2012 hottest year on record in continental U.S., NOAA says

[peter grimes]

Also, that map more correlates with population than it does renewables, as shown by dutchfire.

I'm pretty sure that map C-H posted is the result of "let's start from a conclusion, and find evidence to support it."

In this case, perhaps the sequence was

1. renewables are expensive
2. find map of highest prices for retail kWh
3. make sure the map has very high resolution at the low end (the light blues cover a range of 1.7c/kWh, and low resolution at the high end (the red covers a range of 10.1 c/kWh).
4. confirm your bias
5. ???
6. profit

 

[Murky]

Because leaving it to the UN and politicians is working out so fantastically for you.

The obvious problem there is that too many decision makers are in the pocket of the wrong sort of capitalists/plutocrats.

Do you find it ironic that due to the glacial pace of the UN and politicians that most of the movement in the renewable energy sector has come from the free market?

I don't doubt that with proper incentives the markets would contribute more towards solutions than they are currently contributing to the problem.

 

[Cutlass]

What happens if you get a cloudy windless day? But even then solar and wind power ar extremely inefficient and massively expensive. Areas that rely on renewables, which aren't based on hydro. You can see it on this map of Electricity prices in America. The most expensive areas are those that rely on solar and wind the most.

Don't forget that these renewables require Rare Earth metals and thus the mining of such metals is hazardous to the environment.

Now you're just making stuff up. Connecticut has the highest electric prices in the 48 states, and half our electricity is nuclear, and almost none of it is renewables.

 

[Tee Kay]

Don't forget that these renewables require Rare Earth metals and thus the mining of such metals is hazardous to the environment.

So do basically all electronics, so get off the internet.

 

[Arwon]

What happens if you get a cloudy windless day? But even then solar and wind power ar extremely inefficient and massively expensive. Areas that rely on renewables, which aren't based on hydro. You can see it on this map of Electricity prices in America. The most expensive areas are those that rely on solar and wind the most.

Don't forget that these renewables require Rare Earth metals and thus the mining of such metals is hazardous to the environment.

This is a complete lie. Do you know what the merit order effect is?

It's something which massively changes the electricity generation market as soon as there's enough renewables to influence it. Unlike fossil fuels, the costs of generation are essentially zero for solar or wind, so since they bid either 0 or a negative number, they always dispatch when they generate. Other fuel sources take what demand is left and shut down in deference to renewables at points when the renewable generation is clearly going to be almost sufficient on its own, because they know they won't make any money.

Do you know which state is the only state in Australia to have actually lowered its retail electricity prices in the last, say, five or ten years?

South Australia.

Do you know why?

Wind power has gone from 1% to over 26% of all generation (not installed capacity, generation) in the last few years. We're now at the point where wind power is bringing down wholesale electricity prices in South Australia which means the retail regulated prices follow.

(We're also at the point where coal is being displaced by wind+gas for a net drop in total emissions and in the emissions intensity of electricity)

Do you know what has happened to wholesale electricity prices in Germany as its wind and solar power capacity expanded massively? The daytime peak price period just disappeared. Like literally, disappeared. Fossil fuel generators are being so completely undercut by renewables that they've been forced to make all their money during the night when there's low demand. End result, critical pricing periods largely disappear and average annual wholesale prices drop a bit.

 

[Arwon]

Also, how many times do I have to go through this intermittency thing, y'all?

Citing intermittency as an argument against the suitability of solar and wind taking, cost-effectively, 25%, 30%, 40% of generation is another way of saying "I do not understand how electricity grids work."

Uncontrolled intermittency in electricity generation doesn't create any great technical challenge, nor does it make renewable energy sources unsuited to largescale generation. It's not a matter of "needing backup" being some unassailable issue only to be solved by hypothetical future technology.

Electricity generation already operates as a market, allocating electricity generation from moment-to-moment the most cost-effective way possible. Power plants already come on and offline regularly. See, the trick is, allocation of generation via the dispatch process already deals with uncontrolled but predictable variation....

It's called demand, guys.

If you just have a bunch of fixed power sources constantly outputting the same amount of electricity (read: coal, nuclear), and demand drops and your output doesn't, you throw out the frequency of the system and stuff breaks or blows up. Supply must adjust to match demand load, meaning power plants have to switch on and off at short notice. Happens every day from moment to moment. Even the big coal plants can ramp turbines up and down over an hour or two.

Weather-driven variation just introduces a type of uncontrolled variation on the supply side, in addition to uncontrolled demand variation. That means two variables and makes the models a bit more complex. But hey, turns out computers are a thing, yo. We have the technology.

