Tuesday, June 14, 2022

As ever, price control reduces the supply

The high price of inputs such as coal is making electricity generation more expensive -- meaning that generators need to charge more to recover their increased costs. But making electricity more expensive is deeply unpopular so Australa's brilliant bureaucrats capped the amount generators can charge for their product -- price control.

So to protect their income the generators have been reducing their output to a bare minimum. Doing that also breaks the price caps so it is a stoush between the bureaucrats and the generators -- with the public at risk -- being faced with blackouts

Power generators are exploiting the chaotic energy market by withdrawing power supply from the electricity grid and waiting until strict rules to prevent blackouts kick in, forcing the energy market operator to direct them to fire their plants back up and triggering profitable compensation payments.

There’s no law stopping power companies from withdrawing their electricity generation from the market, and in the past two days they have reduced the volume available by 2 gigawatts in Victoria, 3 gigawatts in NSW and 1.5 gigawatts in Queensland.

The withdrawals were prompted by the Australian Energy Market Operator’s (AEMO) decision to put a cap on spiralling prices that electricity generators are charging for wholesale power, which crimped the profit margin of some generators, which are battling coal prices that are soaring because of sanctions on Russian exports.

But the electricity market is tightly regulated and AEMO has powers, designed to prevent blackouts, which enable it to force generators to fire up units and start supplying electricity to the grid. Whenever AEMO does this, companies are awarded compensation.

AEMO was unusually forthright in a public statement yesterday when it said that directly after price caps were imposed on power companies “available offers were reduced”.

These withdrawals represent more than 10 per cent of the east coast energy grid’s total generation capacity of 55 gigawatts and come on top of an energy crunch created by a series of breakdowns and maintenance outages that have forced about one-quarter of the east coast’s coal-fired power stations out of action.

Melbourne University energy expert Dylan McConnell said while power companies may have reduced their output for legitimate reasons, the scale of withdrawal across the industry raised concerns over its social licence.

“It’s not in good faith and fairly unconscionable conduct. Yes there is some sort of justification for it, but it’s the wrong thing to do,” McConnell said.

Federal Energy Minister Chris Bowen was asked on Tuesday if power companies were gaming the system and said the compliance regulator was monitoring the situation “very, very closely”.

“The Australian Energy Regulator reminded [power companies] of their obligations of the law this morning,” Bowen said.

The market regulator has reassured ministers that it believes there is still sufficient power available to the grid – but it’s likely that power companies will continue to be directed to switch their units back on, triggering more compensation payments.

“I have been in contact with [AEMO] and they are confident the situation can be and will be avoided in NSW and Victoria in particular in coming days,” Bowen said on Tuesday. “Nobody should turn off any power usage that they need for their comfort or their safety ... nobody is asking for that to happen.”

A spokesperson for the Australian Energy Council, which represents major power generators including AGL, EnergyAustralia and Origin, said its members faced a “complex issue” but were seeking solutions to the power crunch.

“The price cap unintentionally means that some plants can’t recover their fuel costs. Participants are legitimately seeking ways to resolve the problem,” the spokesperson said.

NSW Treasurer and Energy Minister Matt Kean said he was in close contact with AEMO and had “every confidence” there was enough power available to avoid blackouts, and he identified compensation payments as a cause of shortfall warnings that had sparked concern.

“The reason that generators are waiting for the market operator to direct them, rather than taking a loss in the market is because they are eligible for some compensation from the Australian Energy Regulator,” Kean said.


Federalism comes to coal

The clause below

"until the transition to renewables and storage is complete"

both shows an awareness of the energy problem and tells us how foolish the faith in "renewables" is. To transform to 100% renewables you would need "storage" (batteries) on an umimaginable scale

Individual states and territories will decide whether to exclude coal and gas power from a temporary capacity mechanism, designed to secure enough baseload generation until the transition to renewables and storage is complete.

