SA’s Wind Farm Fiasco: $Millions in Subsidies Thrown at GDF Suez to Reopen Mothballed Gas-Fired Power Plant
South Australia has the dubious honour of being referred to as “Australia’s wind farm capital”. That ‘accolade’ has brought with itrocketing power prices, an unstable grid and routine blackouts.
As to the latter, South Australians are learning to live with daily ‘load-shedding’, that even its premier academic institutions have to suffer, along with thousands of other businesses and households.
This telling little email from UniSA’s management was flicked to us by one of our SA operatives (who just happens to be an engineer):
The source of the “failure to the incoming electricity supply” is, as our engineer contact informs us, all about ‘grid instability’, caused by SA’s chaotic, intermittent and unreliable wind power supply.
Our contact also tells us that UniSA’s Mawson Lakes campus (located north of Adelaide and south of Salisbury) has been experiencing frequent supply ‘interruptions’ and wholesale blackouts for months now. Air-conditioners no longer function; lectures get cancelled; the campus goes into “lock-down”; and the power surges and erratic supply have damaged electrical equipment and appliances, as well as distribution systems on campus.
The cost of repairing or replacing appliances, equipment or electrical systems – due to erratic wind power supplies (and the power surges, grid instability and consequent grid management chaos that comes with intermittent wind power) – is just another cost that gets brushed aside by one-eyed wind-worshippers. Wind power blackouts are, of course, a little harder for the wind-cultist to hide.
On 1 November last year, a sudden and total collapse in SA’s wind power output saw almost the entire State plunged into Stone Age darkness:110,000 homes and businesses were left without power for hours, with their owners in the dark and operators fuming.
Business operators, like Port Pirie’s Nyrstar smelter went on the war path and dragged Labor’s Energy Minister, Tom Koutsantonis into a crisis meeting about average spot power prices that are now double those of neighbouring Victoria; and the fact that, no matter how much generators chisel out of householders and businesses, SA’s power supply will never again be called reliable or secure.
Having given up on the idea of ever having affordable power again, SA’s hapless Labor government has been reduced to throwing $millions of taxpayers dollars at the French owner of a mothballed Combined Cycle Gas Turbine (CCGT) power plant in an effort to ensure the lights stay on (at least for now).
Here’s the AFR’s Ben Potter (who’s fast gaining a grip on the scale and scope of the wind power fraud) detailing Labor’s costly, panicked – throw $millions of taxpayers’ money at it – response to SA’s wind farm fiasco.
Gas-fired power station bids for SA ‘low carbon’ contract
Australian Financial Review
10 February 2016
Adelaide wants to become the world’s first carbon-free city, but the South Australian government is open to giving a gas-fired power station a “low carbon”ELECTRICITY CONTRACT.
The bid by GDF Suez, French owner of the partly mothballed Pelican Point gas power station, angered renewable energy advocates. The contract is worth about $50 million a year.
“If the government was serious about limiting carbon dioxide emissions, the tender would be limited to renewable energy projects only,” said Mark Parnell, Greens energy spokesman and leader in the SA Parliament.
GDF Suez confirmed Pelican Point was a bidder for the contract to supply up to 481 megawatt hours of low-carbon electricity a year to the government. Gas-fired power stations have roughly half the carbon dioxide emissions of coal-fired power stations, while wind and solar power have virtually zero emissions.
The SA Labor government sought expressions of interest for the contract in November as industry alarm mounted at soaring electricity prices in the struggling state.
Treasurer and Energy Minister Tom Koutsantonis this week emailed industry participants at a December 15 crisis meeting on the electricity market, saying the government aimed to ensure a smooth transition to a low-energy future by inviting a broad range of energy technologies to bid for the contract, and stipulating that bids should not harm energy security or push up prices.
The SA government has celebrated the state’s nation-leading penetration of wind and solar power. But large industrial energy users blame its spasmodic weather-dependent supply patterns for sharp spikes inSPOT MARKET prices and contract prices to levels far above neighbouring Victoria and NSW.
