Power Games
Lily D’Ambrosio, Dan Andrews and Sarah De Santis feel the winds of truthiness in Ararat.
The Victorian Government’s commitment to renewable energy will cost the state dearly in jobs and power bills. But who will pay to keep the state running? By Nick Cater
Victorian consumers can look forward to smaller energy bills thanks to the government’s plans to turn the state into the wind-powered hub of the nation, according to a press release this week from the state’s Labor government.
There’ll be more jobs, more investment and cheaper power bills, Lily D’Ambrosio, Minister for Energy, Environment and Climate Change, told us this week.
A decade or more of this kind of truthiness* has saddled us with the most expensive electricity in the world, hurting the downtrodden Victorians Premier Daniel Andrews claims to represent while enriching investors in wind and solar farms through subsidies.
It’s a take-from-the-poor, give-to-the-rich scheme that shames the social justice warriors who ardently support it, many of whom incidentally are the very same people who gain financially from the continuation of the system.
As we saw in the last election, most vividly in Victoria, there is a clear correlation between the leafiness of the suburb and the greenness of the vote. Josh Frydenberg, for example, faced not just one but two fatuous campaigns from high-profile independents chasing the virtue-seeking vote in the seat of Kooyong.
The Andrews government’s legislation setting a Victorian Renewable Energy Target of rising from 30 per cent and 50 per cent will be cheered by a powerful coalition of the ignorant and the greedy. It will be supported by those who know too little about the hidden costs of forcing green energy into the system to realise that this will be disastrous for the Victorian economy.
It will be supported too by those who know so much about the workings of the green economy that they are able to milk it. The dividends they receive from their renewable investments depend entirely on the implicit subsidies that bump up the company’s bottom line.
We should not be surprised, therefore, that there is a positive correlation between the concentration of those who work in the finance industry and the greenness of the vote. The results in Wentworth and Kooyong illustrate that point. We should not be surprised either that climate policy is divisive. One fellow’s virtue signalling costs another fellow his job.
This principle was outlined in less emotive terms in the Fisher Report published in February, which examined the cost of the extraordinary emissions reduction and renewable energy targets proposed by the federal Labor opposition at the last election.
The author was Brian Fisher, the finest climate economist in the country bar none, who’s credentials are impeccable and impartiality inscrutable. Fisher’s economic modelling was calibrated to settings at the federal level. He did not model the effects of unilateral action by a state government.
We can, however, draw from his principles to predict the effects of the Andrews Government's targets.
Victoria’s three remaining coal-fired power stations, Yallourn, Loy Yang A and Loy Yang B, will close with the loss of 4730 MW of capacity, larger than the deficit caused by the closure of Hazelwood.
It is impossible to fill the gap with wind and solar. The technology required to store electricity is neither mature nor cheap enough to be viable immediately, and is highly unlikely to be viable within ten years.
Gas generators will fill some of the gap but will be expensive. Andrews could cut the cost of gas at a stroke were he to lift the Victorian Government’s absurd ban on onshore gas exploration. But he won’t because the green lobby won’t let him.
Since it is impossible for Victoria to be self-sufficient in electricity in the medium term using alternative sources to coal, it will be obliged to draw in more coal-fired energy from Queensland and NSW. It will do so at times of peak demand, so the cost will be high.
It will also look to Tasmania, the so-called battery of Australia, to fill the gap. The supply will be constrained, however, by the capacity of the single interconnector that runs along the seabed of the Bass Strait. A second interconnector is mooted but the cost may be prohibited. The battery-of-the-nation project also relies on the construction of giant wind farms which, bizarrely, the Greens oppose.
Victoria will be crossing its fingers hoping that the federal government will proceed with the expansion of Snowy Hydro. The risks associated with that investment will be shared by the entire nation.
Electricity and gas prices will rise. This is a certainty. Energy bill pressure will be felt by households and businesses at the margins. Jobs will be lost, wages will be foregone and the number of people suffering from energy poverty will increase.
The risk of blackouts will increase at moments of extreme demand, typically towards the end of a stinking-hot day when business demand is still relatively high, residential demand is increasing, and rooftop PVs' contribution is declining. The Australian Energy Market Operator forecasts that hundreds of megawatts of additional balancing and firming resources will be needed across Victoria and South Australia to close the gap between expected supply and the reliability standard.
The question, as ever, is who will pay for the disruption to the Victorian energy market caused by the Andrews Government’s foolish renewable energy target. The price paid by Victorians themselves will be substantial in terms of jobs, wages and power bills. It is unclear, however, who will fund the cost of keeping an unstable grid running. In particular, who will pay for the upgraded transmission systems needed to keep the energy flowing into Victoria, and the other infrastructure costs that will be required?
Standby for yet another federal/state fiscal fight between the Commonwealth and the state of Victoria over whether the citizens of one state should be responsible for the folly of another.
* A measure of truth based on intuition without regard to evidence, logic, intellectual examination or facts.