Senator Chris Back: Wind Industry must prove its CO2 abatement claims
In our last post we tipped a bucket on the central, endlessly repeated lie trotted out by the wind industry and its parasites, that Australia’s great wind rush has resulted in substantial reductions of CO2 emissions in the electricity sector.
In Australia, the central object of the Renewable Energy (Electricity) Act 2000 is for “renewable” energy to “reduce emissions of greenhouse gases in the electricity sector” (see s3). The legislation provides that wind power outfits receive 1 Renewable Energy Certificate (REC) for each MWh dispatched to the grid. That relationship proceeded on the mammoth assumption that – for each MWh of wind power dispatched to the grid – there will be a 1 tonne reduction of CO2 emissions in the electricity sector.
Were the mandatory RET retained in its current form, Australian power consumers will see some $50 billion added to their powers bills and transferred to wind power outfits over the next 17 years (see our post here). With that amount at stake, it would be fair to assume that there was some measurable benefit attached – of the kind envisaged by the legislation (ie substantial reductions of CO2 emissions in the electricity sector) – to what will be the biggest wealth transfer in the history of the Commonwealth.
And, with that amount in play, it would also be reasonable to assume that our political betters had already satisfied themselves that the benefit in question is, in fact, being delivered – and that they are sitting on hard evidence quantifying that benefit – especially since the mandatory RET has been in operation for over 13 years.
A few starry-eyed, policy-pygmies seek comfort in a report by ACIL Allenthat’s been used to pump up wind industry CO2 abatement claims. But that document is nothing more than a desktop study, based on Alice in Wonderland assumptions that: uses irrelevant annual averages for wind power output; bases its conclusions about CO2 emissions intensity from conventional generators on assumed (not actual) thermal efficiencies; and, critically, ignores the actual figures from coal/gas fired generators – in particular, the actual coal/gas use data from conventional generators (which ACIL Allen never bothered to ask for) against which power output comparisons can be made to determine actual (not assumed) CO2 emissions intensity; and, therefore, whether wind power has, in fact, reduced CO2 emissions in the electricity sector.
At no point since that legislation took effect over 13 years ago has the wind industry provided any actual proof that it has in fact reduced CO2 emissions in the electricity sector. In what might come as a rude shock, none of our political representatives on the Federal stage has ever had the temerity to ask for any hard evidence to substantiate the wind industry’s mantra; and have seemed content to oversee the wholesale punishment of power consumers on nothing more than blind faith.
Chris has thrown down the gauntlet, challenging the wind industry to stump up concrete proof to back its wild claims about reducing CO2 emissions in the electricity sector. Here’s a speech Chris delivered in the Senate last Wednesday.
MATTERS OF PUBLIC INTEREST
Renewable Energy Target
Wednesday, 3 September 2014
Senator BACK (Western Australia) (13:36):
I wish to discuss the renewable energy target review and its report, now that it has actually been handed to the government by the independent panel, chaired by Mr Dick Warburton. I want to make some comments about the review itself.
The first point I want to put to bed is around some allegations that have been bandied about in this place during the week to do with the apparent incompetence of the panellists to review the RET.
I just want to point out that, in addition to Mr Warburton, the other panellists include the eminent Mr Brian Fisher AO PSM, a previous executive director of the Australian Bureau of Agricultural and Resource Economics and Sciences. He is a renowned economist.
Another panellist is Ms Shirley Int’t Veld. As a Western Australian, she was the managing director of Verve Energy in WA from 2007 to 2012. Verve was the energy instrumentality that used more renewable energy sources than any other in Western Australia, so I do not know how she could not be regarded as credible.
The other panellist is Mr Matt Zema, managing director of the Australian Energy Market Operator. So I want to dispel the myth that this group was not competent to undertake the work.
For those who might be interested, I will review what the RET is all about. The RET is a government intervention designed to mandate the proportion of electricity generated from selected sources. It is designed to support a policy of at least 20 per cent of Australia’s energy coming from renewable sources by 2020; as such, the policy taxes electricity users and, in some cases, non-renewable generators.
How does it work?
The renewable energy certificate market emerges from the energy targets. Renewable energy certificates, or RECs, are issued to power station generators classified as renewable under the act. They are a form of energy currency as electricity retailers must purchase the RECs to cover their liability. Costs are passed on to consumers through purchase of mandatory certificates by electricity retailers. That, of course, is where it becomes a tax on energy consumers.
The first point I make about the target is that the objectives of the act have not been met, principally because there has not been to any extent a reduction of greenhouse gases in the time the target has been in place.