See, the market itself fills in the gaps caused by the (profitable!) generation profile of uncontrollable intermittent renewables. In fact, in high penetration grids like Texas, Spain, Denmark, South Australia and so forth, there's conventional power sources (gas, hydro) which have adjusted to the new market conditions and started specialising in anticipating and meeting the gaps created by intermittency. Just like how they used to follow peak demand in determining whether they can profitably operate, they now also follow weather charts. COMPUTERS.

In Spain, even the relatively inflexible coal generators have learned to anticipate weather conditions well enough to go offline when they know they'll be under-bid by wind and unable to sell power.

The issues are not technical, they are lack of political will and they are capital availability since the costs of renewable generation are almost entirely front-loaded.

(Modelling suggests that a grid planned from the beginning around distributed renewables instead of fixed output combustion/fission could go higher even before talking about storage, but no grid is doing that yet and infrastructure change is slow.)

Post script: I don't mention storage becuase reliable batteries for largescale generation aren't around yet, BUT, since we're herping the derp about intermittency... Friggin hydro. Use the merit order affected, newly cheap, daytime/windy period power to pump water uphill, storing as kinetic energy. Run down those stores at other times when prices are higher. Already exists in many places. Limited scope in Australia, but already being done.

Aren't price signals amazing?

 

[classical_hero]

This is a complete lie. Do you know what the merit order effect is?

It's something which massively changes the electricity generation market as soon as there's enough renewables to influence it. Unlike fossil fuels, the costs of generation are essentially zero for solar or wind, so since they bid either 0 or a negative number, they always dispatch when they generate. Other fuel sources take what demand is left and shut down in deference to renewables at points when the renewable generation is clearly going to be almost sufficient on its own, because they know they won't make any money.

Do you know which state is the only state in Australia to have actually lowered its retail electricity prices in the last, say, five or ten years?

South Australia.

Do you know why?

Wind power has gone from 1% to over 26% of all generation (not installed capacity, generation) in the last few years. We're now at the point where wind power is bringing down wholesale electricity prices in South Australia which means the retail regulated prices follow.

(We're also at the point where coal is being displaced by wind+gas for a net drop in total emissions and in the emissions intensity of electricity)

Do you know what has happened to wholesale electricity prices in Germany as its wind and solar power capacity expanded massively? The daytime peak price period just disappeared. Like literally, disappeared. Fossil fuel generators are being so completely undercut by renewables that they've been forced to make all their money during the night when there's low demand. End result, critical pricing periods largely disappear and average annual wholesale prices drop a bit.

Yet SA has almost the highest prices in the world. http://www.adelaidenow.com.au/news/south-australia/power-prices-to-be-highest-in-the-world/story-e6frea83-1226305741810

A report released today by the Energy Users Association of Australia, which compares 2011 household electricity prices in 92 countries, states or provinces, shows South Australian prices are the third highest behind Denmark and Germany.

Association executive director Roman Domanski, however, said it was only a matter of time before SA would have the world's most expensive power prices.

"It will go to top of the tree ... the way things are going at the moment, it could even be this year," he said.

From July 1, prices will rise further when the carbon tax is introduced - and with rises in network charges and additional fees for renewable energy.

The carbon tax is tipped to increase the average residential power bill by more than $150 in its first year.

In the report, the association says SA has an average electricity price of 28.6c per kilowatt-hour. Denmark's was 31.4c/kwh and Germany 28.7c/kwh.

Mr Domanski challenged state Energy Minister Tom Koutsantonis to "argue very strongly" for urgent reform, by changing the way the regulator sets network prices.

He said the Government also had a role to play in reform of the market and in advocating a more sensible approach to renewable energy targets that did not rely on subsidies.

UnitingCare Wesley electricity expert Mark Henley said the organisation wanted a four-pronged attack on the state's electricity prices which had begun to increase sharply since ETSA was privatised in 1999.

"We want an energy affordability roundtable of key government and industry people," he said.

"We need to look at the cost shift from lower income people to higher income people through things like solar tariffs, we have to get better at reducing electricity use to cut peak demand and better concession schemes.

"We also need the State Government to start investing in infrastructure again instead of having electricity customers paying for all infrastructure through electricity bills."

Even with a temporary price fall as a result of deregulation, the prices are still far above the OECD average. Considering we have abundant energy resources, we shouldn'tbe faced with nearly the highest prices in the world.

 

[Arwon]

Unsurprisingly your post is complete rubbish.

That EUAA report is selective lobbyist bollocks filtered via the Murdoch press. I mean it claims the SA retail tariff of around 29c/kwh on average is "the highest in the world" which just isn't true. Even if it were the case, then it is still true that wind power is what is lowering prices from previous coal driven highs. It also remains the case that *only* SA among Australian regions, with its wind power, is experiencing price declines. Previously it was very high in an almost entirely coal driven environment. Wind is fixing that.

