Electricity: no end to the damage regulations are doing

There is no let up in the lies, ignorance and dissembling that passes for debate on Australian energy policy.

Tanya Plibersek ventured onto the Bolt program and said, in line with green ideology, that the Renewable Energy Target means cheaper prices – a canard also voiced by the ABC insider duo of Lenore Taylor and Laura Tingle and central to the policy of the Victorian and other governments.

In its initial stage, a renewable subsidy does, indeed, depress general prices. Wind gets a subsidy of ~$85 per MWh on top of the $40 it, like other generators, can earn in the market. So the wind suppliers will offer electricity at any time because they earn revenue whatever the price. This drives down the aggregate price but only as long as the unsubsidised generators can cover their marginal costs.

Marginal costs eventually become total costs once major refurbishments and repairs are necessary. And so it was with the two South Australian coal power stations that have closed and so it is with the giant Hazelwood facility in Victoria.

All this is severely aggravated by gas policy in all states but Queensland which have shut the door on new supplies. So gas, which will always be dearer than coal but plays a useful peaking role, cannot run because any available supplies have been constrained by regulatory policy and gas generators cannot cover their costs unless "directed on" by the market manager. This then (on behalf of consumers) takes the risk that costs won't be covered.

The sorry picture of whether prices rise or fall when governments force the substitution for wind (that requires $110 per MWh for profitable operation) and coal (that requires $40-45 per MWh) is demonstrated by the forward price for electricity shown here for Victoria.

What we have is the tragedy of the world's lowest cost electricity system destroyed by political intervention.

Not only is wind high cost but as we are seeing in South Australia its episodic nature means it does not offer reliability.

Here is the generation throughout the nation at 6.30 this morning.

Wind which as a result of subsidies and penalties to fossil fuels, dominates investment in energy could barely produce one per cent of the supply.

But the ABC-ALP-Green left is only the worst of the culprits.

The coal industry lobby groups themselves are less than fulsome in promoting the domestic use of the industry's product since they are dominated by BHP, which is under the control of a CEO who is a True Believer in the global warming fraud and understandably ashamed of his firm's role in boiling the world. This forces BCA, Minerals Council and other lobby groups to call for various forms of "Clean Coal" that would add anything from 25 per cent to 300 per cent to the costs of coal generation.

The Minister, Josh Frydenberg, though by no means a swamp drainer, is about as diligent and honest as we can expect from a traditional politician. He is using the ALP's extremism against Mr Shorten, hoping that others will overlook the fact that the Coalition policy over the next few years is identical to that of the ALP and that the problems wind has created to date will get far worse over the next few years as, in line with Commonwealth requirements, the wind share is of supply is set to double.

Josh claims he is being up-front in saying that the cost of the government's policy will be $63 per household. He may believe that but it defies credibility. As I have previously demonstrated present Australian regulator y and budgetary spending on green energy is $5 billion a year (five times the one-off waste of money by the Andrews government's cancellation of the East West road). $5 billion comes to $500 per year per household. And this excludes the costs of other regulations on appliances, buildings, motor vehicles and the like all of which bring costs to consumers.

Continuing on the current path, let alone shifting up to the ALP's will vastly undermine future living standards. The tax on consumers is one thing but far greater damage is done by the lost businesses (think aluminium smelters) and forestalled business investment that the high costs of energy is creating.

There can be no half-way measures. We must immediately cancel all subsidies to energy and other interventions by government allow the market to repair itself.