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Renewables statistics realities

By Geoff Carmody - posted Wednesday, 11 July 2018

In the spirit of the NEM, we could look at renewables generation across groups of states, provided inter-connector facilities allow load-sharing between them. At present, the NEM can be broken into two regions: (i) the Vic/Tas/SA region, and (ii) the NSW/Qld region. (WA is unconnected.) The chart below illustrates renewables shares, using state power generation-weighted averages, for these two regions.

The chart shows these two NEM regions have very different renewable energy characteristics:

  • The Vic/Tas/SA region is much more wind and hydro-dependent than the NSW/Qld region (over 16% and over 23%, respectively). The NSW/Qld region averages well under 5% for both.
  • The NSW/Qld region depends more on solar power, but only with about 5% of generation.
  • Neither region, on average, exceeds the solar (15%) or wind (29%) share thresholds above which multiplied generation and storage capacity is needed for reliability. On wind, Vic/Tas/SA is closing in.
  • Reliability demands interstate inter-connectors themselves have (i) sufficient capacity, (ii) reliability, and, (iii) connected states always agree to keep them open, for regions to work in a NEM-type way.
  • In 2016, SA and Tasmania, and the relevant inter-connectors, clearly failed this test.

Some may argue these charts show surging power prices in Australia have not been due to increasing renewables generation shares because, regionally at least, the renewables capacity 'multipliers' aren't (yet) exceeded.

This is tendentious. It's also incorrect.

In particular, the effect of preferential treatment for wind and solar power reduced market access by base-load power generators, raising their costs to stay in operation. The incessant political 'jawboning' against new investment in base-load power capacity, the increasing investment/sovereign risk that caused, the publicity given to lenders not willing to finance such investments, and the withdrawal of existing base-load supply, all helped increase power prices as base-load capacity disappeared.

All of these influences are directly attributable to Australia's renewable energy policy.

Once solar and wind thresholds are breached (as now for wind in SA), reliability imperatives demand increasing multiplied wind and solar generation capacity, almost matched by increasing multiplied capacity in storage. If we want reliability, this is unavoidable due to solar/wind intermittency. See chart below.


These average capacity multipliers will also multiply total costs of ensuring reliable power even as $/MWh renewables generation costs fall. The marginal capacity multiplier for solar, once solar accounts for more than 15% of generation, is 12.33 times. The corresponding multiplier for wind, once wind accounts for more than 29% of generation, is 5.90 times. These estimates are based on official data for SA in 2016-17.

Solar and wind power are making the power grid more and more intermittent. If we want reliability, this is adding cost increases via shrinking base-load power shares already. As the share of renewables exceeds the multiplier thresholds noted above, reliability will require even more cost increases as we shift further from current base-load power to multiplied generation and storage capacity for intermittent renewables.

Our RETs are a detonator set to trigger a larger power cost explosion. They are intended to skew power supply towards renewables, and away from everything else. They multiply required renewables generation and storage capacity to match reliability of fossil fuel power they replace, exploding power costs. Costs are already increasing, as intended, as RETs destroy the economics of fossil fuel base-load power options more generally. As fossil fuel base-load is confined to shorter supply hours, its viable power costs must rise.

Is this what we want? Apparently so. We've designed, made, and set off this power cost bomb ourselves. Global emissions reductions from our efforts will be invisible. Why inflict this damage on ourselves?

Saddler says the electricity sector has 'easy options' for (global?) emissions reduction via increasing RETs. Really? I'd hate to see the affordability and reliability consequences of his list of hard electricity options.

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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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