I don't even know what you think you are arguing with the OECD thing. Most of our price rises are network charges not energy costs. Our prices are high because of high use and high peak demand... energy costs are a small component. Do you even understand how network charges work? You're taking about retail costs, which have essentially nothing to do with wholesale electricity prices, which are what you need to look at to talk about the impact of different types of generation.

So is it that you're a dupe or that you're a liar? It is quite unclear.

State your argument simply and then we will set about dismantling it. I have graphs. I get that you don't understand electricity but do try. Go on, disprove renewable energy. It's friggin adorable.

 

[peter grimes]

Yet SA has almost the highest prices in the world. http://www.adelaidenow.com.au/news/south-australia/power-prices-to-be-highest-in-the-world/story-e6frea83-1226305741810


Even with a temporary price fall as a result of deregulation, the prices are still far above the OECD average. Considering we have abundant energy resources, we shouldn'tbe faced with nearly the highest prices in the world.

So is your position that you want cheap energy for residential consumers? That might not be the best thing from en economic standpoint. When a commodity is cheap there's no price signal to encourage responsible stewardship of the resource.

 

[Arwon]

OK, graphics time.

First up, wind share of total generation:

This shows the steady increase of total market share in South Australia's electricity market. Note this is actual generation supplied, not capacity.

The important thing is what it does as it ramps up, in terms of impacting the wholesale spot price:

See how the peak of SA wholesale prices occurs back in 2007-08 when wind was still less than 10%? That's because back then there were mostly coal plants and a limited import capacity, so on hot days the coal plants could bid whatever they want and still sell their electricity.

ALSO note how the costs of energy aren't actually rising in recent years? That's important when we talk about the cause of our constant rapid electricity bill rises over the last five years.

(The impact of the carbon price, BTW, will be seen in the 2012-13 figures when they're available, but will be complicated by the flooding at Yallourn, a brown coal plant which supplies 8% of electricity in the National Electricity Market. It'll be a step change, and set the new long term average at a higher point. My guess is it'll settle at around $50/MWH, around what it was in 2006-07, but with less carbon-intense electricity.)

That's best shown by this graph:

Really high trading intervals. All that dark blue South Australian bidding hits its peak in 2007-08 to 2009-10, creating the really high spot prices you see above.

Then what happens? Two things. One is lower demand, both due to milder weather and solar PV takeup now that solar panels pay for themselves over their lifetime (solar PV shows up to the grid as reduced demand).

The other is that wind starts to kick in, and now that it's a quarter of generation, it starts to reduce the opportunities for really really high bidding. Winjd doesn't always correlate with high demand days, but there's enough days when it's both high demand and windy that the merit order effect comes into play, and the average wholesale prices come back down.

The flowthrough of these lower average spot prices hasn't yet fully carried over to retail prices. That's unfortunate, and partly a result of SA, like most states, having annual regulated price determinations instead of market rates. So when the wholesale price drops, South Australians on market tariffs will experience the reduction but there's no automatic mechanism to reduce the billing rates for customers on the regulated tariff, they have to wait for the regulator to make its next annual decree.

The lack of passthrough of lower wholesale prices is also, in large part, because actual energy costs are only about 40% of a household bill. Network costs are most of the rest, and they're also rising rapidly due to rising peak demand driven predominantly by air conditioners. So even as the SA energy cost drops, they're still copping network cost rises like everyone else.

Incidentally, one government estimate says that installing a $1000 air conditioner imposes $7000 in network costs that must be spread across everyone paying bills. Our lack of time of use pricing means people who don't use air conditioning are directly subsidising those who do. Flat regulated tariffs are regressive.

Here is the typical cost breakdown of a residential power bill in 2011:

You can see that SA with its major renewable penetration doesn't have notably different bill costs than other states. Its energy cost component is a higher proportion, which accounts for their higher bills and should drop over the next couple of years now that wholesale prices are at the national average (despite the supposedly super expensive wind). So there's no reason for Adelaide to continue to have more expensive electricity unless its network is more costly per person. Given the heat there, this might actually be the case, but I don't have enough knowledge there.

Side note, the other impact of this has been to reduce SA's status as a constant major net importer of electricity, though not completely, so far:

All graphs except the one I made are from the Australian Energy Regulator's (part of the ACCC) State of the Energy Market report.

 

[Dale]

Arwon, I didn't notice you mentioning the recent 8.1% reduction in price from the state Govt.

But anyways, that's a fantastic example of the free market in action. I looked up info on SA electricity and all the wind has almost offset the entire interconnect import from Vic. This has the result of reducing coal pollution in Vic.

I also wouldn't worry about Yallourn impacting 2012-13 prices. Loy Yang B is usually at low capacity and during the outage they just ramped it up to cover the demand. Also, demand across the Eastern grid has been falling the last 5 years anyways, so Vic had an excess of generation capacity sitting idle. It's a shame the Govt pulled out of the coal generator buyout, since the owners of Hazelwood were actually looking to get out since demand was falling.