The Energy Security Board’s draft capacity mechanism, to be released within two weeks, is understood to be based on a technology-neutral model and will not endorse subsidies to keep coal-fired power stations and gas in the system longer than needed.

The ESB brief from federal, state and territory ministers is that the capacity mechanism should not conflict with ambitious renewables and storage targets, and that different jurisdictions can opt in to preferred technologies.

Energy ministers are keen to avoid costs being passed on to customers when energy retailers lock in long-term electricity supplies under a capacity mechanism, which other countries facing supply pressures have adopted.

Amid an east coast electricity crisis fuelled by global factors and outages across the National Electricity Market, more coal-fired power capacity will come online this week to reduce the reliance on high-priced gas.

Queensland’s CS Energy, which contributes 10 per cent of the NEM’s output, is preparing to bring three of the four units at the 1525MW Callide power station online next month, increasing output alongside its 750MW Kogan Creek plant. The Callide plant’s C4 generator, which was shut after an explosion last year, will not resume activity until April next year.

Queensland Energy Minister Mick de Brenni said the government would “not be shutting the gate on our power stations, their workers or their communities and instead will invest in their future”.

“The energy ministers meeting was clear – we will finally have a sensible plan to boost our energy capacity across the nation,” he said. “But we were also clear – in Queensland, the diversity of our energy system is what delivered reliable power, and our power stations will continue to sit at the heart of that. Because Queenslanders own their own energy assets, we have avoided the energy chaos that has gripped southern states in the wake of nine years of the divided Abbott-Turnbull-Morrison government.”

Grattan Institute energy and climate change director Tony Wood said the proposed capacity mechanism was not a “coal-keeper or gas-keeper … it’s the lights-on-keeper”.

Mr Wood said a capacity mechanism was unlikely to lock in long-term investment in coal-fired power stations, and predicted fierce opposition to “perverse incentives” extending the life of coal plants. He raised concerns about high coal prices on the spot market, which were “just as bad” as gas.

“If the capacity mechanism is designed properly, it will only be there while we need it,” he said.

“Other countries have forms of a capacity mechanism, Western Australia has a capacity mechanism. You can design a bad one or you can design a good one. You can design one that rules out certain technologies but there will be consequences if you rule out certain technologies.”

Mr Wood said guidelines provided by energy ministers to the ESB last year would give cover to some, including Victorian Energy Minister Lily D’Ambrosio, to say “we don’t want to have coal or gas getting capacity payments”.

He described the mechanism as a “shock absorber or comfort blanket” for governments that would “not stay in any longer than necessary”. “I do not know how you have a capacity mechanism without coal and gas because you’ve only got a couple of large pumped hydro projects and one of them is already running late,” he said.

“The collective ministers (need to be convinced) that this is not a coal-keeper, or gas-keeper or fossil fuel-keeper. This is a policy that says if we are going to achieve (high renewables targets) we’re going to need capacity to be there when the wind isn’t blowing and the sun isn’t shining. One way to do that is to pay for it.”

Energy ministers will discuss a new net zero emissions energy market plan at their next meeting in July to better align federal, state and territory strategies to decarbonise the sector.


Peter Gleeson: Some people are born bad so let the grubs rot in jail

There’s an 18-year old man languishing in a jail cell right now, having killed a young couple and their unborn baby while driving a stolen car, high on alcohol and drugs.

Before that fateful killing in Brisbane on Australia Day last year, the perpetrator had a 12-page rapsheet, a juvenile delinquent in every sense of the word.

We can’t name him because he was 17 when the offence of manslaughter was committed. So he will retain his anonymity for a crime that shocked the country.

He will also be out of jail on Australia Day, 2027, having served six years for a crime so heinous – so far reaching and evil – that it has sparked an outpouring of anger and grief. The teen ran a red light and collided with a truck before rolling and hitting the couple as they were out on an afternoon walk.

