The Government and Power Producers, what a mess!

[Cafad]

I see today that the Nat.Gov. in all its wisdom has abandoned one of the few schemes that it had actually thought of itself. The contract for closure scheme for high carbon polluting power producers. I happen to work at one of the power stations that put in for the scheme and it complicates my personal view of my future employment in a very confusing way.

On the surface this scheme made sense, phase out the dirty power producers and bring in cleaner ones, you can't get simpler than that. How could they make a mess of this? On the surface this outcome is a "win" for Labor as it doesn't shut down any large scale employers and it saves them from committing to spend massive amounts of cash in the near future but there are a few things that are not made clear.

The price of power has dropped off (not the domestic price, it is still going up, thank infrastructure installation and lack of forward planning for that) but the price that the producers get paid by the "energy trader" is turning out to be far lower than most companies expected when they worked out their 5 and 10 year plans just 2 years ago. This means they stand to make less money from their power stations than they had expected, to compensate for this they are very likely to attempt to cut costs and shed employees, and some stations may close down anyway because they cannot make money in the current electricity market.

Now how do I know this, because I have already seen it happen, at the station I work at over the last few years and I fully expect that this station will be shut down within 6 months. Somewhat ironically if we had been accepted into the CFC scheme we would have remained operational for the next 4 to 6 years. Everyone getting that? If we were paid to shut down we would have run for 5 years, if we were not paid to shut down we will be shut down in 6 months. Sounds like a joke but it is the (somewhat confusing) truth.

I am not going to mention company or station names, apparently it is bad form to comment on your employer in any way but I am sure a quick google will show you which stations were involved and therefore which companies.

There is a lot going on in the power industry, from the government mandating the use of renewable power (ie the energy trader has to accept power from renewable sources if they are producing it, fossil fuel power then makes up the difference) to the carbon trading scheme and the dominance of Gas Turbines.

For a while there it looked like Gas Turbines would be the future of power generation just because they produce less carbon pollution but anyone in the industry knew that this dominance would be short lived as gas reserves world wide were not tipped to last very long (can't remember the actual figures but 2050 to 2070 was the impression I got) and then we would have to rely on nuclear (if we hadn't run out of uranium by then) or back to coal which could last us till well beyond 2100 (again, can't remember the figures, but they were only estimates anyway). Then fracking is developed and now it looks like gas might just last us a while longer. And of course there is the coal seam gas mess, how about we just not talk about that!

So what do we do now? We send our problem off shore and pay some other countries, almost certainly European ones since they lead the world in sensible ideas and the proper implementation of them, to deal with it for us. It is worse than foreign investment, this is the Aust. Gov. forcing Australian companies to pay money to companies in other countries in order to continue operating in Australia. There has to be a better way to reduce polution than this!

OK, I've had my ramble, I don't usually comment on anything politicians do (it only seems to encourage them) but I can see this decission taking the country, not only down the wrong road, but accelerating hard past the sign that says "Increasing Electricity prices, next 100km".

Cheers!

[LogicprObe]

I have a few who have been laid off from aluminium smelters here in NSW...............thus enabling the shutdown of cleaner power stations than those you are talking about.

I don't think they know what they are doing.

[Cafad]

I don't think they know what they are doing.

I suspect you are 100% correct.

[LogicprObe]

Well..........I do know they are reversing most of their policies to try and get re-elected.

Little did they know that all they had to do was scrap Work Choices, keep all Howard's other policies and they may have made four terms!

[davidsss]

Unfortunately this reflects a complete lack of strategy on the part of the government. They were going to close down the really bad (generally brown coal) power stations. Good idea, those things need to go. Any thought as to what would replace them? Any energy strategy? No, not really.

DS

[Super Mustud]

Unfortunately this reflects a complete lack of strategy on the part of the government. They were going to close down the really bad (generally brown coal) power stations. Good idea, those things need to go. Any thought as to what would replace them? Any energy strategy? No, not really.

DS

For once I agree with you.

[LogicprObe]

For their strategy to work, the government should have built generators that were not subject to the carbon tax, then undercut these 'dirty' generators and sent them broke.............instead of trying to buy them off!

[Super Mustud]

For their strategy to work, the government should have built generators that were not subject to the carbon tax, then undercut these 'dirty' generators and sent them broke.............instead of trying to buy them off!

Nah, you can't do that. You will never get investment in the future if you even talk that way. Suicidal, even if emotionally attractive to the business haters. But buying them out and closing them down over time would be good. Then we need a great big windmill farm in Carlton and surrounding area. What with all the hot air and all...

[proftournesol]

The big polluters have been issued billions of dollars of free emission permits, it would make no sense for them to close their operations completely until they are able to sell them after the emissions permit trading market is established (another set of middlemen to make a large profit). They may shut individual power generation plants though as you suggest. The real crux though is the cap (on emission permits) that the government will set as this is what will determine the price that emitters have to pay. If the cap is set low then the price of each individual permit will rise. It may be that the governments (state and federal) are hoping that the old stations become so uneconomic that it's cheaper for the private operators to just walk away and hand them back to government control.