Although described as a “low-carbon electricity supply” contract, the document specified that electricity with an average CO2 emissions intensity of up to 400 kilograms per megawatt hour would be considered.
This is just above the level of a relatively efficient gas-fired power station like Pelican Point. GDF Suez withdrew half of Pelican Point’s 479-megawatt capacity two years ago as SA’s rapidly increasing share of renewable power pushed more costly “mid-market” suppliers to the sidelines.
This and other withdrawals left the stateVULNERABLE to sharp electricity price spikes to more than $2000 an hour when the wind didn’t blow and the sun didn’t shine, and heavily reliant on Victorian brown coal power delivered via high-transmission interconnectors.
“The state is primarily interested in wholesale electricity supply solutions which reduce the emissions associated with the state’s energy use. In the past, the state has sought proposals for GreenPower to achieve this objective,” the document says.
“In this process, however, the state is focused on solutions which maximise economic benefits for South Australia.”
Mr Parnell said Mr Koutsantonis “is very wedded to the future of gas, so it doesn’t surprise me that they are trying to place a gas-fired power station in the low-carbon category”.
Australian Financial Review
How delicious! The SA Green’s Muppet-in-Chief, Mark Parnell accusing Tom Koutsantonis of being “very wedded to the future of gas”, whereas Parnell is simply “wedded” to the delusion that a wholly weather dependent power source – that requires 100% of its capacity to beBACKED UP 100% of the time by conventional generation sources – provides for a reliable and secure electricity supply, delivered at an affordable price.
Always keen to express his sweaty-palmed, adolescent love of these things, Parnell has been known to bunk up in a tent underneath one of these things with SA’s other high-priest of the dwindling wind-worship cult, Crystal Brook’s favourite ‘fan-tasist’, Dave Clarke.
Throwing $50 million a year of South Australian taxpayers’ money at GDF Suez to keep its Pelican Point CCGT plant running around the clock, is like a dog chasing its tail.
GDF Suez stopped operating its Pelican Point plant as a direct consequence of the market perversion caused by the Federal Government’s Large-Scale RET.
Wind power is already heavily subsidised under the LRET, which, as we detail below, allows wind power outfits to flood the market when the wind is blowing, literally payingTHE GRID manager to take it – which knocks conventional generators out of the market, leaving them burning coal or gas (and incurring constant expense), but with little revenue (or no revenue whatsoever) to offset that cost (let alone turn a profit).
In short, wind power outfits collect the same amount of revenue, irrespective of theSPOT PRICE. However, conventional generators receive the prevailing price – and, unlike wind power outfits, do not receive any form of subsidy for what they dispatch: the market perversion driven by the LRET and subsidies for wind power is what has caused SA’s conventional generators to become unprofitable; and it’s that lack of profitability that led to Alinta’s decision to close its Port Augusta plant; and led to GDF Suez mothballing half of its Pelican Point CCGT plant 2 years ago (until now, due to the market distortions caused by wind power subsidies, its working half still only gets a return when wind power isn’t being given away).
The Power Purchase Agreements (PPAs) struck between wind power outfits and retailers (which you’ll never see the likes of Infigen or Trustpower talk about publicly) are built around the massive stream of subsidies established by the Large-Scale Renewable Energy Target (LRET) – which is directed to wind power generators in the form ofRENEWABLE ENERGY CERTIFICATES (RECs aka LGCs).
Under PPAs, the prices set guarantee a return to the generator of between $90 to $120 per MWh for every MWh delivered toTHE GRID.
In a company report last year, AGL (in its capacity as a wind power retailer) complained about the fact that it is bound to pay $112 per MWh under PPAs with wind power generators: these PPAs run for at least 15 years and many run for 25 years.
Wind power generators can and do (happily) dispatch power toTHE GRID at prices approaching zero – when the wind is blowing and wind power output is high; at night-time, when demand is low, wind power generators will even payTHE GRID manager to take their power (ie the dispatch price becomes negative)(see our post here). In recent times, wind power outfits in SA have been paying the grid operator up to $20 per MWh to take power with, quite obviously, no commercial value.
