January 11, 2013
Australia

Clean energy, but at what price?

Lauren Novak | The Advertiser | 11 January 2013

South Australia is set to become home to the nation’s largest wind power project if plans for a $ 1.3 billion, 199 turbine wind farm on the Yorke Peninsula are approved.

The news, revealed earlier this week, follows a pledge by Indian renewable energy firm Waaree to build a 100 megawatt solar power plant in SA within five years.

If the plan worth about $200 million comes to fruition, it will create the state’s largest stand- alone solar power plant.

The developments fit nicely with the State Government’s ongoing drive to be the “green power” engine room of Australia.

The charge was spearheaded by former premier Mike Rann, who was later appointed chairman of Low Carbon Australia.

On taking over the leadership, Premier Jay Weatherill set a list of seven priorities for his Government which included aims to grow the state’s advanced manufacturing sector – including clean, green technologies.

But taxpayers struggling to pay skyrocketing energy bills may question the investment in wind or solar power when traditional options like coal are much cheaper to produce.

Some argue the Government’s penchant for renewable energy is driving up power costs for all.

While commentators say it is difficult to estimate by exactly how much green energy may have increased power bills, a recent report by the NSW Independent Pricing and Regulator Tribunal forecast that government green schemes would add $316 a year to the average power bill.

“The reality is it’s costing us a heap of money and it’s very debatable if it’s saving us any carbon at all,” Opposition energy spokesman Mitch Williams said. “It’s only now that electricity prices are going through the roof that people are starting to question why.”

Mr Williams said more public debate was needed to educate power users about the system and the reasons for pricing decisions. “The public has accepted a number of myths,” he said. “They think green energy is basically free and they think that it’s actually saving carbon.”

South Australia’s energy system requires providers to nominate a price at which they can offer a certain amount of power at regular intervals throughout the day.

The lowest price put forward by a provider which can meet the demand across the state at that time is chosen and set as the price paid for power supplied by all generators – be it from traditional or renewable sources.

Mr Williams said this meant wind power generators which may only be able to provide 20 per cent of the state’s power could bid at unrealistically low prices, knowing they would never be called on to sell their power at that price because they could not meet 100 per cent of the demand.

This meant renewable energy generators were paid much higher rates than they were bidding for their product and that “needs to change”, Mr Williams said.

He would like to see energy providers paid the price they actually bid, so if they bid a low price it would save consumers money.

“That would make the market much much more competitive,” he said.

The State Government has set a target of 33 per cent of SA’s energy production to come from renewable sources by 2020. As of the end of last financial year the figure stood at 24 per cent.

This target means energy retailers must work towards incorporating a growing percentage of renewable power into the product they supply to customers.

As renewable energy is comparatively more expensive to produce than “dirty” power sources this raises the end price for users.

Institute of Public Affairs data shows black and brown coal cost between $35 and $40 per megawatt hour to produce. Natural gas can cost between $45 and $80 which is comparable to wind at about $80 per megawatt hour.

Solar is by far the most expensive source with solar hot water energy costing $100 per megawatt hour and up to $400 for solar photovoltaic power.

IPA deregulation unit director Alan Moran said unlike coal, which is a highly concentrated source of energy, wind and solar energy take more effort and money to harness.

This meant renewable energy sources must be subsidised by governments in order to be viable.

“If I’m a normal business I have to try to get customers to buy my product but if you’re selling renewable energy nobody will ever want to pay for it because it’s so expensive ( without subsidies),” Mr Moran said.

Last year, Greens MLC Mark Parnell told Parliament that, according to the Australian Energy Market Operator, the average wholesale price for electricity in 2012 was $30.82 per megawatt hour – the lowest it had been since 2003 when the price was $30.11.

“Generally the price has been falling over the last five years,” he said, attributing that decline in part to “the rapid increase in renewable energy, particularly wind energy” in South Australia.

“On the other hand, the retail price for electricity that is paid by consumers is going through the roof,” he said.

He questioned whether the Government accepted “the big end of town (energy retailers) is making money at the expense of households”.

Acting Energy Minister Michael O’Brien yesterday said the Government was committed to increasing its output of renewable energy for the environmental and economic benefits.

“We have an ideal opportunity in South Australia . . . of gaining the lion’s share of investment and economic activity associated with renewable energy, particularly wind power because we have the resource,” he said.

“We have made this decision and it may have imposed a short-term impost on households but we know that with the introduction of the carbon tax we’ll realise how beneficial that earlier decision was.

“As dirty power becomes progressively more expensive, electricity in South Australia will drop.”

URL to article:  https://www.wind-watch.org/news/2013/01/11/clean-energy-but-at-what-price/