SA – Australia’s ‘Wind Power Capital’ – Pays the World’s Highest Power Prices and Wonders Why it’s an Economic Basket Case
Once upon a time, in a land far, far away there was a veritable manufacturing and industrial nirvana. Post WWII, its population grew at a phenomenal rate; and so too did the level of prosperity enjoyed by thousands of migrants fleeing to it from war ravaged Europe – cheap and abundant food, decent, affordable housing, motor cars, televisions – all within reach for the first time for this aspiring class of people; it soon became a paradise for the working class: it was called South Australia.
And it got that way through the efforts of a legendary political performer, Sir Tom Playford.
In the 1940s, Playford (Premier for 26 years from 1938 to 1965) had a gift in the form of vast untapped reserves of brown coal located at Leigh Creek, about 260 km north of Port Augusta which sits at the top of the Spencer Gulf.
Through Tom’s tireless efforts he coupled that resource with his own creation, the Electricity Trust of South Australia (ETSA), which went on to provide cheap reliable power to almost every home, farm and business in very short order: from 1946 to 1965, the proportion of South Australians connected to electricity increased from 70% to 96%.
Central to his efforts to populate and industrialise South Australia, was the power station at Port Augusta – for a detailed rundown on Tom Playford’s pragmatic political genius see our essay here:
News last week that Alinta Energy will shut down the Port Augusta power station (which carries Tom Playford’s name), was greeted by the economics lightweights that write for The Australian (and others) with seemingly jubilant headlines such as “Jobs blown away as turbines kill coal”. We’ll return to the nonsense contained in that type of infantile journalistic hubris in a moment.
We have no doubt that the closure of the Port Augusta power station will have Sir Tom turning in his grave.
Kicking off in a big way from 2009, South Australia led Australia’s ludicrous “wind rush”: it currently has over 40% of the installed wind power capacity connected to the Eastern Grid (1,477MW out of the 3,669MW total).
Since then, power prices have skyrocketed – and its unemployment rate with it. Last week, South Australia received the dubious honour of having the highest unemployment rate in the Nation: at 7.6% and rising, it’s even worse than moribund Tasmania, which usually tops that list with ease.
Now, those with some sense of economics – like STT Champion, Danny Price – have chimed in to warn that South Australia’s dismal economic situation can only get worse from here – given that the closure of the Port Augusta power station can only “drive up [power] prices”.
Coal shutdown ‘will drive up power price’
Michael Owen, Meredith Booth
13 June 2015
The federal government and economic forecasters are warning South Australia that the closure of coal-fired power stations by April will push up power prices in the state, which has the highest electricity bills in the nation.
South Australia has pursued the rise of green energy since 2002 and generates 37 per cent of its power through solar and wind.
Frontier Economics managing director Danny Price yesterday said it was unusual “so much wind is going into such a market”.
This was raising prices and reducing demand for coal power.
“There’s no doubt in my mind that the closure of Alinta’s plant will drive up prices,” he said.
“In the last 10 years, new coal-fired power stations (globally) outstrip new renewable generation by five times,” he said.
He said the Alinta power stations at Port Augusta, 310km north of Adelaide, that were slated for closure supplied 16 per cent of the state’s power and their loss would leave it short of cheap baseload electricity.
On Thursday Alinta Energy announced its two power stations, one already mothballed, and an associated coalmine at Leigh Creek, 260km north of Port Augusta, would close 12 years early because they were unviable. Alinta blamed the rise in renewable power, much of it government subsidised.
Federal Liberal MP Rowan Ramsey, whose seat of Grey takes in Port Augusta and Leigh Creek, yesterday called on Alinta Energy to delay closure until at least 2018.
“Their absence will create a lot of issues about baseline power supply and will lead to price rises across South Australia and difficulties for businesses and other parts of the community,” he said.
Experts say the cheapest solution for the state to deal with a shortage of baseload power was to enlarge the interconnector between South Australia, NSW and Victoria, allowing the state to tap into an excess national supply.
The Australian Energy Regulator last year approved funding to upgrade the interconnector linking South Australia and Victoria, with the $47 million project expected to be commissioned by July next year.
State Treasurer Tom Koutsantonis insisted electricity prices would not rise.
He said coalmining was a dying industry and suggested workers affected by Alinta’s closure were highly skilled and would either take redundancies or find work elsewhere.
South Australia posted its worst unemployment figures in 14 years on Thursday, the rate rising to 7.6 per cent last month, up from 7.2 per cent in April. It was the worst result since July 2001.
Mr Koutsantonis said Thursday’s state budget “would be focused on creating jobs”.
University of Adelaide workforce academic John Spoehr warned the state faced a return to double-digit unemployment.
“Unless we can fill the void, unemployment will rise to 10 per cent over the next two years,” Associate Professor Spoehr said.