[LogicprObe]

Nah, you can't do that. You will never get investment in the future if you even talk that way. Suicidal, even if emotionally attractive to the business haters. But buying them out and closing them down over time would be good. Then we need a great big windmill farm in Carlton and surrounding area. What with all the hot air and all...

Investment in what future?

Selling off public assets?

[Super Mustud]

Investment in what future?

Selling off public assets?

Any form of investment. Some of the chat here is along the lines of nationalisation of business without compensation, or alternatively destruction of business by the government without compensation. That obviously will not happen, but it is what has been suggested here.

Whether we should privatise in the first place is another matter. Most privatisations here were voted for by the public. They call it democracy. Doesn't necessarily make it a good idea, but democracy can be like that. That's one reason why I say that only the conservatives are true believers in democracy. The left side of politics really despises the so called "ignorant" voter for stuffing up the lefty ideology.

[LogicprObe]

Yes...........one could say that compulsory voting forces the stupid and moronic to vote.

It's a bit like the teachers persuading the dunces to stay away on Naplan Test day!

[MWR]

Well that's what you get by selling off the farm boys. Let's keep shareholders happy and bugger everyone else!

[Cafad]

Yes...........one could say that compulsory voting forces the stupid and moronic to vote.

It's a bit like the teachers persuading the dunces to stay away on Naplan Test day!

It also forces the ones who really dislike poiticians to vote, so the winner of an election is the polly who is least disliked rather than the one that you actually agree with.

[proftournesol]

From the fairfax press today (or what's left of it)

FOR nearly half a century, Hazelwood - often described as Australia's dirtiest large coal power plant - has loomed large over Victorian life.

It provides about a quarter of the state's electricity, employs hundreds and is responsible for 13 per cent of its emissions. This is now unlikely to change any time soon.

The federal government has shot itself in the foot. It promised brown coal generators $5.5 billion in compensation for the loss in asset value due to the introduction of the carbon price, ignoring the advice of economists such as Ross Garnaut. According to Frontier Economics, it means the generators are between $400 million and $1 billion better off than if there was no carbon tax.

Having inflated the generators' value, the government then began negotiating with them over a fair price for them to shut early.

Energy Minister Martin Ferguson, in the meantime, nominated his preferred targets for the ''contract for closure'' program - Hazelwood and Playford B, a small plant in South Australia. It bolstered their hand in negotiations and infuriated some cabinet colleagues.

In simple terms, the government took steps to beef up the generators' asking price, then baulked at paying it. But other factors were also at play.

The generators were emboldened by the prospect of the Coalition repealing the carbon price. Brown coal plants will be worth more and have a longer life if Tony Abbott is successful.

There are also wildly divergent opinions on what will happen to the carbon price and the value of the coal plants once emissions trading starts in 2015, making it harder for the government and the coal plants to reach a deal.

Added up, it left Canberra and the generators far apart on price and with diminished motivation. The government is also facing budget pressures - extra incentive to walk from what insiders say would only have been a bad deal for taxpayers.

The buy-out policy - like a similar scheme proposed by former premier John Brumby in 2010 - was always opposed by market purists, and Canberra has a long history of paying too much for greenhouse schemes that deliver too little.

In environmental terms, the move will not stop Australia meeting its 2020 target of at least a 5 per cent cut in emissions below 2000 levels. But the loss of a scheme that would have delivered a cut of about 20 million tonnes of carbon dioxide a year - one-eighth of what is needed - means Australian businesses will have to buy more carbon credits created through clean energy projects overseas to meet the goal.

The emissions will still be cut, but probably not in Australia - and Hazelwood and other brown coal plants in the Latrobe Valley are likely to keep operating for years to come.

So the options seem to be to increase the cost of emission reduction for everybody else, or to manage the emissions target with either a high cap that won't reduce emissions a much as there won't be much price signal, or to have a lower cap that will risk making Hazelwood etc uneconomic to operate in which case they may just hand back operation to the Government, Mustud's nightmare of nationalisation by stealth.

[Cafad]

From the fairfax press today (or what's left of it)

So the options seem to be to increase the cost of emission reduction for everybody else, or to manage the emissions target with either a high cap that won't reduce emissions a much as there won't be much price signal, or to have a lower cap that will risk making Hazelwood etc uneconomic to operate in which case they may just hand back operation to the Government, Mustud's nightmare of nationalisation by stealth.

I tend to think that there would exist a middle cap, or a slowly increasing cap plan, and I suspect that no one tried very hard to determine just what value that cap, or plan, might be.

[Super Mustud]

From the fairfax press today (or what's left of it)

So the options seem to be to increase the cost of emission reduction for everybody else, or to manage the emissions target with either a high cap that won't reduce emissions a much as there won't be much price signal, or to have a lower cap that will risk making Hazelwood etc uneconomic to operate in which case they may just hand back operation to the Government, Mustud's nightmare of nationalisation by stealth.