The second point is that whatever achievements the renewable energy sector has made have largely come from hydroelectricity. Hydroelectricity, as we all know, was around for a long time before the renewable energy target was formed. Having lived and worked in Tasmania and having even had to declare an interest because a company of which I was the managing director actually supplied lubricants and fuels to the hydroelectricity scheme in Tasmania, I place on record that it is a wonderful scheme.
Senator Singh interjecting –
Senator BACK: I want to place on record that I, for one, want to make sure that – whatever outcome is eventually decided by government – the hydroelectricity scheme is enhanced, protected and encouraged independent of the RET system, because it preceded RETs by so many years, as Senator Singh herself indeed knows.
At the time it was suggested that to achieve a 20 per cent contribution of renewable energy by 2020 would require some 41 gigawatt hours to be generated by renewable sources. We know that two things have happened. First of all, there has been a drop in demand –
Senator Singh: Mr Acting Deputy President, I rise on a point of order. I offer a correction to Senator Back; it is 41,000 gigawatt hours, not 41 gigawatt hours.
The ACTING DEPUTY PRESIDENT (Senator Seselja): Order! Senator Singh, there is no point of order.
Senator BACK: Senator Singh’s contribution is quite right, for which I thank her. It is 41,000 gigawatt hours. I will check the Hansard to see what I did say.
Indeed, as a result of a reduction in demand, we now realise that to achieve that 20 per cent target the figure is probably closer to 23,000 gigawatt hours. I do appreciate Senator Singh’s keen attention in listening to my contribution. That is the background of the RET.
The RET comes under two broad categories: the small-scale renewable energy target and large-scale renewable energy targets.
The small renewable targets, which are probably 10 per cent or less, are mainly to do with photovoltaics and solar hot water systems. In relation to the small-scale RETs, the recommendation of the panel is that there is probably little if any need for further support at this time. This is because power charges have gone up – somewhat because of the carbon tax, which has now been repealed through the excellent work of Senator Cormann and others – and costs in the solar sector have come down considerably.
Nevertheless, power charges have gone up while the costs of putting photovoltaics on roofs have come down. It is arguable that photovoltaics are now cost neutral. I was the chief executive of an organisation that introduced seven or eight different forms of solar energy many years ago on an island that I had the pleasure of being responsible for and I am a great supporter of solar energy. If indeed there needs to be some continued support for a limited period of time then I would not violently object to that. However, market forces have applied and the costs of photovoltaic installations have come down while electricity charges have come up, and I hope that we are now at the point of cost-neutrality. The panel has said that we are probably already at that point and that, if we are not there currently, we will probably be there reasonably soon.
I want to move to the issue of the large-scale renewable energy targets.
I have spoken in this place before of how concerned I am with regard to the wind energy sector. This report and others support the fact that there is an enormous amount of misinformation out there in the wider community about the large-scale RETs, particularly those relating to the wind industry.
The industry have employed very effective tricks to – I believe – mislead the public into believing that paying them billions of dollars in subsidies will lower power prices. Of course, it will not; there is no evidence to say that it will. The reason that the public is not outraged about this, as I said earlier, is that the public do not pay this money in taxes; rather, they pay it as part of their energy consumption. The modelling has shown that it is possible that some $37 billion over the next 15 years – or $2.5 billion per year – may be wasted on wind farms. Again, because the costs are concealed, they will not be picked up.
Comment was made that currently the RET is responsible for only around four per cent of household electricity bills. I have to say to you that other evidence refutes that. I will quote this document from AGL Energy and then seek the authorisation of the chamber to table it. I have passed the document to others in the chamber seeking authorisation.
The interesting point in the document is that AGL estimate that, in their commitment to buy 1.3 terawatt hours per year through the various wind associated organisations, it will cost them some $32 per megawatt hour above the 2015 wholesale market. They say that as a headline figure that will cost them some $40 million a year more for electricity than would have been the case without the wind strategy in place. I seek leave to table the document.
Senator BACK: We are seeing the possibility that the estimated cost of the REC scheme could add some $50 billion to power bills over the next 17 years, with some 600 million renewable energy certificates being issued at a unit cost of about $90. So, in other words, we are looking at having $50 billion added to consumers’ power bills, transferred to wind-power companies. I think this is unacceptable.
I know that Senator Polley wishes to follow me and I am anxious to make sure that she is given adequate time to do so, but first I would like to comment on emissions reductions, because I think this is important.
