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Deciphering the truth about our electricity system

This month has seen a variety of headlines about increasing electricity prices and our electricity system. Remembering this article from a year ago -

Watchdog warns about cost of green power
BEN HARVEY and DANIEL MERCER, The West Australian – August 12, 2011

Then this month -

Poorer suburbs switch off heating to save money – The Sunday Times – August 04, 2012
Gillard blames states for power price hike -7 Aug 2012
PM must be joking on electricity: Baillieu – August 07, 2012

I wonder what readers think about where the truth is.

For my money – if people are discussing the issue of increasing electricity bills and not accounting for the influence of years and years of increasing the percentage of expensive wind and solar power – then they are probably not getting facts right.

I wonder how much of this “poles and wires” expenditure is to accomodate wind and solar. Remembering that our grids were built to deliver cheap, reliable, steady, coal fired electricity outwards from generators.

16 comments to Deciphering the truth about our electricity system

  • val majkus

    Sinclair Davidson recently had a post
    catallaxyfiles.com/2012/08/08/gold-plated-infrastructure/
    he says the Govt should look to its own propoganda for a fix (there’s a graph – where every $100 on your electricity goes) bearing the Govt seal and Prof Davidson concludes

    it is the carbon tax and also ‘Retail, customer service and programs for energy efficiency and renewables’ that should be considered to generate cost savings – especially the programs for energy efficiency and renewables.

  • Graeme Inkster

    Good point Warwick.

    SA is not listed as overspending on infrastructure, but has led(?) the way to ‘Renewables’.
    Result: highest electricity prices in Australia.
    Denmark led the european rush to wind turbines. Result: highest electricity prices in Europe.
    Spain has cut the price paid for ‘renewable’ energy to try and help economic recovery with lower electricity bills.

    Even the States spending big on infrastructure are in part responding to the expected impact on the national grid of increasing amounts of highly variable ‘renewables’. A large wind farm at Silverton requires connection to the grid, followed by the necessary gas fired backup.
    Coal fired stations have been neglected when money spent upgrading them would return greater emission reductions than wind turbines ever will.

    I must look up that proverb; something about “The blind leading”?

  • Bob in Castlemaine

    Warwick, I think the biggest factor keeping the average punter from understanding the full cost of their electricity is the complex “hidden” nature of the many direct and indirect subsidies propping up wind, solar and other renewables boondoggles. Alan Moran recently identified some of these “hidden” costs:

    The carbon tax is not the only leg-up the government gives to renewables. It builds on subsidies through the renewable energy target, which now costs Australian households and businesses around $1.5 billion a year, costs which are set to double by 2020. In addition, the Commonwealth provides $3 billion a year in other taxpayer-financed green power subsidies with the new $10 billion Clean Energy Fund supplying a further trough.

  • val majkus

    I picked this comment up at the Oz (in response to Richardson’s column today)
    JohnO of Melbourne Posted at 9:36 AM Today

    Graham, a mate of mine from waay back to High School is a currently serving fully qualified Electrical Engineer (funny how we never ever seem to hear from the engineers when it comes to these ‘debates’ isn’t it?). The power companies are NOT ‘Gold Plating’ electrical infrastructure (Gold Plating is a phrase used to describe overspecifying equipment). They are being required to carry out massive upgrades of the Entire Nations electricity generation and transportation grid, with the explosion Urban Expansion, vast regions which used to be entirely farm land now need to support an electrical network that is in some cases more then 20,000 times ‘denser’ than what used to be there, with all of the redundancy and carrying capacity you would expect of it. They also need to take into account future population growth, and that these currently ‘permiter’ networks may in fact be regional hubs in 20 years time, the equipment must also run for at least 40+ years, 24 x 7. Julia Gillards assertion of ‘Gold Plating’ is disgraceful and will ultimately lead to engineers being forced to specify sub-standard components which WILL FAIL in future years, with devestating consequences. Disgusting.

