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Weatherill’s green power push leaves SA in the dark

Tuesday, 05 December 2017

Weatherill’s green power push leaves SA in the dark
MRC Executive Director: Nick Cater

Nick Cater writes in The Australian:

Jay Weatherill switched on the world’s biggest lithium-ion battery last week, the showpiece in his $500 million plan to keep the lights on until next year’s election.

“This is history in the making,” the Premier declared with an unnerving tone of triumphalism. “South Australia is now leading the world in dispatchable renewable energy.”

Sadly, the battery’s stored energy wasn’t sufficiently dispatch­able to relieve the gloom of 208 neighbouring households that endured a blackout lasting several hours the day the battery was turned on.

There are blackouts, apparently, and then there are blackouts. The ones on Friday were caused by storm damage, the type of blackout from which batteries provide no relief, we were told.

Turning on a light switch and seeing nothing happen is a familiar experience in regional SA, particularly in the north and west coast, which 18 months ago was amply served by the Northern power plant at Port Augusta. Today there is hardly a pub beyond Gepps Cross without a diesel generator.

A blackout lasting several hours in Port Pirie last month, an event so routine it hardly makes the news any more, caused loss of stock at one the city’s two main supermarkets, the one that hadn’t invested in its own generators.

Weatherill has yet to admit that the closure of Northern power, with the loss of 520 megawatt generating capacity, had anything to do with the blackouts that have afflicted SA for the past 18 months.

The destabilising effect of the wind and solar plants with their fitful offerings of non-synchronous power are irrelevant to the energy crisis in Weatherill’s book.

Instead he adopts the tactic favoured by leaders clinging to power in failed states and points the bone at dark, malevolent forces. He accuses the power companies of “pursuing profits at the expense of reliable, affordable power”.

He denounces the mendicancy of neighbouring states. A blackout last December was caused by “a fault on the Victorian side of the border”.

He blames the Turnbull government, claiming “South Australians have been let down by a broken National Energy Market”.

Most of all he blames the weather gods, who deliver their wrath more frequently on SA than any other state, directing mighty winds and lightning strikes to the weakest points about the grid.

With his frequent complaint about high gas prices, Weatherill may have a point.

The Andrews government in Victoria has banned not only the extraction of natural gas on its soil but also the exploration for gas, conventional or unconventional, creating a shortage that has forced up prices.

Weatherill is trying to fix it in the only way he knows, by handing out subsidies, $24m this year, to lure gas producers to the Cooper Basin.

If any further proof were needed of the madness of the anti-carbon command economy, this one should be added to the exhibit list. One state government takes a principled stand to stop gas being extracted, another takes a principled stand to subsidise its extraction. Two premiers are riding high horses in different directions, and neither of them in the right direction, which would be, if they had any sense, in the direction of a free market.

The notion that governments can micromanage the economy by taxes, subsidies and regulation was abandoned long ago across the broader economy.

Now subsidies for renewable energy are being abandoned, too, in sensible jurisdictions. The EU will abandon fixed energy targets from 2020. In Germany, Angela Merkel’s government has experienced what the Chancellor calls a paradigm shift, recognising the trillion dollars spent on renewable energy subsidies in the past 20 years have pushed prices unacceptably high and disrupted supply. The German government has capped the capacity of wind farms and dropped a proposed levy for coal-fired power stations.

In the US, the overlapping subsidies designed to promote Barack Obama’s “new energy economy” have fallen into disrepute. A 2013 report by the National Academies of Sciences, Engineering and Medicine concluded “several existing provisions have perverse effects, while others yield little reduction in greenhouse gas emissions per dollar of revenue loss”.

Instead the US energy market has been transformed by a healthy free market in natural gas. Ten years ago the price of natural gas regularly hit $US10/million BTU (MMBtu). Now prices are below $3/MMBtu.

Ironically, despite withdrawing from the Paris Agreement, the US will actually meet its targets.

The federal government in Australia is therefore in good company in its decision to wind back energy subsidies and inject some free-market realism back into the discussion.

If Environment and Energy Minister Josh Frydenberg had accepted the Finkel review’s recommendations for a clean energy target, he would have been flying in the face of evidence from around the world. Grand gestures, backed by subsidies, put up prices and have perverse consequences. Renewable energy’s future will depend on its ability to support itself.

The wisest course for Labor would be to join the worldwide trend against subsidies and back Frydenberg’s legislation when it comes before parliament. Bill Shorten would be smart to begin the crab-walk away from its 50 per cent renewable energy target, which can be achieved only at enormous cost through explicit and implicit subsidies.

With an election barely three months away, the Weatherill government has no intention of breaking the subsidy habit. The Australian Energy Market Operator warns of the likelihood of blackouts this summer if any part of SA’s fragile electricity grid were to falter. Weatherill is using every Band-Aid solution he can lay his hands on to ensure that doesn’t happen, spending $550m his government doesn’t have.

Two banks of emergency generators — powered by diesel — have been installed, paid for, naturally, by the government. There is no shortage of places to put them in the de-industrialised landscape of greater Adelaide. One sits in vacant space at the former Holden plant in Elizabeth — itself a monument to the futility of subsidies.

The other is on the site of the former Port Stanvac oil refinery at Lonsdale, now home to the Adelaide desalination plant, a state-government panic measure from an earlier election.

Rent seeking should never be encouraged, of course, but it is worth noting that Alinta Energy had offered to keep Northern running in return for a lazy $25m — less than a 20th of the cost of Weatherill’s cobbled-together plan.

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