However, the retailer still pays the wind power generator the same guaranteed price under their PPA – irrespective of the dispatch price: in AGL’s case, $112 per MWh.
PPA prices are 3-4 times the cost that retailers pay to conventional generators; retailers can purchase coal-fired power from Victoria’s Latrobe Valley for around $25-35 per MWh.
Underlying the PPA is the value of the RECs that are issued to wind power generators and handed to retailers as part of the deal.
The issue and transfer of RECs under the LRET sets up the greatest government mandated wealth transfer seen in Australian history: the LRET is – without a shadow of a doubt – the largest industry subsidy scheme in the history of the Commonwealth. That transfer – which comes at the expense of the poorest and mostVULNERABLE; struggling businesses; and cash-strapped families – is effected by the issue, sale and surrender of RECs. As Origin Energy chief executive Grant King correctly puts it:
“[T]he subsidy is the REC, and the REC certificate is acquitted at the retail level and is included in the retail price of electricity”.
It’s power consumers that get lumped with the “retail price of electricity” and, therefore, the cost of the REC Subsidy paid to wind power outfits. The REC Tax/Subsidy has already added $9 billion to Australian power bills, so far.
Between 2015 and 2031, the mandatory LRET requires power consumers to pay the cost of issuing 490 million RECs to wind power generators. With the REC price currently $82 – and tipped toTRADE around $93 as retailers get hit with the shortfall penalty set by the LRET – the wealth transfer from power consumers to the Federal Government (as retailer penalties) and/or to the wind industry (as REC Subsidy) will be somewhere between $40 billion and $50 billion, over the next 16 years:
With more wind power capacity per head than any other State, South Australians are going to be lumbered with a disproportionate share of the ludicrous cost of the REC Tax/Subsidy, set by the LRET.
A cost that is already forcing major employers like Nyrstar to consider shutting up shop – with the immediate loss of 750 jobs in economically depressed Port Pirie. And that has already led to more than 50,000 SA households suffering along without any power at all (see our post here).
Now, adding State-subsidy-insult to Federal-subsidy-injury, South Australians are about to be Royally screwed twice: once by being forced to throw $93 per MWh (in REC Tax/Subsidy) at wind power outfits (whenever the wind blows); and, on top of that, being forced to stump up $50 million a year to cover the fact that the former will never amount to a meaningful power source. And then there is all of the commercial and domestic electrical repairs required as a result of such a high penetration of intermittent power sources.
South Australians have Premier Jay Weatherill and his merry band of Labor lunatics to thank for, what can only be described as, an ‘energy debacle’.
Notwithstanding the scale and scope of SA’s brewing economic disaster – and its latest move to subsidise its way out of trouble – Labor still seems wedded to pushing the wind industry’s barrow.
Having directed planning panels all over the State to keeprubberstamping wind farm applications – and otherwise encouraging more of these things to be speared into the heart of thriving rural communities; like those situated in the Eastern Mount Lofty Ranges and on Yorke Peninsula – Labor seems simply incapable of retreating from the brink.
Albert Einstein’s definition of “insanity” springs to mind: “doing the same thing over and over again and expecting different results”.
Backing the likes of New Zealand’s Trustpower or the cowboys behindSenvion (aka REPower, aka Suzlon) in their bids to carpet South Australia’s most agriculturally productive regions with hundreds more of these whirling wonders beggars belief.
What South Australians need is reliable, secure and affordable power – of the kind to be delivered by GDF Suez’s Pelican Point CCGT plant, that – but for the power market perversion caused by the LRET’s massive REC Tax/Subsidy for wind power – would have been happily delivered without costing SA’s taxpayers a red cent.
The very last thing South Australians need is any more of the same.
Not that Weatherill, Koutsantonis & Co will admit it publicly, but the deal done with GDF Suez (using other peoples’ money) to guarantee the 24/365 availability of 479MW of dispatchable (ie ‘controllable’) power, is a monumental concession that SA’s too-long held dream of being powered by the wind has just gone up in smoke.