Wednesday, 18 October 2017

OPEN LETTER to Minister Josh Frydenberg and MPs.

Hon. Josh Frydenberg MP                                                                              18th October 2017
Minister for the Environment & Energy PO Box 6022
House of Representatives
Parliament House
Canberra ACT 2600


Open letter re your Monty Pythonesque electricity plan

I understand you have devised an ingenious plan to rectify the current government-directed destruction of our once reliable and affordable power system. According to media reports, your scheme will require electricity retailers to do essentially what they are currently doing, while the “renewable” rorters do what they are currently doing, and electricity distributors continue to do what they are currently doing.

Despite the fact that everyone will be continuing as at present (except of course that we will now pay for some more government officials to oversee this plan, and for some more bandaids), I understand that you and the Prime Minister are confident that electricity prices will fall in maybe ten years time, by a paltry amount, and the lights will stay on because you have willed it so.

Could you please clarify whether your advisers got the script for this plan from Monty Python or from Blackadder. Attribution should go to the right source.

I understand the crux of your ingenious scheme is that retailers will be obliged to purchase at least 1MW of electricity from baseload sources for each 1MW of unreliable (i.e. wind and solar) electricity they purchase. What exactly do you think they are doing at present?

Dr Finkel’s report was grossly misleading in multiple ways. However, he did provide some basic facts pertinent to your plan. On p. 87 of his report, he noted that “In FY2016, 76 per cent of electricity produced in the NEM came from coal-fired generators.”

So the ratio of electricity from coal-fired baseload sources to all other sources was 3:1 in 2016 – and those other sources included gas and legacy hydro. Dr Finkel’s projections (Figure 3.8 in his report) are for the ratio of baseload to intermittent sources to be 3:1 in 2020 and 1.5:1 in 2030 under his Big Lie “Clean” Energy Target, and 2:1 in 2030 under current arrangements.

Consequently, your mandated 1MW:1MW requirement would make no difference to the behaviour of wholesale purchasers of electricity in the immediate future and indeed for decades. Consequently it will not deter the “renewable energy” rorters from building more unreliable, intermittent power stations causing increased variability across the grid and more expensive power which your government forces electricity consumers to purchase.

Your ingenious plan demonstrates a complete lack of understanding of how the introduction of intermittent power generation has created system unreliability and doubled real electricity prices in Australia, and how it will continue to do so.

In short:
  • Intermittent wind and solar is highly expensive electricity, requiring the combination of high wholesale prices plus LRET subsidies (paid by consumers) of a roughly similar amount, to make them viable.
  • Because of the subsidies and the nature of the NEM, subsidised generators are able to always place their output into the grid, at the expense of baseload generators, with the latter then being turned into intermittent generators – not because of any deficiency on their part but because they keep getting shut out of the grid on an intermittent and unpredictable basis.
  • Since they are thus prevented from operating at full capacity, baseload generators then also require high prices per MWH in order to be viable, and those necessary prices increase as the intermittency forced on them increases.
  • Given that the proportion of intermittent generators is continuing to increase under your policy, and thus also the intermittency forced onto baseload generators, and given Australian government is driven by irrational ideology, no independent party will invest in new baseload plant or in the refurbishment of existing plant.
  • Wind and solar generators are not just intermittent, they also fail to provide the frequency control and other functions essential to a widespread grid and which are an intrinsic part of baseload generators. Thus the increasing proportion of intermittent generators also adds increasing instability to the grid.
  • Because of the multiplicity of intermittent generators mushrooming around the country, much more transmission infrastructure is required. Each of those generators requires an expensive substation to convert its output into a form suitable for the grid, plus new transmission links. The cost of this comes out of the pockets of electricity consumers.
  • Many members of the public have responded to your high electricity prices (and in many cases encouraged by government subsidies) by placing solar panels on their roofs. Most of them remain connected to the grid because they also want electricity at night (adequate battery storage is very expensive) which cannot come from solar farms, and only sometimes will it come from wind farms, so you need additional investment (either legacy baseload or new gas-fired installations) to back up those private investments. All that investment has to be paid for by end-users. In addition, local distribution networks have consequent less demand on them, so their owners are requiring increased per household connection charges to meet their costs.
  • You and previous governments have produced a Rube Goldberg structure of government agencies to oversee the NEM, which have destroyed affordable and reliable electricity, and whose failure is rewarded with expansion. In addition, you have duplicated at the national level government officials that once existed only at state level. Electricity consumers and taxpayers pay for this mess.
  • The financial sector has got in the act offering hedging instruments so various parties can cope with the financial uncertainty caused by this system, uncertainty we never had before the NEM and intermittent power. The financial sector employs people and capital to provide those hedging instruments. That is a real cost which again ultimately comes out of the pockets of electricity consumers.
  • Where once electricity in each state was produced by a state government responsible to its electorate, it is now produced by an unscrupulous oligopoly whose members use every tactic they can to game the fake market Australian governments have created and thereby add further costs to consumers in order to pad the profits of their largely foreign owners.

As I pointed out in an earlier letter to you, this complex mess over which you are presiding and which you refuse to correct is costing the Australian community an excess and wholly unnecessary cost of between $30Bn and $50Bn per annum. Yes, that is measured in tens of billions of dollars each year. It is increasing each year and it is destroying tens of thousands of jobs.

Despite that knowledge, while presiding over a system where real consumer electricity prices are now twice what they were before your NEM started, you insult the Australian people by claiming you’ll deliver them a reduction of less than 5% in maybe a decade’s time, when you will be long gone from office. In other words you are telling them the country will have to suffer unaffordable power prices now and for decades – because you and the Prime Minister are too gutless or incompetent to fix it.

And all of this is done supposedly to limit the beneficial trace-gas carbon dioxide, despite your Chief Scientist having testified to the Senate that totally abolishing Australia’s emissions of carbon dioxide would make virtually no difference to the world’s climate.

More of the detail behind these points is explained in my letter to you re AEMO’s recent misleading advice to you and in my open letter to Dr Finkel, of which you also have a copy.

I pointed out previously what is now being commonly recognised. There is only one way to restore affordable, secure electricity to Australia and its citizens. It has two parts:
  • Abolish now all subsidies for particular forms of electricity supply. That means the RET-based subsidies for wind and solar in particular but also the various other forms like preferential funding for intermittent power generators.
  • Offer long-term government contracts for low cost dispatchable electricity supply which is also able to provide the other characteristics needed for stable supply (e.g. frequency control) sufficient to meet Australia’s electricity requirements with the safety margin we once enjoyed.
If you do not understand that, you are too clueless to be worth feeding. If you do understand it, then the policies you are following are outright treachery against Australia and its people – and all the Liberal and National party members who support this treachery are also culpable.

Dr Michael Crawford

(email address redacted)
cc: Members of Australian Parliament and other interested parties