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A New International Example for Bad Energy Policy

If a country’s goal is to decrease carbon emissions by increasing reliance on renewable energy, it only makes sense to install the new equipment in the location with the best potential—both in geography and government.

For Australia, which has a national Renewable Energy Target (RET) of 33,000 gigawatt hours of electricity generated by defined renewable sources by 2020, South Australia (SA) is that place. According to SA Treasurer Tom Koutsantonis, who is also the Energy Minister, the federal government had determined that SA is where “the best conditions for wind farms” could be found.

The state government was amenable, with SA Premier Jay Wetherill promising to make Adelaide, its capital city, “the first ‘carbon neutral’ city by 2050.” The state’s RET is for 50% renewable energy by 2025. Wetherall, in 2014, claimed: “This new target of half of the state’s power to be generated by renewable sources will create jobs and drive capital investment and advanced manufacturing industries.”

In reality, SA has now found that talk is cheap, but renewable energy is expensive.

The decision to set a 50 percent renewable target is “complete naivety and foolishness” according to Lindsay Partridge, chief executive at Brickworks, one of the nation’s leading providers of building products.

Now the largest producer of wind power, SA has enough installed capacity that, under ideal conditions, it could meet 100 percent of the current electricity demand. “However, wind generation tends to be lower at times of maximum demand,” according to the Australian Energy Regulator. “In South Australia, wind typically contributes 10 percent of its registered capacity during peaks in summer demand.” In fact, on some days, Jo Nova explains, they actually “suck electricity instead of generating it.”

Last month, SA experienced an energy crisis that The Australian blamed on “an over-reliance of untrustworthy and expensive wind and solar.” It warned that the federal RET “will force other states down the path taken by South Australia, which has the highest and most variable energy prices in the national electricity grid.”

In July, the confluence of several factors resulted in a huge spike in electricity prices—as much as 100 times the norm.

In May, SA’s last coal-fueled power plant was closed. Even before then, The Australian reported electricity prices were “at least 50 percent higher than in any other state.” According to the Australian Energy Market Operator, the average daily spot price in SA was $46.82 per megawatt hour. After the power plant was turned off: $80.47. In June: $123.10—more than double the previous year. In July: $262.97.

As a result of the loss of coal, when there’s no wind or sun, SA is now reliant on natural gas generation and from coal-fueled electricity being imported through a single connector from neighboring Victoria.

In part, due to a calm, cold winter (weather that is not favorable to wind farms), natural gas demand is high and so are prices. Additionally, the Heywood interconnector was in the midst of being upgraded—which lowered capacity for the coal-fueled electricity on which SA relies. Because of SA’s abandoning coal-fueled electricity generation and its increased reliance on wind, The Australian reports: “The national energy market regulator has warned that South Australia is likely to face continued price volatility and ‘significantly lower’ electricity availability.”

Then came the brutal cold snap, which caused more folks to turn on their electric heaters—thus driving up demand. The left-leaning, Labour state officials were prompted to plead for more reliable fossil-fuel-generated power. With the connector constrained, the only option was to turn on a mothballed gas-fueled power station—a very expensive exercise.

The SA energy crisis serves as a wake-up call and a warning to the other states, as the problem is, according to Koutsantonis, “coming to New South Wales and Victoria very soon.” But it should also, as the Financial Times reports: “provide lessons to nations rapidly increasing investment in renewables.”

Malcolm Roberts, CEO at the Australian Petroleum Production and Exploration Association,  added: “No technology is perfect. Coal is great for base-load power, but it’s not so great for peak demand but gas is well suited for meeting peak demand. You need gas as an insurance policy for more renewables.” Even the Clean Energy Council’s chief executive, Kane Thornton, in the Australian Financial Review, “conceded conventional power generation such as gas would most likely be needed as a back-up.”

The best explanation for SA’s energy crisis came from the Australian Energy Council which called it an: “accidental experiment in how far you can push technologies such as wind and solar power in to an electricity grid before something breaks.”

On August 13, The Economist, in an article titled “It’s Not Easy Being Green,” addressed the three goals of Germany’s energy transformation: “to keep energy supply reliable; to make it affordable; and to clean it up to save the environment, with a target of cutting emissions by 95% between 1990 and 2050.” All three of which, Clemens Fuest, of the Munich-based Ifo Institute think tank, says, “will be missed.” He calls Germany “an international example for bad energy policy.” Now we can add South Australia as another.

The question remains: will America learn from these bad examples, or will we continue down the path President Obama has pushed us onto—spending billions, achieving little environmental benefit, and raising rates on households and industry? The result of November’s election will provide the answer.

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc., and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). She hosts a weekly radio program: America’s Voice for Energy—which expands on the content of her weekly column. Follow her @EnergyRabbit.

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