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Rent-seekers think Liberals wrong? Well that’s good

Tuesday, 14 November 2017

Rent-seekers think Liberals wrong? Well that’s good
MRC Executive Director: Nick Cater

Nick Cater writes in The Australian:

“Any fool can criticise, condemn and complain,” wrote Dale Carnegie. “But it takes character and self-control to be understanding and forgiving.”

Carnegie’s advice should temper our loathing of the people responsible for wrecking a perfectly good energy market with their ill-judged policy intrusions.

They may claim to be well intentioned, but as Carnegie reminds us in How to Win Friends and Influence People, even gangsters imagine themselves blessed with hearts of gold.

“I have spent the best years of my life giving people the lighter pleasures, helping them have a good time,” Al Capone once ­lamented, “and all I get is abuse.”

Jay Weatherill was only trying to brighten our lives with his quirky plan to power his state with windmills and other imperfect methods of delivering alternating current at a constant 50 oscillations a second.

So far his little experiment — the South Australian Premier’s words, not ours — has delivered the highest electricity prices in the country, and possibly the world, and the first state-wide blackout for more than a half-century.

A more reflective premier might have thought twice before abandoning coal, preferably before a demolition squad blew up the state’s last thermal power plant, as it did late last week.

Instead, Weatherill is backing fledging technology called solar thermal. It would be a “game changer” that “signals the death knell for coal-fired power stations”, Weatherill told reporters in ­August, when he announced a solar-thermal plant would be built near Port Augusta.

The plant will have a capacity of 130MW, about 4 per cent of SA’s peak demand. Despite its modest size it will knock $90 million off our collective electricity bills, Weatherill said. “That’s about $50 per household … it could be much lower than that.”

One thing in solar thermal’s favour is that it can store energy. It won’t store it for long, however, since it suffers from the same impediment that stops us boiling the kettle tonight for tomorrow’s cup of tea.

But who are we to challenge Weatherill’s uncorroborated price assumptions about the potential of unproven technology? Especially when it has the cast-iron backing of concessional equity loan from the government.

The Premier reckons the project is a goer even without the $110 million it is borrowing from the feds, which makes you wonder why taxpayers get dragooned into carrying the liability for these kind of things.

Oliver Yates spent many ­hours trying to answer that question at Senate estimates committees before stepping down as chief of the Clean Energy ­Finance Corporation earlier this year. Here’s an extract from a particularly long session in February last year.

Greens senator Peter Whish-Wilson: “A point of clarification … Is there some kind of market failure in relation to financing these kinds of projects?”

Yates: “Market failure is, I think, an overused term. It could be a market failure, but a market failure could also represent the fact that there are not a lot of investors in certain asset classes … If you call that market failure then, yes, it is a market ­failure.”

Yates is an angry critic of the Turnbull government’s plans to fix the energy market. The Liberals “are knowingly stoking the fires of the destruction”, Yates told the online journal RenewEconomy earlier this month. “They are on the wrong side of history.”

Yates’s outspoken comments followed his unexpected intervention at a Liberal Party lunch in Melbourne earlier this month, when he stood up from the table so suddenly that his companions found their desserts on their laps.

He spoke for several minutes denouncing climate denial before he was ejected by security guards. Such incidents are rare at Liberal Party fundraisers, but there is an argument they should be encouraged. Properly promoted, they would surely draw a crowd.

Yates’s wrath was invoked by Jane Hume, a mild-mannered senator from Victoria, who tried to lighten proceedings by presenting Scott Morrison with a lump of brown coal as a souvenir from ­Victoria. For Yates it was further evidence of a Liberal Party in denial, as he told this column yesterday. “They’re walking around as if coal is a good idea, ” he says. “Some of us find that offensive.”

In the interests of disclosure, we should note that Yates has skin in the game. He co-founded the Clean Energy Derivatives Corporation, which bets on ­future National Electricity Market prices.

It is hard to see how sanity can be restored to the energy market without treading on the toes of the renewable energy lobby.

What angers them most about Josh Frydenberg’s reforms is the National Energy Guarantee, a mechanism that requires electricity retailers to find their own back-up power when wind and solar plants cannot operate.

They can no longer expect the east coast grid to cover for them; anybody selling electricity must provide it every day in regular 4,320,000 alternating cycles.

The NEG is bad news for renewable energy producers because it takes away an effective subsidy and goes some way to levelling the playing field. Regional electricity producers that rely heavily on intermittent renewable energy sources will have to fire up gas plants, install batteries, pump hydro, boil kettles or anything they think of to keep the lights on.

It is bad news for the SA government, which assumed those costs would be absorbed by consumers in other states. It is bad news for carpetbaggers generally.

It is, however, good news for everyone else since it will end a form of subsidy that was being added to our bills.

Investors in renewable energy will think twice before investing in new projects, and shift the focus to projects with back-up, such as solar thermal, if it proves to be viable.

It will reduce the risk of blackouts — even in South Australia — and empower consumers. It will help restore the energy market to what it used to be: a system where supply is dictated by customers’ needs rather than the caprice of the weather gods.

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