The arguments regarding the long-term effect of the RET on price are fundamentally flawed, simply because the energy generated by wind farms does not reduce greenhouse gas emissions in the electricity sector.
I challenge the wind energy sector to produce the evidence relied upon to assert that wind power has reduced GHG emissions in the electricity sector.
Wind power is delivered intermittently, on repeated occasions not at all, meaning of course that the entire installed capacity from wind power has to be matched with equal capacity of fossil fuel generation. I challenge that industry to produce evidence to this chamber to say that what I am indicating is not correct.
Once awareness of the existence of the RET, let alone the magnitude of its cost impact, becomes more widespread in the public arena, support for it will evaporate. Renewable energy is not free. It is high cost compared to alternative forms of generation. It is not commercially viable without large subsidies, which ultimately come out of the consumer’s pocket.
Senator BACK (WA)
Clearly on a roll, Chris followed up his speech in the Senate with this media release.
Dr Christopher Back
Liberal Senator for Western Australia
3 September 2014
Can the wind industry meet my Emissions Reductions Challenge?
In the Senate today, Senator Back said that the RET acts as a tax on energy consumers and conventional energy suppliers to fund a subsidy to selected renewable energy generators.
“But – and this is the big issue that the Coalition Government is now addressing – after 13 years of operation it has become clear that the objectives of the Act have not been reflected in the outcomes. While the investment in renewable energy sources has increased, from a carbon abatement perspective, the Act has been all but totally ineffective in its objective to reduce greenhouse gas emissions in the electricity sector.”
Arguments regarding the long-term effects of the RET on price are fundamentally flawed. This is because energy generated by wind farms does not reduce greenhouse gas emissions in the electricity sector. In fact, there is some evidence that the addition of wind energy onto the grid actually increases carbon emissions. This is the great tragedy of the scheme.
“My challenge to the wind industry is to produce the evidence relied upon to assert that wind power has reduced greenhouse gas emissions in the electricity sector at all. Wind power is delivered intermittently and, on repeated occasions, not at all, which means that an entire installed capacity from wind power has to be matched with an equal capacity of fossil fuel generation at all times.”
Grid managers are required to keep fossil fuel generating plants constantly running in the background to maintain balance within the grid in order to account for dramatic fluctuations in wind power output which occur on a minute by minute basis and base-load generators are required to maintain spinning reserve for occasions when wind power output collapses as it does on a routine but unpredictable basis. The requirement to maintain spinning reserve means that base-load generators are burning coal and gas at a constant rate even though no power is being dispatched to the grid.
“The case to abolish the RET is driven by its cost to electricity consumers compared to the corresponding reduction (or lack of reduction) in greenhouse gas emissions achieved through its 13 year lifespan. This cost comparison, extending the RET tax to 2031 for no measurable reduction in greenhouse gas emissions in the electricity sector is completely futile. It becomes a drag on the Australian economy and an insidious impost on every electricity consumer in the nation – large and small businesses, families and individuals.”
The wind industry is trumpeting two issues in the media: one is that wind is dropping the wholesale price of electricity; and the second is that the RET will cause the retail price of electricity to fall. Put simply, if wind is causing the wholesale price of electricity to fall, then the renewables industry no longer requires the billions of dollars in subsidy it receives through the large-scale RET scheme, as renewable energy is therefore cost competitive in the market.
In reality, the RET is causing electricity prices to rise significantly as it is the Power Purchase Agreement (PPA) that is and always has been the fundamental relationship between the power generator and the retailer.
These PPAs lock in prices of up to $120/MWh compared to the average wholesale price of between $30-$40/MWh. The price set by the PPA is paid by the retailer irrespective of the wholesale price. This PPA price is passed on to retail customers along with the retail margin over the life of the PPA which is usually 15 and up to 25 years. I have tabled a confidential document showing proof of this in the Senate chamber today to ensure transparency for the Australian public.
It is a legislated requirement that 600 million RECs will be issued between now and 2031, adding a cost of at least $50 billion to power bills over the next 17 years. This represents a significant wealth transfer to wind power companies from Australian power consumers and achieves no measurable benefit to the environment.
The RET scheme was never intended to act as an unchecked subsidy. “Once awareness of the existence of the RET, let alone the magnitude of its cost impact, becomes more widespread, public support for the scheme will evaporate. Renewable energy is not free; it is high cost compared to alternative forms of generation and commercially unviable without large subsidies. What people need to understand is that they pay these costs in their electricity bills and not through their taxes. It hurts everyone.”
Senator Chris Back (WA).