“We need to boost infrastructure and the capacity of the public sector with a combination of debt and direct-funded infrastructure. Let’s not be deficit fetishists.”
Alinta chief executive Jeff Dimery said South Australia would have no problems with securing baseload electricity supply.
Additional reporting: Verity Edwards
Now, we promised earlier that we would skewer the naive nonsense about wind power “killing coal”.
STT just loves it when a case can be made simply – and even more so when it can be done in pictures.
Aneroid Energy (formerly windfarmperformance.info) tosses up the facts that the wind industry loves to hate; on a daily basis. It’s the very stuff that scotches wind industry bunkum – such as, “the wind is always blowing somewhere”; and “if you build enough turbines and spread them out far enough you’ll have baseload wind power coming out of your ears”:
We’ll start with a quick look at Australia’s wind power May-hem. Here’s the chaos delivered by all of the Australian wind farms connected to the Eastern Grid (which covers the ACT, Tasmania, South Australia, Victoria, NSW and Queensland) for the month of May (oh, and if the graphs appear fuzzy, click on them and they’ll pop up crystal clear in a new window).
Looking a bit like the meanderings of a drunken spider that had dipped one leg in the ink-well and staggered over the page, that’s the nonsense that wind farms can deliver power as an “alternative” to on-demand power generation sources such as hydro, gas and coal belted, yet again.
With 31 ‘chances’ to make a meaningful contribution to lighting up the 1.4 million homes said by wind power outfits to be ‘powered’ by their wind farms – output collapses 7 times to less than 250MW – or less than 6.8% of the total installed capacity of 3,669MW.
Now, let’s have a look at what SA’s 1,477MW of installed capacity was up (or, rather down) to during May.
Instead of ‘blowing coal away’ as the wind industry, its parasites and spruikers would have us believe, wind power managed to produce 5 complete ‘doughnuts’ during May – ie complete collapses in wind power output. So much for the pitch about ‘powering’ all those homes with ‘wonderful, FREE wind energy’ …
And – on 7 other occasions – collapsed to less than 200MW – or less than 13.5% of SA’s the total installed capacity of 1,477MW.
Those inconvenient pics and numbers are more than enough to skewer the typical line spread by fawning and gullible journos, about the contribution from wind power – such as the drivel in the piece above where it gushes that SA “generates 37 per cent of its power through solar and wind”. No it doesn’t.
The demand for power is a ‘here and now kind’ of thing; and from the graphs above (and below), with wind power it’s a case of here for a few hours today; and gone for the day, tomorrow.
But, STT, never afraid to kick a wind industry myth when it’s down, thinks it’s worth drilling a little deeper into the numbers for this month.
Here’s the total output from all wind farms on the Eastern Grid for 2 June 2015.
Thumping stuff – if chaos is your thing: a whopping collapse of 380MW – from 450MW to 70MW in less than 6 hours; with 70MW being around 1.9% of the total installed capacity of 3,669MW.
Now, let’s have a look at SA alone.
Another phenomenal effort – a 250MW collapse – taking less than 6 hours to bottom out with a big fat ZERO. And struggling to top 20MW (or 1.3% of capacity) for 4 hours – 1pm to 5pm – right at the point when demand hits its straps.
Sure, everyone is entitled to a little down time, so let’s have a look at the situation on the Eastern Grid on 5 June 2015, to see if wind power was able to benefit from its unscheduled R&R two days earlier.
No, apparently the rest didn’t help much. From 10am to midnight total output bubbles along between 200-400MW (or between 5% and 10% of capacity) – with more than 90% of Australia’s wind power capacity taking most of the day off (yet, again).
And, to see if SA’s wind farms were pulling any of what little weight was being pulled by wind power, here’s the numbers from the same day for SA.
Looking more like the profile of a Swiss ski run, another coal ‘crushing’ effort there from SA’s finest.
Over the day, there’s an almost total collapse of 1,200MW or 81% of capacity going missing. By lunchtime, wind power is off for a well-earned siesta, with output sliding from 200MW (or 13.5% of capacity) to less than 50MW (or less than 3% of capacity) – a whole lot less than the 37% contribution to SA’s power output touted by the gullible young pups from The Australian (solar’s contribution to total output in SA is a pittance, and is, of course, ZERO when the sun sets).
Wind power hasn’t ‘killed coal’ in SA – it hasn’t anywhere.
On the dozens of occasions outlined above – where wind power output struggled to top 10% of its capacity – the balance of the power being chewed up in SA (and elsewhere on the Eastern Grid) ALL came from conventional, on-demand generation sources, predominantly coal, gas and hydro – in that order.
