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Thursday, 24 October 2013

Venomous rant against renewables by Australian economist

The Australian renewables industry is under no illusion about the extent of the forces lined up against it following the election of a highly conservative Coalition government in Canberra.
The antipathy to renewables in large sections of the Coalition is deep set, as it is among some of the highly influential and ultra-conservative think tanks such as the Institute of Public Affairs, and various industry lobby groups.
But even battle-weary supporters of solar and wind energy – and those firmly in the middle of the road –  were taken aback by an extraordinary tirade against renewable energy delivered in Sydney on Wednesday by Burchell Wilson, a senior economist at the Australian Chamber of Commerce and Industry.
ACCI is one of the most visible and influential lobby groups in Canberra, and its opposition to climate policy, carbon pricing, and renewables incentives, is well known. Still, no-one was quite ready for the “venomous rant” – as one observor described it – against the renewable energy target that Wilson delivered to the Eastern Australian Energy Outlook Conference.
Wilson’s approach was not atypical of the sort of rhetoric we have come used to hearing from conservative energy ministers – be they state of federal – and the incumbent utilities, who are threatened by the rise of renewables, and their cheerleaders in the conservative think tanks.
The trick for these people is to ignore the benefits of renewables – increased investment, more jobs, lowering emissions, delivering a  faster transition to low carbon economy, solar delivering cheaper alternative to homes and businesses – and instead paint a doomsday scenario.
There was no mention of the massive influence of network costs, or the $1 billion in annual subsidies paid to support the delivery of fossil fuel generation to customers in WA and Queensland. Instead, the focus is on inflated “abatement costs” using out of date technology prices, warnings about rising energy costs, collapsing industries and economies, and all the things that only a “green ideologue” would think were good.
Then you throw in hyperbole – the renewable energy target  was “crazy”, “an ugly baby”, and “bad policy” that could only be justified by an “ideological predeliction towards renewable energy.”
This was a view, Wilson claimed, that was “largely uncontentious”.  There were “no economists I know who is not an ideologue who disagrees with that.”
Given that more than 100 countries now have renewable energy targets of some sort, and that these are recommended as sound policy by such conservative bodies as the International Energy Association, that must mean there are a heck of a lot of ideologically-driven economists out there. Probably the same mob inventing crap about climate change, pushing for carbon pricing and a new world order.
But Wilson is simply calling the kettle black, or green as the case may be. “That was one of the most deceptive, disingenuous and manipulative presentations I have ever seen,” said Andrew Richards, the external affairs manager for renewable energy investor Pacific Hydro. “It was almost comical.”
Jonathan Upson, from Infigen Energy, described it as the “most creative presentation I have seen.”
When challenged by Upson and others on his statements, Wilson, a former regulatory economist with a Victoria-based energy distributor, declared that: “I’m an economist, so costs are my forte.”
And later, he added: “You can have your own opinions about climate change and climate policy, but you can’t have your own facts.”
But apparently you can.
When challenged by Upson about his claim that the RET had been the second biggest contributor to the doubling in retail electricity prices in the last five years, ignoring the impact of network upgrades that accounted for at least half of that, Wilson said: “I was just referring to green schemes. It’s a power point presentation … it’s shorthand.”
When it was pointed out that renewables had contributed to sizeable falls in wholesale prices – a fact recognised by participants, regulators and analysts in energy markets across the world: Wilson replied: “I was here talking about the RET, I’m not sure why you talking about wholesale prices.”
Well, the reason people talk about wholesale prices is that these falls more than offset the costs of the scheme in the first place, and deliver lower wholesale electricity costs to all. This, the so-called merit order effect, was deemed an asset until the generators discovered just how far this undermines the earnings from their incumbent investments. Which is probably why the man from Alinta (the owner of two mothballed coal fired generators) leaped to Wilson’s defence, and why generators in general are seeking to have the RET diluted or removed.
(A graph prepared by the Australian Energy Market Commission which highlights the contribution of network pricing, green schemes and the declining wholesale prices can be found here).
And when RenewEconomy challenged Wilson over his claim that the RET did not displace coal, but displaced gas instead, Wilson said:
“I don’t think I actually said that, did I.”
Er, yes, you did. Everyone heard it and I and the conference organisers have it on tape. And AEMO data states quite clearly that since the introduction of the 20 per cent RET by Labor, with the full support of the conservatives, black coal generation has fallen by 15 per cent, but gas generation has actually increased – along of course, with renewables.
If you doubt what the energy market operator has to say about this, read what Queendsland’s biggest generator Stanwell Corp has to say about the ipact of demand and wholesale prices. You can even see a pretty graph illustrating the changes in generation here.
“I’m talking about the operation of the RET over a specific juncture in time,” Wilson complained, without identifying which particular juncture. “I really don’t understand what the mentality is here with these point scoring exercises.”
Probably just to point out that you cannot bring your own facts to the table.
The tragedy of this is that Wilson’s presentation may have been plain wrong, nasty, manipulative and ideological, but he’s not alone in Canberra. Even middle-of-the-road energy folk found the presentation to be “unprofessional”, but noted that while energy market professionals may see the obvious holes in the argument, some politicians could be easily swayed, and offer up the same nonsense.
As Wilson (rightly) pointed out, there is a vast reserve of anti-renewables passion in the rump of the National Party and the Liberal party backbench open to such rhetoric– which insiders say is being whipped up by new Liberal MP Angus Taylor.
Wilson expressed his hope that these views would overwhelm those of moderates such as Environment Minister Greg Hunt,  and Energy Minister Ian Macfarlane. He hoped that the economic rationalists at the Productivity Commission would have carriage of the next RET review. He will likely be granted his wish, given that the institution that called out the fossil fuel industry on this nonsense, the Climate Change Authority, is to be dismantled and “independent” advice is to be brought “in house”.
Wilson insisted that renewables “are producing a product that no one wants to buy.” This ignores the fact that Australian households and businesses are still spending more than $1 billion a year installing their own rooftop solar systems – even with most subsidies removed. (Hint: this is very cheap abatement). It also ignores the radical change that is engulfing the electricity industry world-wide.
But the more people like Wilson stick their head in the ground, the more they risk the future of the industry they seek to defend. As US energy market analyst Perry Sioshansi told the conference yesterday, the traditional generation model is being over-run by cheaper, greener alternatives. And how bodies such as ACCI can argue that Australia has cheap electricity, when it costs nearly $280/MWh for the consumer even before green schemes are added, is beyond belief.
“I believe that the electric supply industry will soon approach a tipping point where consumers will provide electricity cheaper than industry can deliver,” Siosanshi told the conference. And the industry has been so wrapped up in its own hyperbole and ideological purity that it’s missed the chance to save itself. Siosanshi said it was probably already too late. And this is now a widely supported view in the US, and in Europe.

Republished from REnew Economy

Wednesday, 23 October 2013

Is it already too late for traditional utilities?
A leading US energy analyst has warned that the conventional electricity industry is facing a major “thunderstorm” from distributed energy resources, and it may already be too late to save the traditional business model.

Energy & Environment Dates 2012