It’s a universal truth: renewables mean higher costs

Tell me anywhere in the world where a higher penetration of ­renewable energy has been associated with lower electricity prices.

It certainly isn’t Denmark, which went crazy about wind power and has some of the highest electricity prices in the world.

It also isn’t Germany, which fell in love with wind and solar power — yes, solar power in Germany — and has some of the highest electricity prices in the world. Did I also mention, notwithstanding the substantial taxpayer and customer subsidisation of renewable energy, Germany will fail to meet the 2020 emissions reduction target it set ­itself and may well fail to meet its 2030 target? Germany also has finished constructing a new brown coal-fired power station recently.

In Spain, electricity prices were below the European average in 2009. They are now significantly above that average in the context of a massive expansion of subsidised renewable energy. This link finally was accepted by the government and the subsidies have been dramatically curtailed.

It also isn’t the Canadian province of Ontario, where retail electricity prices have doubled since 2005, notwithstanding assurances by the progressive government, which recently has been convincingly voted out of ­office, that this would not happen. The Ontario government forced the premature closure of its coal-fired power stations and piled on the subsidies for renewable energy.

When the head of Environmental Defence Canada was asked whether he was concerned that the Ontario government’s plan, as enacted through the Green Energy and Green Economy Act 2009, would lead to ­higher electricity prices for consumers in the province, he simply replied: “No, not at all.”

It’s a different story today and the newly elected premier, conservative Doug Ford, recently has cancelled a government auction for more renewable energy. He also has vowed to take on Prime Minister Justin Trudeau, who is planning to impose an escalating carbon tax on all provinces deemed to be failing to reduce emissions to the required degree.

Not that things are going swimmingly for Trudeau, who is having to tweak his carbon tax plans ­because of the potential blow to the competitiveness of Canada’s energy-intensive, trade-exposed industries.

With the incipient trade war with the US in the background, the Canadian government is seeking to lower the burden on EITE firms lest they sustain falling profits and possibly close. Trudeau is finding that it’s not easy being green.

And let’s consider some states in the US whose governments have decided the promotion of ­renewable energy is the way to go.

One of the hidden costs of ­renewable energy is the extra cost of transmission lines that are used only infrequently. Solar and wind farms are typically spread out, which increases the costs.

As ­Michael Shellenberger, energy contributor to Forbes, notes: “It would take 18 solar farms to produce the same amount of electricity that comes from the one nuclear power plant (in Diablo Can­yon, California). Where just one set of transmission lines is required to bring power from Diablo Canyon, 18 sep­arate transmission lines would be required to bring power from solar farms. These transmission lines are in most cases longer because solar farms are far away in the desert where it is sunny and land is cheap.”

So let’s look at the data. For the US as a whole, electricity prices rose 7 per cent between 2009 and 2017. (Oh, that we were so lucky.)

In North Dakota, electricity prices rose 40 per cent while the penetration of renewables (wind and solar) went from 9 per cent to 27 per cent.

In South Dakota, it was a similar story: electricity prices rose 34 per cent while renewables went from 5 per cent to 30 per cent.

In California, an epicentre of green politics and party to a carbon cap-and-trade scheme, electricity prices rose 22 per cent while the share of ­renewables rose from 3 per cent to 27 per cent.

Are there exceptions to this rule — a higher penetration of ­renewables leading to lower electricity prices? In Texas, renewables have gone from 5 per cent to 15 per cent — note the latter is still quite low — and electricity prices fell by 14 per cent across the period. But this was mainly the result of falling gas prices, with Texas the hub of gas fracking. ­Environ­men­tal groups in Australia, of course, are fiercely opposed to fracking.

As Shellenberger concludes: “Integrating solar on to the grid is much easier to do when you can easily turn natural gas plants up and down to accommodate their intermittency. And it’s much ­easier to do when it is 12 per cent of your electricity instead of 20 per cent.”

The real issue with renewable energy is its non-synchronous and intermittent nature. In short, it cannot produce electricity when and where it is needed. And at times it produces too much electricity in relation to demand. Peak solar production, for instance, ­occurs at 1pm; peak demand is much later in the day.

This has led to the extraordinary situation in California and Germany where neighbouring states/countries are actually paid to take the excess electricity. Mind you, Poland has become jack of ­accepting Germany’s excess renew­able energy output, fearing for the commercial future of its coal-fired power stations.

Malcolm Turnbull is wont to tell us electricity is all about economics and engineering. The Prime Minister may be right, but he fails to understand the core features of the economics and engineering — the physics, ­really — that mean the higher penetration of renewable energy will almost always lead to higher electricity prices, including in Australia. And note that we are not blessed with ample supplies of cheap gas, as is the case in the US. So in arguing the case for his beloved national energy guarantee, he must explain how the promotion of more renewable energy, via the imposition of a reviewable emissions reduction target, could possibly lead to lower electricity prices when this has not been the case around the world.

We know that the modelling undertaken by the Energy Security Board is completely shonky ­because it assumes a competitive market in which the cost of capital and system costs miraculously fall as result of the NEG. At the very least, the ESB should have insisted the modellers undertake sensitivity analysis on their findings and subject them to an independent expert committee.

The public is right to be sceptical about the modelling prediction of lower prices under the NEG. It’s just a pity no one called out the modellers when the renewable ­energy target was being reviewed.

It is probably the case that ­renewable energy can be made to work in Australia — it is relatively sunny and windy in parts. But the costs, many hidden ­including transmission, storage and the provision of inertia services, are likely to be substantial and ongoing.

The last thing the renewable energy players really want is lower electricity prices. After all, what will sustain their supernormal profits after the large-scale renewable energy certificates peter out in the early 2020s?

But think of it this way. Most of our large energy-intensive plants will have closed by then and so ­demand will have fallen away. We can all be happy watching the turbines turn and the solar panels heat up and be satisfied that we are doing our bit to reduce global warming — or not.