When SA’s wind watts go AWOL for hours – and even days at a time – South Australia imports huge volumes of cheap coal-fired power from Victoria’s La Trobe Valley and NSW, using the Heywood and Murraylink Interconnectors (with a combined notional capacity of 680 MW).
It also has 1,280MW of gas-steam capacity with AGL’s Torrens Island plant near Port Adelaide (see this article).
And – when demand outstrips those base-load sources – SA has a fleet of highly inefficient (and therefore costly to run) Open Cycle Gas Turbines and diesel generators to cover the shortfall.
The cost of providing power using OCGTs and diesel generators to provide back-up for unpredictable but inevitable wind power collapses is astronomical: the dispatch price has to hit $300 per MWh before OCGT owners even begin to think about firing them up.
In this Wattclarity post on 9 June (on a typically cold SA winter evening) as wind power output collapsed (again) – heading in the opposite direction to demand – OCGTs were cranked into gear, as were diesel generators (referred to as liquid fuel generators in the Wattclarity article). The cost of wind power’s disappearance and the use of OCGTs and diesel generators to meet demand saw the dispatch price zoom from its usual $30-40 per MWh mark to $589.50 per MWh in order to keep the grid up and lights burning (see the NEM data here).
South Australians are already lamenting the fact that they pay the highest power prices in the world:
And that there are 50,000 homes (in a state with a population of around 1.6 million) that have no electricity whatsoever – and thousands more having their power cut every year – simply because they can no longer afford it:
What Danny Price points out is that – with the closure of the cheapest generator in the State – the Port Augusta power station – things can only get worse from here.
The furphy that ‘turbines kill coal’ is covered by the pictures above – how on earth could SA’s wind power be ‘killing’ anything on 2 and 5 June – and on 5 occasions in May – when it was struggling to produce anything at all, let alone enough to boil a kettle?
In truth, what led to Alinta Energy’s decision to ditch its Port Augusta plant is the monstrous market distortion generated by the Large-Scale Renewable Energy Target – a Federally mandated $50 billion wind industry subsidy scheme paid for by all Australian power consumers as a hidden tax on retail power bills (see our post here).
On the rare occasions when wind power is able to deliver meaningful output to the grid – which is usually at night-time – wind power outfits are more than happy for the dispatch price (the price paid by the grid operator to generators) to hit zero – and often pay the grid operator to take their output.
The LRET effectively forces retailers to take wind power output ahead of every other generation source. Failure to take wind power and the Renewable Energy Certificates (RECs) that go with it, leaves the retailer liable to pay a fine (the “shortfall charge”) of $65 for each MW/h the retailer falls short of the LRET’s mandated target.
The REC that is issued to wind power generators for each MWh of wind power dispatched (currently worth around $50) forms part of the bargain struck under the Power Purchase Agreements wind power generators hold with retailers, containing fixed and guaranteed minimum prices of between $90-120 per MW/h (3-4 times the cost of conventional power). The wind power outfit collects the REC, which passes to the retailer who then surrenders it to the Clean Energy Regulator, thereby, avoiding the “shortfall charge”. The price fixed by the PPA is tied to the expected value of the REC, the wind power outfit gets the price fixed by the PPA, irrespective of the dispatch price; and the power consumer pays the price fixed by the PPA, plus a retail margin on top.
As a result of the above, when they’re delivering to the grid, wind power outfits are happy to watch the dispatch price plummet, punishing base-load generators – like Alinta Energy, while having no impact on their own returns. It’s what’s called “predatory pricing”:
What SA’s turbines have ‘killed’ is meaningful employment.
While the article talks of unemployment at 7.6%, that masks the pockets of regional and youth unemployment: Adelaide’s northern suburbs, like Elizabeth have youth unemployment rates in the order of 40% – and, with the imminent closure of big employers, like motor manufacturer, General Motors Holden (with another 1,300 jobs on the chopping block) SA can only look forward to a generation of even more despair (see this Advertiser article).
And that brings us to another well-worn wind industry myth: the yarn about wind power creating thousands of ‘groovy-green’ jobs – lately used by wind industry spruikers to garner support for the retention of the LRET.
SA has more wind turbines per head than any other state – its great ‘wind rush’ took off in earnest in 2010. Since then, its power prices have surged to be among the highest in the world (with the closure of the Port Augusta power station they’re about to rocket again). Over the same time scale, its unemployment rate has jumped to be the worst in the Nation; and – with escalating power prices – can only worsen from here.
So, with $billions ‘invested’ in wind power in SA, STT puts the poser: what happened to all of the lasting, well-paid jobs promised by wind power outfits during their nauseating community ‘consultations’? Maybe the answer is found by taking a look at Germany, which, like SA, was beguiled with the self-same same pitch:
Will the last South Australian to leave, please turn out the lights – if anyone can still afford to keep them going, that is?