Dealing with Excessive Power Costs

The exposure of the WETax (wind energy tax)

Australia cannot continue to endure the economic destruction of our energy production and distribution services by the wind industry.

Moreover, under the current policies for renewable energy, this destruction is certain to increase as more wind projects are built.

The Wind Energy Tax (“WETax”) disguised as Renewable Energy Certificates (“RECs”) must be progressively eliminated. This WETax is at the heart of our excessive power costs and decreasing reliability of supply. It perfectly reflects the greed and power of this industry and the technical idiocy and waywardness of those that should be building and maintaining our power industry rather than saving the planet.

DeFrock had planned to run several posts before this one but given the recent defrocking of the wind-loving Prime Minister it seemed that this Post was very relevant to decisions that the new Government will be considering in the very near future.

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What Are the Options to Deal With Excessive Power Costs?

DeFrock believes there are a number of solutions, but most, if not all, would need parliamentary approval, highly unlikely to be obtained under the Coalition or a future Shorten government.

Nevertheless DeFrock wishes to list and canvas solutions and particularly to expose, as the AC/DC song advertises “dirty deeds done dirt cheap”.

The solutions that require changes in the renewable Energy Act (‘the Act”) are canvassed in Policy Solutions and the others under Market Solutions.

Policy Solutions

Eliminate, or wind down over three years, the issue of Renewable Energy Certificates (RECs). Logical and long overdue. This alone would put the wind industry in its rightful place.

The public needs to understand that RECs are a direct taxing right awarded to the wind industry, levied directly on consumers large and small; and collected on behalf of the wind industry by power distributors.

Where else has the federal government awarded a direct taxing right to a non-government body?

DeFrock suggests that we call this carefully camouflaged tax what it is, the Wind Energy Tax (“WETax”) and categorise it as Dirty Deed (One).

The WETax amounts to about $1.6 billion a year additional income to the wind industry with the corresponding additional cost to power consumers. Is there some sort of fraud and or theft happening here? And if so, who are the perpetrators?

DeFrock well knows that uncovering and labelling wind rip-offs is only a start; but, if repeated often enough, might help bring about change.

Winding down the WETax would progressively introduce intermittent energy producers to the real market.  But, no need to be sympathetic, the industry’s spruikers are repeatably saying that wind energy is now competitive with dispatchable power (available on demand, e.g., coal, gas, diesel and hydro). This statement is nonsense and an accounting fiddle, Dirty Deed (Two), but is a sword DeFrock thinks wind power should be given every assistance to fall upon.

Change the ratio currently fixed by the Act of one to, say, two, units (RECs) of WETax for each MWH of wind power produced, thus creating a surplus of RECs. This would cause REC prices (and the WETax) to fall. The surplus RECs would become worthless.

Reduce the penalty price paid by distributors for not buying enough RECs to meet their obligation to buy a specific (but increasing) amount of renewable energy. This would depress the value of the RECs and the magnitude of the WETax.

Freeze the legislated amount of renewable energy that has to be produced at the 2018 figure then reduce it over 3 years.

Reduce the default payment levied upon distributors who have not met their obligation in purchasing enough RECs to meet their renewable energy obligations. The default payment is non-deductible for tax purposes and is mandated at $65/MWH. Purchase of RECs are tax deductible.

Reducing the default payment would automatically reduce the value of the WETax, (i.e., RECs)

Market Solutions

While DeFrock suggests no sympathy or consideration for this industry is warranted, and notes that amendments to the Act would be technically simple but politically very difficult, so the Minister probably has to consider possible mechanisms that would not require any change to the Act.

The following solutions might be in this category.

Cause the Australian Energy Market Operator (“AEMO”) to seek bids (price and amount) for supplying power, not in five minute intervals as is the current practice (and specifically designed to suit the wind industry) Dirty Deed (Three), but say every hour. This would immediately show the fundamental technical incompetence (chaotic variability) of wind power and make it difficult for a wind energy producer to predict and bid the full amount of its production over this longer period. Wind Energy producers would have to better manage their output (like other major suppliers) and would have great difficulty getting rid of all their production. So, less production and reduced WETax.

The bid process creates an offer “stack” that remains open until it reaches the AEMO defined need with the last bid accepted being the highest price. Amazingly the AEMO pays all the successful bidders, regardless of their bid price, a price equal to the last bid dispatched.

Surely if a producer bids, the AEMO should accept or not, and pay the producer their offer price, not that of someone else. This unique bidding mechanism is deliberately crafted to favour the wind industry Dirty Deed (Three). This illusory “bid” is very much against the public interest and commercially loaded against dispatchable and cheap power sources. Further research may indicate this particular Dirty Deal is not legal.

Before bidding into the market wind producers have already “earned” (provided they then sell their power to a distributor) the proceeds of the WETax, currently around $85/MWH, which is, according to the wind fanciers, above the present cost (including profit) which they indicate may be below $65/MWH. So having qualified for their WETax a producer has still to sell the power they have produced to collect the WETax and to make their Super Profit.

Wind power producers’ practice is to offer the whole of their estimated production for the five minute period at a very low price so they are accepted into the stack, and therefore guaranteed to sell, but actually get the stack price determined by the highest dispatched offer. Effectively this creates a “first in to the grid” right for wind power and a guaranteed super profit. Another Dirty Deed (Four).

This is a classic case where, if something looks unsavoury, then “follow the money.” Perhaps we should add “and the votes”. Who are the players in AEMO, for example? Perhaps the subject of a future post.

People who do not like high power prices (and the other faults with wind power) have to understand, admit and trumpet that wind energy is both disastrously expensive and causing the chaos in our energy supplies.

Wind energy sneaked into our power industry by sounding alarms about man-made global warming, then switching the rhetoric effortlessly to climate change when global warming did not persist. It has continued to build fear around CO₂ emissions from fossil fuel power plants, all the time building its own guaranteed excessive returns.  It is literally ripping off power customers under the noses of those who should have been the guardians of our so fundamental reliable power supply Dirty Deed (Five).

Time to burst this industry’s special taxing rights, the WETax, which is so harmful to households and industry, and the AEMO’s non-competitive bid process. The latter alone is probably enough to delay new projects but the progressive reduction in RECs will end any fraud.