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Power failure: some inconvenient renewable energy realities

By Geoff Carmody - posted Tuesday, 30 January 2018

The problem

Electricity is more and more important for our power supply.

We debate power sources. But we rely a lot on fossil fuels. 'Green' car and other batteries, (such as the SA Tesla battery array), add power storage costs, whether re-charging using renewables or fossil fuels like coal.

Stated energy policy is to deliver affordable, reliable power, with lower greenhouse gas (GHG) emissions. Policy isn't delivery. Our electricity demand-supply balance looks wobbly on reliability, and is very costly.


We've only pursued lower emissions. Globally, we've gone backwards on these. For affordability and reliability, locally, likewise. Energy costs have soared. Local businesses are closing, and/or going offshore, taking emissions with them. Australian living standards have suffered, and will suffer more, as a result.

This is power failure.

The Government's stated policy goals provide the benchmarks for measuring failure.

Policy delivery has transformed us from a low-cost energy-competitive powerhouse to a costly-energy policy pauper. Global GHG emissions are still increasing. Nothing we do will alter this prospect much, if at all.

Why do we no longer deliver the two outcomes we once achieved: affordability and reliability?

The fundamental cause: politicians chased one new goal, and ignored the two old ones

The Government says we face an energy 'trilemma': supplying affordable, reliable, low-emissions electricity. They, the Opposition, and others, should know. They're all accomplices before, during, and after the fact.


Politicians put this 'trilemma' label on a problem of their own making over many years. It's become a policy excuse, in the last year or two, as adverse cost and reliability consequences of their blinkered energy policy have emerged. Blame-shifting is rampant.

These people didn't even talk about a policy 'trilemma' until recently. They only talked about reducing emissions. They hoped affordability and reliability would look after themselves – while denying they couldn't.

Affordability and reliability went backwards as the power grid staggered under a renewables policy onslaught that is also driving out lower cost dispatchable power supplies.

Some argue lower-emissions renewables like solar and wind are cheaper than fossil fuels like coal or gas. Really? Great news if it were true. Subsidies could stop. The market would switch to renewables unaided.

But these same renewables supporters won't let go of the subsidy teat. Why do they still want others to subsidise renewables? Because they know they're really not cheaper after all? They're right. They aren't.

It's worse. Such are the mixed policy signals and general uncertainty engendered by politicians that investment in dispatchable supply is under threat. That points to less affordability and reliability in future.

Politicians chose – and continue to choose – the costliest emissions reduction option

The focus on Australia's tiny contribution to reducing global anthropogenic emissions is worse. Politicians chose the costliest emissions reduction option: renewable energy targets (RETs). They still do.

Economically, this was the worst choice. Because costs are rising and reliability is falling, this will prove a poor choice politically, too.

Adding to costs, politicians ruled out some gas and all nuclear resources for lower-emissions power.

Simple physics shows renewables (solar, wind and hydro) are:

  • Subject to weather, and water supplies, for power generation.
  • Are thus uncertain and intermittent generators, not continuously reliable dispatchable power sources.
  • Have low energy densities: large areas, volumes and weight are needed to generate modest power.
  • As their share in power generation rises, they raise total costs of renewables/fossil fuel blends a lot.
  • The Australian contribution to lower global emissions from RETs has been/will be insignificant.

Politicians ignored flow-on effects

Adding to power failure, being one-eyed on emissions, politicians ignored side effects. Modern power systems are interdependent. Increasing the renewables generation bit affects how other bits perform.

This is crucial for the back-up power needed for reliability. Back-up capacity requirements (extra generation plus storage) increase dramatically as the share of renewables in total power generation rises.

We have two choices for back-up power: fossil fuel or even more renewables.

NEM rules require all generators to supply power at lowest cost. The rules mean fossil fuels can't do so for much of the time, adding to their power dispatch costs when they can. But subsidised renewables require multiple generation capacity plus storage (batteries, etc). Multiplied capacity for the same power costs a lot.

Either way – indeed, with today's power grid, both ways – back-up costs of our blended fossil fuel plus renewables power system increase.

Against the three policy benchmarks, how does our power system score after increasing renewables' share?

Affordability = fail. Reliability = fail. GHG reductions = fail. Living standards = fail. More RETs = success.

Now what?

Insanity has been defined as doing the same thing (or even more of it) and expecting different results. Whether Einstein himself ever subscribed to this definition is debated. But Einstein wasn't dumb. Indeed, E = mc2 gives us a clue to a 'trilemma' energy policy improvement.

On energy policy, Australian politicians haven't been smart. Power realities have been ignored.

We can reduce the inherent tension between affordability, reliability and lower emissions.


1. Use nuclear fuels for peaceful power here. We already export them. It can be safe. Ask France.

2. Reverse state bans on gas development. These increase power costs. Give landowners a cut.

3. Phase out all RETs ASAP. On a reliability-equivalent basis, RETs are more expensive, not cheaper.

4. Require all power dispatch be on a reliability-equivalent levelised lowest-cost basis from now on.

5. If we must price emissions, a comprehensive, uniform, national emissions consumption price is best.

We can choose a better path. If we want to. Wemay well choose more of the same. Power failure.

It's our choice.

Whatever the causes of any global warming, the consequences of our policy choices are anthropogenic.

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This is an edited version of Geoff Carmody's 5 January 2018 booklet entitled "POWER FAILURE: affordable reliable renewables? Some inconvenient realities".

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About the Author

Geoff Carmody is Director, Geoff Carmody & Associates, a former co-founder of Access Economics, and before that was a senior officer in the Commonwealth Treasury. He favours a national consumption-based climate policy, preferably using a carbon tax to put a price on carbon. He has prepared papers entitled Effective climate change policy: the seven Cs. Paper #1: Some design principles for evaluating greenhouse gas abatement policies. Paper #2: Implementing design principles for effective climate change policy. Paper #3: ETS or carbon tax?

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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