 

[Arwon]

Yeah ESCOSA has just caught up to the market in its latest determination. That's one of the problems with regulated retail prices.

I think what happened is the Vic owners realised they can still undercut the NSW black coal plants, and upped their asking price beyond what the government was willing to offer. Not sure why the NSW plants didn't take the money and run, though.

 

[Dale]

My understanding was that it was one of the things cut by Swan at the mini-May budget.

 

[Arwon]

It was announced quietly by Martin Ferguson a while ago. Another possibility is he sabotaged it, too.

 

[Dale]

According to the Sydney Morning Herald (http://www.smh.com.au/opinion/polit...-buyback-plan-up-in-smoke-20120905-25ewq.html) it was because the generators are still profitable, even after the carbon tax. And with an expected much lower carbon price in 2015, there was no chance the generators would sell for the price the Govt offered. Hence the Govt dumped the policy. The irony here is that the $5.5 Bn compensation to assist coal generators to transition or exit, is just adding to that profit.

Ergo, the carbon tax did the opposite of expected. Instead of reducing carbon emissions by 13% by forcing coal burner generators closed, it's allowed the coal generators to push the cuts down to the retail sector, and at the same time, stay profitable and receive massive taxplayer funded compensation. Though considering all other parts of the carbon tax were expected to do the opposite of what it should (ie: Australia's carbon emissions rising under the tax according to Treasury modelling) is it any surprise this too went the opposite?

For once I actually agree with the Greens when they say the Govt failed massively. Though I'm sure we agree they failed for different reasons.

 

[Arwon]

According to the Sydney Morning Herald (http://www.smh.com.au/opinion/polit...-buyback-plan-up-in-smoke-20120905-25ewq.html) it was because the generators are still profitable, even after the carbon tax. And with an expected much lower carbon price in 2015, there was no chance the generators would sell for the price the Govt offered. Hence the Govt dumped the policy. The irony here is that the $5.5 Bn compensation to assist coal generators to transition or exit, is just adding to that profit.

Ergo, the carbon tax did the opposite of expected. Instead of reducing carbon emissions by 13% by forcing coal burner generators closed, it's allowed the coal generators to push the cuts down to the retail sector, and at the same time, stay profitable and receive massive taxplayer funded compensation. Though considering all other parts of the carbon tax were expected to do the opposite of what it should (ie: Australia's carbon emissions rising under the tax according to Treasury modelling) is it any surprise this too went the opposite?

Yeah, that's what I said last post. The unfortunate thing is that the brown coal plants are still able to out-compete the black coal without a steeper tax (and maybe even then... we're talking about the cheapest fossil fuel on the planet) or dramatically fewer free permits. Big fossil fuel controls our political system and still manages to strangle most meaningful change, what can I say?

However, unlike in the La Trobe Valley where they sit on top of giant mines and get their fuel for free, the black coal plants in WA, QLD and NSW actually have to purchase their coal. They don't dig it up on site. Black coal is increasingly exposed to international coal markets, a lot of the long term contracts from privatisation in the 1990s are up for renewal and those plants business models are very price sensitive. Carbon pricing adds to that price pressure and accelerates closures. We'll see more ageing black coal plants follow Munmorah into closure before we see the brown coal plants go.

Pass-through isn't really an issue because of the structure of the NEM. There's a competitive market and the merit order effect and those things really squeeze margins quite substantially. Gas and renewables are still systematically more advantaged in the NEM than coal power plants than they were previously. If nothing else, any carbon price still has a direct impact on the generation market, as well as an influence over investment decisions about future generation.

(Although there *should* just be a ban on new coal power plants rather than an attempt to influence investment decisions away from them).

Ah well, at least the electricity sector is reducing emissions intensity. Gas and renewable generation are replacing black coal power generation overall, and when either the SA interconnector gets an upgrade or Victoria gets around to reversing its insane restrictions on wind turbines, that'll start to eat into the brown plants too.

 

[Dale]

Victoria gets around to reversing its insane restrictions on wind turbines, that'll start to eat into the brown plants too.

The reason that was done mainly is due to the drop in demand over the last few years. I believe the current Govt figures they can meet their target just from reduced coal energy demand. And with Yallourn, Hazelwood and the briquette factory due for compulsory shutdown between 2015-2020, they will probably meet that.

The growing rate of home solar and wind installations has reduced grid demand quite a bit. Couple that with the heavy reduction in manufacturing across the country and the reduction in aluminium processing in line with dropping Chinese demand, and it's not hard to see how carbon savings will be made simply from free market movements.

Even the steelworks here in Melbourne is reducing output in line with dropping demand.