The families of Kate Leadbetter and Mathew Field gave victim impact statements to the sentencing court that were as raw and emotional as they were shocking.

Kate’s mother Jeannie Thorne said she is now living another life – the life that she never wanted. “I should be in my other life, the one that’s been ripped away,’’ she told the court.

All she wants is her old life back with her daughter, son-in-law and the prospect of being a grandmother to the boy they were going to call Miles.

Instead, they are living every parent’s worst nightmare, having to lay to rest two beautiful young souls, taken in the prime of their lives by a young man who was a menace to society and an accident waiting to happen.

It is little use debating the pros and cons of soft sentencing. On any measure, serving six years in jail for the callous disregard and loss of human life experienced during this tragedy is clearly not in keeping with community expectations.

Everybody knows a similar case in their own backyard.

But Judge Martin Burns has a job to do, noting no sentence would ever be enough for the families, giving the offender a sentence commensurate with what the law allowed.

Here’s what I think. Throw the key away for the little grub. Let him rot in a jail cell forever. Change the law. Mandatory life for such a terrible crime.

This cretin should never enjoy the comforts and luxuries afforded to law-abiding people. His social licence has been revoked. Some people are just born bad. He is one of them.

Mind you, vigilantism is never the answer. Yet, I’ve had several emails in the last few days from men suggesting they’d take justice into their own hands if it was their daughter and son-in-law. It’s an emotive and some would say entirely natural response.

But the big question remains; How do we weigh up the rehabilitation prospects of a young man who clearly has no regard for the law, or for the general wellbeing of people?

Is this person capable of redemption, of being able to go straight and learn from this enormous tragedy?

Or is he to be forever consigned as bad to the bone, a threat to society, a person who will die early, either through his own actions or those of somebody else?

My sense, my fear, is that this guy is evil. As such, when he gets out in 2027, he’ll go back to his old ways.

Hopefully, I’m wrong. However, the real truth in this sad story is that two families, and the many friends of the dead couple, are living a life of sheer hell. For that, there will never be justice.


Australians will pay dearly for the green pipe-dreams of Mike Cannon-Brookes and his ilk

A polar blast from Antarctica has left many Australians shivering in their homes, as icy winds have torn down power lines. It feels like a portent of things to come. Even without electricity outages, Australians are contemplating turning off their heaters and putting on extra cardigans as the national regulator announced price increases of up to 18 per cent from the start of July.

The cold snap won’t bother Mike Cannon-Brookes. He’s unlikely to be switching off lights in spare rooms at his $100 million Point Piper mansion or any of his other trophy homes. On the contrary, he was cock-a-hoop. ‘Wow. A huge day for Australia,’ he tweeted on Monday. Having bought just over 11 per cent of the shares of AGL, Australia’s largest energy provider, the rich lister climate activist successfully intimidated management into dropping its plan to split its retail business from its coal-fired power plants, sparking the resignation of the CEO and the chairman of the board, as well as two other directors. Management was convinced that a majority of shareholders supported its plan but they needed 75 per cent and rather than put the proposition to a vote they turned tail and ran.

Caving into to Cannon-Brookes didn’t impress AGL shareholders, with the stock price falling this week, but that is unlikely to worry the billionaire who has money to burn and has been retweeting the thoughts of António Guterres, secretary-general of the United Nations, and a former socialist prime minister of Portugal. Guterres is grumpy that ‘We still see funding for coal & fossil fuels from some of the biggest names in finance, hedge funds & private equity,’ and tweeted that ‘Investing in fossil fuels is a dead end – economically & environmentally,’ and ‘No amount of greenwashing or spin can change that,’ exhorting his followers, ‘Don’t work for climate-wreckers.’

No prizes for guessing who are ‘the climate wreckers’ that are still investing in fossil fuels. China’s Yankuang Energy Group is keen to buy out other shareholders in Yancoal, an Australian coal producer and developer operating open cut and underground coal mines in New South Wales, Queensland and Western Australia.