  • Bob in Castlemaine

    In Victoria expenditure on the upgrading the distribution networks has been high in recent years for a few reasons:

    * Underspending on distribution upgrade/expansion works during the final decades of State utility ownership, largely due to a political imperative,

    * Continuing rapid expansion of greater Melbourne, population has increased from 3 Million in the early eighties to more than 4 Million today, and

    * Increased consumption of power per household – more high load appliances such as reverse cycle air conditioners, dishwashers and clothes dryers.

    Hence I think much of the “poles and wires” expenditure is justified, but on the other hand the cost of additional transmission infrastructure works to accommodate highly unreliable wind generation schemes, is not justified and does nothing more than serve a misguided political/ideological agenda.

  • val majkus

    Davidson has another electricity post here
    It’s caused by regime uncertainty

    At that point climate change policy became bipartisan with the Howard government adopting ALP policy – always a mistake in the post Hawke-Keating era. So it looks like a combination of climate change policy and gold-plating (the desire to extract as much value from existing assets before the government expropriates their entire value) is responsible for the massive increases in electricity prices.

    We can argue about why the Howard government lost its nerve on climate change in 2007 – it was a mistake and Howard did go on to lose government and his seat – but there can be little doubt that regime uncertainty associated with climate change policy is the cause of the price hikes we have experienced in the last 5 years.

    check out the graph!

  • WSH

    WRT comment 4 – the extra electricty infrastructure needed for urban expansion is paid for already by property developers who then factor those costs into land & house prices. Just try getting an extra pole to your property – then you will know who is paying.
    So I am not sure of the validity of all of that text from The Australian Val.

  • Philip Bradley

    Gold-plating means to invest in things that don’t generate sufficient return to justify the investment. Government entities are particularly prone to this, because of the ‘We have to spend all this year’s budget, so we can get a bigger budget next year’ mentality.

    Having said that, here in Perth we clearly have a history of under investment – most power poles are still wood and prone to catch fire the first time it rains in autumn. Although that didn’t happen this year, presumably because we got fair amount of summer rain, which washed away the dust accumulation that causes the fires.

  • val majkus

    Warwick I think you’re talking about connection
    and I know what you mean – I’ve had clients who were quoted $10,000 per pole when they made a development applioation and one thing to keep in mind was closeness to an electricity connection – and my father’s property after his death paid (I think) $40,000 on a one off offer for electricity connection(that was in the late ’80′s)
    I accept connection is in built to development costs
    but gold plating is not connection costs
    As I understand it gold plating relates to electricity reliance
    that is keeping the poles and wires up to date to continue electricity reliance rather than frequent black outs or brown outs
    but I might be wrong as to what that term ‘gold plating’ means

  • David Brewer

    Lots more nonsense on power prices in today’s papers and TV shows.

    Gold plating: On The Insiders, see Gillard attacks states to defuse carbon tax anger. Journalist K. Middleton makes what she says is the government’s case that you need gold plating on the National Broadband Network (NBN), otherwise it won’t work. But you don’t need to pay sky-high power prices because much of the cost is to cover just a couple of really expensive peak periods in the whole year. Install smart meters and convince people they can do without power when it costs a lot.

    So fractions of a second increases in broadband speeds, to be delivered by the NBN some time in the next 15 years, are indispensable, but we should just learn to live with a few blackouts now and then because meeting peak electricity demand is a costly luxury???

    Who’s responsible for power price rises: The Sunday Telegraph says the New South Wales state government is creaming off extra revenue from power companies, accounting for part of the increase in electricity prices. The government answers back that they are taking less than what their predecessors budgeted for. No one makes the basic point that the government taking money from anything is just tax revenue that they would otherwise have got somewhere else, whereas the endless green schemes of the last 5 or 10 years have massively increased the actual cost of generating electricity – a sheer deadweight loss. Even now that we have the carbon tax – the efficiency of which depends on it being a uniform impost on emissions across the whole economy – they leave all the green schemes in place, so that some avoided emissions cost 10 times as much as others.

  • Graeme Inkster

    Gold plating means what ever I want it to mean, said the Red Queen.

