Loon in, Turn on…Blackout

South Australia, for the fourth time this year, offers a wake-up call to our perpetually dozing politicians and the energy experts they have hired. Ironically, the latest power crash came just two days after the chairman of the Australian Energy Market Operator (AEMO), the network control authority, announced that the wind problem was fixed and we’d not again experience a breakdown like the one in October of last year. 

At least they got the message in Western Australia, where the ALP is running like mad from its previous proud pledge to ape South Australia and get 50% renewable energy.

And the perpetrators of the demise?  Oh, how they fulminate and search for new magic wands!  In response to the crisis, Prime Minister Malcolm Turnbull, advised by Chief Scientist Alan Finkel, said there was an “urgent need for more storage of energy” and , further, that the government was “certainly looking at pumped hydro”.  Pumped storage may have a place in energy systems but it involves buying energy to pump water uphill then releasing that water to provide power at a time when it is more valuable. It detracts from, rather than adds to, the amount available. And he is looking at battery storage which if a breakthrough arrives will not be made in Australia.

Finkel, an electrical engineer with no background in electricity markets, was commissioned to report on the future security of the electricity market. His preliminary report is so ill-grounded on facts and so peppered with fanciful assumptions that a government taking the advice would further grind the economy into the ground.

Nobody can seriously doubt that the malaise confronting electricity is a result of regulatory and tax-forced injections of wind and solar into the market.  Not only, as events are proving, is this power source utterly unreliable but it costs three times as much as the coal that its subsidised provision displaces.  Nobody would buy wind and solar electricity unless they are compelled or bribed to do so.  Yet the Finkel preliminary report says the market is being driven not by this but by consumer demand and technology.  The credibility of the report is zero except to rusted-on ideologues, and the Prime Minister remains unfortunately among these.

Finkel also talks about the need for strong governance, by which he means more of the government oversight and regulatory controls that have converted an electricity market that just a decade and a half ago provided the cheapest, most competitive energy on the planet. Today that market plumbs the outer reaches of global prices. And in a series of community forums being held around the country the Finkel team is allowing the ventilation of additional claims for a more distorted market that commandeers production facilities, provides more subsidies to green power and to the less well off.

The Finkel “expert panel” even repeats the canard that Australia is a pariah because we over-emit greenhouse gases.  They are unaware that this is only because, unlike other OECD countries, we export goods that embody carbon emissions – goods like farm produce and (the fast disappearing) aluminium; in terms of consumption of products in which carbon dioxide is embodied we are the same as the rest of the world.

But the Finkel panel is not alone.

Energy Networks Australia has fabricated a plan in an assumption-ridden set forecasts conducted by CSIRO “economists” which it is alleged will bring $414 a year saving in household electricity bills by 2050, while achieving net zero carbon emissions from the electricity sector.  And we still have the recently retired head of taxpayer-funded Clean Energy Finance Corporation, Oliver Yates, calling for more papering over of a decaying electricity system’s cracks by the building of more transmission – as though this can be done for free and is not simply shifting power to the already strained areas from regions that, like Victoria after the looming Hazelwood closure, will become strained.  Needless to say, all those experts hired by the government eagerly sought the closure of what they called the dirtiest power station, an action from which the next series of crises will emerge.

There is only one solution. We must unwind the subsidies and regulatory interventions that have created the problems. Governments spend or impose regulatory costs like the renewable subsidies that amount to about $5 billion a year.  These are poisoning the economy as well as costing each household $500 per year.  We need politicians to announce that all subsidies to energy will be removed immediately and that there will no longer be any favouring of particular power sources. Only then will we see the supply system convalescing and recovering so that it once again provides the cheapest electricity in the world and all that entails for living standards.

Alan Moran is the author of the forthcoming book “Climate Change: Treaties and policies in the Trump era”