China’s enthusiasm for fossil fuels doesn’t worry Australia’s climate zealots. Australia’s emissions of carbon dioxide peaked in 2009 at 390 megatons (Mt) and have now fallen to 376 Mt, less than 45 per cent of our emissions in 1990 whereas China’s emissions are more than 2600 per cent greater, at 9,876 Mt, and it has said it will not even try to cut them until at least 2030 or to reach net zero until 2060, ten years later than other countries.

Despite this, during the federal election campaign Allegra Spender, the new teal member for Wentworth told Sky’s Chris Kenny, that China’s climate policies were ‘incredible’. The most incredible thing about China’s climate policies is that Ms Spender would praise them. China’s plans for 169 new and expanded coal projects will boost domestic coal production by 559 million tons per annum, and could boost global methane emissions, the most powerful greenhouse gas, by 10 per cent. It also increased its raw coal output by 10.5 per cent in the first four months of 2022 and expanded coal imports in April by 8.4 per cent year-on-year.

India is also planning to import Australian coal this year, for the first time since 2015, amid fears of power shortages during peak demand over the summer. This is despite the fact that the price is more than three times higher than at the end of last year, driven up by Europe seeking to replace Russian supplies following the invasion of Ukraine. Rather than fuelling increased investment in renewables as the green dreamers claim, the high price of coal may simply spur India, like China, to mine more coal domestically.

Despite the rising global demand for fossil fuels, new Labor prime minister Anthony Albanese has decided to force taxpayers to bankroll the profits of wealthy renewable investors like Cannon-Brookes and Macquarie Bank by using government money to foot the bill for expanding and upgrading the energy grid to handle more renewables. Labor hopes to trick taxpayers by hiding the costs off-budget, as it did with the public money it sunk into the NBN. It is music to the ears of green champagne socialists – public subsidies to cover the costs of building new infrastructure while private investors milk the profits.

AGL was planning to close the last of its coal-fired power plants between 2040 and 2045 instead of 2048, but Cannon-Brookes wants those dates brought forward to 2035 and to invest A$20 billion in renewable energy and storage solutions. Yet even with taxpayers covering the cost of upgrading the grid, the early closure will mean greater reliance on energy sources which will be more expensive than existing coal-fired power plants. One analyst estimates that AGL will have to spend at least $10-$15 billion to replace $1 billion of earnings coming from coal assets. In addition, having dumped its demerger, AGL will also have to establish new debt facilities in a far more difficult environment, with higher interest rates and even greater environmental hurdles.

Cannon-Brookes thinks his plan is in the best interests of ‘shareholders, customers, Australian taxpayers and the planet’, no less. Yet one wonders how in touch he is with his customers few of whom could afford to take up a green loan of $100,000 he wants AGL to offer to back their ‘decarbonisation journeys’ to convert their households to 100 per cent renewable electricity.

Indeed, there is a distinct air of unreality about the wish list of Cannon-Brookes’ backers who want Paris-aligned climate goals, a genuine decarbonisation plan that maintains jobs without a huge increase in prices, and enhances and protects shareholder value, while providing comprehensive support for impacted communities. AGL has said it is open to new approaches from third parties, but as one analyst remarked, ‘who would be willing to take on the whole business in the current political climate is beyond me’.

Cannon-Brookes says he will be seeking assurances from what is left of AGL’s management that the new plan they come up with is not simply to sell off AGL’s assets piece by piece. But whatever plan they come up with his green pipe dreams will cost the rest of us dearly


Also see my other blogs. Main ones below:

http://dissectleft.blogspot.com (DISSECTING LEFTISM -- daily)

http://antigreen.blogspot.com (GREENIE WATCH)

http://pcwatch.blogspot.com (POLITICAL CORRECTNESS WATCH)

http://edwatch.blogspot.com (EDUCATION WATCH)

http://snorphty.blogspot.com/ (TONGUE-TIED)


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