That's no nightmare. I reckon that the current operator will do quite nicely out of a handover. The system will require it.

Anyway, no such thing as stealth possible in Government.

[proftournesol]

The latest tinkering, again from Fairfax press

Electricity market to be opened up to curb demand

In a bid to drive down surging electricity prices, the national wholesale electricity market is to be opened up to large energy users for the first time.

The move is part of a series of measures aimed at cutting power demand during peak periods of the day, such as late afternoon.

Central to the new proposals, households will be pushed to cut electricity consumption during these peak periods - typically first thing in the morning and during the late afternoon and evening - in a bid to slash the need to spend tens of billions of dollars on new equipment, outlays which are driving up power prices.

In NSW, for example, electricity prices have risen upwards of 60 per cent over the past three years, which has prompted a fall in power demand for the first time on record.

Advertisement

In a report issued this afternoon, the Australian Energy Markets Commission, which oversees the electricity and gas markets, has outlined detailed plans for an overhaul of the market.

The key measures include:

• allowing large power users direct access in the wholesale electricity market for the first time;
  
• changed electricity tariffs to encourage more energy usage in off-peak times of the day, such as the afternoon and late evening;
  
• open up the sale of household and small commercial electricity, such as from rooftop solar panels, to buyers other than electricity companies.
  

Savings

Some of these proposals, such as shifting demand to off-peak usage periods, are not new. Such efforts are already used by as many as 500,000 households for their water heating, which have reduced the need for a medium-sized 300 megawatt power station.

The savings from more active use of this practise may rise to as much as 2,800 megawatts, which is equal to about 8 per cent of total electricity demand, with savings running to billions of dollars. This total reduction is approximately the size of the Bayswater power station in the Hunter Valley, which is the largest in Australia.

At the same time, those consumers who agree to use less electricity at peak demand times could receive discounts, sharing in part of the savings.

This approach to pricing would bring electricity prices into line with other industries such as the airline, hotel and car rental sectors, which all charge higher prices at peak demand times, such as school holiday periods, the report noted.

Any such move would also need government assistance programs to offer compensation to those who are unable to alter the time of day they need access to electricity, such as the elderly and the ill, the report noted.

At present, households pay a uniform tariff for their electricity, irrespective of the time of the day. The proposal is to change to a so-called "time of use" tariff structure, with higher prices to be charged during the peak demand periods and lower prices during periods of limited demand.

You're right, they'll probably come up with some half-arsed policy that achieves nothing. It's difficult to work out where the cap will be as the Government has no discernible policy objectives at all. At least with the Greens and the Coalition you know where you stand, for better or for worse.

[Cafad]

Don't we already have day rates, night rates and off peak rates? How many do we need?

And what does this bit:

• allowing large power users direct access in the wholesale electricity market for the first time;
  

actually mean? Will large power users be able to buy in bulk now? That would certainly change things but as to how that will change the market I have no idea, we will have to wait and see how it will be implemented I guess.

I have to agree Prof, I don't really like the greens much but at least they are consistent, with Labor there is just no predicting what they are going to do next.

Edited September 6, 2012 by Cafad

[proftournesol]

It will be important now to make the Government justify paying an additional $5,000,000,000 in free compensation for emission permits to those large emitters now that the buy back isn't going to happen, they were included as part of the package, it was a part of their compensation for closing the plants. If we don't it just adds to the yearly $10,000,000,000 we give the mining and fossil fuel industry in corporate welfare.

[Full Range]

Looking at it with an engineers eye

We in Australia can use wave generated energy as we don't lack the coastline and suitable places

This system ticks quite a few of the boxes for me and I am sure that with good engineering and deign it can be the way of the future

I read about a pilot program in WA a few years back and I should follow up

I have no idea of costs to build such a system and hope someone in the industry can reply

KK

[LogicprObe]

Looking at it with an engineers eye

We in Australia can use wave generated energy as we don't lack the coastline and suitable places

This system ticks quite a few of the boxes for me and I am sure that with good engineering and deign it can be the way of the future

I read about a pilot program in WA a few years back and I should follow up

I have no idea of costs to build such a system and hope someone in the industry can reply

KK

http://www.oceanlinx.com/

The last one was a complete disaster.

It all sounded so good!

http://enviro.org.au/enews-description.asp?id=696

....and then...........

http://peakenergy.blogspot.com.au/2010/05/5m-port-kembla-wave-generator-wrecked.html

[proftournesol]

It looks like the prototype has provided valuable information on the number of mooring lines required. This is one of the roles of a prototype:)

[Full Range]

I was thinking of a dual water / land based system wave generating system in my minds eye

In memory the WA pilot was operated by Carnegie Corp

[JeffK]

I think given that those five generators have not reached "close down" agreements, the compensation the brown coalies are receiving to enable them to buy less permits should be removed; just as it does not exist for Qld and NSW black coal fueled generators.