December 15, 2011
Australia, Opinions

Some facts on the wind farm wind-up

Mark Lawson, The Australian Financial Review, www.afr.com • Wednesday 14 December 2011

One of the major questions generated in the drive towards a clean and green electricity system is how much this will cost consumers, and how much carbon will actually be saved

To date, such questions have been treated as irritations that are not worth answering. Instead, we are being handed a carbon tax on top of an existing set of statutory requirements, passed in late 2009, that 20 per cent of the electricity supplied in Australia must be from green projects by 2020.

The electricity supply and distribution industry has to work out how to do it, and consumers have to pay for it. Why should the government ask itself irritating questions, especially when it doesn’t have to pay.

So how much will this cost? Recent statements by the grid operator for eastern Australia, the Australian Energy Market Operator, indicate that the average output of a wind farm is 29 per cent to 32 per cent of installed capacity.

Of this installed capacity, the AEMO will count only a few per cent towards the capacity it must have on hand at all times to meet the demands of consumers. That includes the power plants actually generating electricity at any one moment, plus reserves.

If, say, wind is to generate 10 per cent of Australia’s total electricity supply by 2020, we will need to install wind generators equivalent to more than three times that amount, or more than 30 per cent of the entire average supply.

Further, the AEMO has said it will count only a few per cent towards the installed base, which it says it must have on hand at all times.

In other words, that vast number of wind generators has to be built in addition to the network of conventional generators.

Despite that obviously enormous extra cost, groups in the wind industry insist that wind power will really cut costs, pointing to studies showing that this form of energy reduces something called pool prices.

The pool price is an internal pricing system run by grid operators as a way of allocating capacity between different generators. Wind farms do push down pool prices but wholesale prices are a completely different issue. Those are going up.

To cut to the chase, the Australian Energy Users Association estimates that if green energy is used to generate 20 per cent of our electricity – 10 per cent from big projects like wind and 10 per cent from household projects such as photovoltaic arrays – then wholesale power prices will increase by 25 per cent. That works out to a 10 per cent increase in retail prices. The Clean Energy Council, the umbrella group representing wind, estimates the increase in retail prices will be about 4 per cent to 7 per cent.

There is not much difference between the two figures and, compared with the average increases due to changes in the network, even the higher figure might not be noticeable. Power prices have increased by perhaps 40 per cent since mid-2007, with much more to come, due to changes in the network

The network, which includes power poles, distribution lines, substations and the crews who come out if something goes wrong, accounts for about half the retail price of electricity.

After forking out big money for changes to the network that they don’t understand – why is so much investment necessary? – consumers may be much less tolerant about paying another 10 per cent for wind, particularly if they happen to ask inconvenient questions such as how much carbon is being saved by the additional dollars paid on power bills?

The problem is that we are building a vast network of wind farms and photovoltaic arrays in addition to the conventional power network, and all that extra equipment requires additional carbon generated during its manufacture.

The electricity grid itself also has to be retailored to handle the variable nature of power from the wind and sun. These changes are complex but involve having more ·gas turbines, which can be powered up and down faster, as well as more turbines powered up but off-grid ready to be hooked on when the wind dies.

The efficiency losses will not be nearly as bad as estimated by some engineers when wind first began to be hooked up to grids. But there will still be some losses. How much? What will consumers have to pay per tonne to save carbon in this fashion?

One possible reason for the reluctance of government and green groups to ask such questions is that they may not like the answers.