

However, there’s a silver lining because the funny thing is the RET is actually reducing energy costs for energy-intensive manufacturers.

This is completely counter-intuitive and it’s understandable that those outside the electricity sector find it hard to understand, including the Prime Minister and probably many of those people he trusts and respects — like Maurice Newman, the man who will be advising the manufacturing taskforce Abbott is establishing.

In my conversation with Newman in July, he was convinced the RET and the carbon trading scheme were almost entirely to blame for the doubling of power prices since 2007, even though the Australian Energy Market Commission and every state government utility regulator had provided information that shows this is not accurate.

For this group, the logic is that renewables must require a price higher than what existing power generators charge, otherwise why would you need the subsidy from the RET?

Now, this is true for that portion of power we get from large-scale new renewables (currently about 7% of electricity and rising to around 16% in 2020). But by adding extra supply with near-zero operating costs to an already oversupplied power market, it also acts to depress the price received by the remaining, far larger portion of our power coming from fossil fuel generators. As Environment Minister Greg Hunt’s new adviser complained in a submission while he was an employee of the owner of some large coal and gas power generators:

“It [the RET] imposes highly subsidised energy into the generation mix, the result of which will be a reduction in the wholesale energy price … Customers certainly potentially face lower wholesale energy costs as a result, at the expense of existing investors [in existing power generators].”…….

This isn’t much fun for investors who own the other power generators that see power prices go down. As Industry Minister Ian Macfarlane observed in the press conference yesterday: “… in terms of the RET review; we’re facing an enormous challenge in terms of an excess generating capacity in electricity in Australia. To be adding large quantities of generation into that situation has to be questioned. The review process will go through those things but as the Prime Minister says, in terms of the cost of energy, the fact that a coal-fired power station is dispatching electricity at a lower price now than it was five years ago …”

Did you hear that? Coal power stations are suffering lower prices because of excess generating supply. And the RET will add to that excess supply…….http://www.crikey.com.au/2013/12/19/why-abbott-has-got-it-all-wrong-on-green-energy/?wpmp_switcher=mobile

December 20, 2013 - Posted by Christina Macpherson | General News