    It could well mean, as David Brewer says, that we should have “Smart meters”. In that case we should try asking whether the advocate will take public responsibility for the deaths of elderly people when air conditioning is cut off when its hot.

  • Bob in Castlemaine

    Does to not “gold plate” mean continuing to operate transmission and distribution networks during periods of high summer demand with major plant overloaded. An example, operating for prolonged periods with large transmission network power transformers heavily overloaded to the point where they must have fire hoses spraying them for added cooling; is that what’s meant by avoiding “gold plating”?
    The danger of considering such modes of operation acceptable practice, to avoid “gold plating”, is not necessarily just a simple matter of an occasional blackout. For instance, failure of a major transmission network power transformer, could result delays of weeks or months before that plant could be replaced.

  • Philip Bradley

    Slightly OT, but yesterday in rainy Perth, my solar panels produced exactly 0.42 Kw hours of electricity, less than 5% of what they deliver on a sunny summers day, and we are 7 weeks past the winter solstice.

    How anyone can consider solar a viable source of grid power is beyond me.

    Note, the solar panels came with the house when we bought it.

  • Graeme Inkster

    Here is a table of Wholesale electricity costs before and after the carbon tax.

    papundits.files.wordpress.com/2012/08/pricesss_thumb.jpg

    There has been a slight drop in demand, most noticeable in NSW.

    What is interesting is the jump in wholesale prices of 115 – 147%. This is basically ex the power stations, and is not affected by the cost of wires and poles (gold plated or not) but reflects the carbon tax and the costs of compliance.
    The jump in all cases exceeds the $23 carbon tax by a wide margin and might include a little padding for future uncertainty. Though the highest jumps are in Vic. & SA which depend on brown coal.

    The reduction in demand also pushes up the price because the costs are spread over a smaller amount sold. Nor should it be thought that this will reduce CO2 emissions, as running coal (& gas) units at less than capacity results in lower efficiency (read higher emissions per MWh output).

  • Tezza

    Yet to be convinced that renewables have (so far) had a significant impact on Australian power prices: Solar accounts for 3/5 of 5/8 of not very much and wind has just struggled to attain 2%, The EU (which has a significantly greater penetration of renewables) has not experienced the same increases in power costs that Oz has. So why are power prices in South Australia currently on a par with the most expensive in the EU (Denmark/Germany)?

  • Graeme Inkster

    Tezza:

    South Australia has considerable “renewable” energy installed. Depending on who speaks the figure changes, but I have heard 31% wind power by capacity, and 26% delivered.

    From the figures I found, it would appear that wind capacity (late 2011) was 20.5% which puts SA in line with Denmark. There was also 18.0% capacity of PV solar. The claimed capacity factor for solar PV is 18% and for the wind turbines is 34%. This last figure is unbelievable, way over that delivered anywhere else in the World (outside polar regions). And I certainly wish that my own solar panels were returning somewhere near the first figure, although September has, so far, been a good month.

    Nonetheless there is a considerable strain on the conventional system. I was out of date with my statement that SA was reliant on brown coal, as this is the declining sector. It only delivers about a quarter of the State’s power, a lot of that in summer. Gas and petroleum OCGT make up the remainder. Their existence is proof of the fluctuating nature of wind, as only OCGT (in the absence of hydro) can supply at the rapid change rates needed.

    We have had strong winds for some days recently, and the turbines ran at the rarely obtained full capacity. Some nights they were able to supply SA’s demand, but they couldn’t have supplied 100% for a full day (as claimed) due to the wind speed dropping in the morning as demand increased. Solar power was stronger (as noted above) but wouldn’t have covered either the morning or evening peak demand times; the combination failing as seen elsewhere in the World.

    The only “success” has been in the feed-in tariffs pushing up the cost of electricity. In the weird world of the Greens this will be hailed as the start of people giving up air conditioners, refrigerators, washing machines and large TVs and getting back to ‘nature’. The minimal reduction in CO2 emissions will be regarded as proof of correctness.

    I wonder if they have ever thought about why power used to be measured in horse power, and what emissions that caused?

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