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Renewable Energy Certificates

 

Wind and solar power is not intrinsically commercially competitive with fossil sourced energy in Australia. This is due to the very high up-front capital cost of the equipment required to capture the energy and the intermittent nature of the energy resource; so that the equipment is typically generating revenue for less than a third of the time. In addition there is a point at which peak energy delivery begins to exceed demand at different times, requiring equipment to be turned off even though the energy source is available; for example it is windy or sunny when consumers don't want the energy.

 

In Australia wind generated electricity, and to a lesser extent solar, is made economically viable by a system of Renewable Energy Certificates (RECs) that subsidise renewable energy producers.

 

RECs have been established to support the National Mandatory Renewable Energy Target (MRET) to 2030: ‘to encourage additional generation of electricity from renewable energy sources and achieve reductions in greenhouse gas emissions.’ It aims to meet a renewable energy target of 20% by 2020.

 
The National RET scheme:
 
  • places a legal liability on wholesale purchasers of electricity to proportionally contribute to an additional 17,150 gigawatt hours (GWh) of renewable energy per year by 2012 increasing annually until it reaches 45,000 GWh in 2020
  • sets the framework for both the supply and demand of renewable energy certificates (RECs) via a REC market.

 A REC is an electronic, tradable commodity similar to a share certificate as it represents a unit of value and may be traded for financial return. 1MWh of energy equals 1 REC. Electricity wholesalers need to buy RECs that are created by the accredited generators of electricity from renewable energy resources. Each calendar year wholesalers are required to surrender a number of registered RECs equal to their liability for the previous year; at an increasing rate (renewable power percentage (RPP)) each year.

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Following a politically driven debacle that gave small rooftop solar installations a fivefold REC allowance and temporally destroyed the REC market, in February 2010, the Australian Government announced changes to the national RET scheme, separating small-scale and large-scale renewable supply.  From January 2011, the scheme exists in two parts, the Small-scale Renewable Energy Scheme (SRES) and the Large-scale Renewable Energy Target (LRET). The SRES is a fixed price, unlimited-quantity scheme available only to small scale technologies such as solar water heating.

The LRET will retain the REC's existing floating price, fixed-quantity structure, and will be available only to large-scale power generation, such as wind, solar, biomass and geothermal energy. The LRET target will be 4,000 GWh less than the previous national RET scheme target, requiring the scheme to deliver 41,000 GWh of renewable energy by 2020.

The price of a REC fluctuates with supply and demand.

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The present price means that consumers presently pay around double the mean energy price for 'renewable' wind and solar energy. This cost of subsidising each MWh of renewable energy is passed on directly to the electricity consumer in their electricity bill.

 

Notwithstanding the subsidy the available, the economic wind resource in NSW is too limited and too small for wind to contribute more than a few per cent to projected NSW electricity needs. Consequently NSW wholesalers buy more RECs from Tasmania and South Australia than locally, even though the power can't practically be delivered to their customers due to very significant transmission costs and losses.

As will be seen later in this paper a significant issue is that the 20% renewables by 2020 target is a politically set  'stretch goal' - like 'no child to live in poverty by...'  It is extremely ambitious and very likely to be unachievable using current technology. 

It is important to realise that under the REC mechanism the price will continue to rise until the mandatory targets for renewable energy are met irrespective of the technical difficulties in delivering this power.  Thus if the proposed 'stretch'  targets are made mandatory it is quite possible for the subsidy to make the cost of renewable energy many times that of conventional , or nuclear, energy.  

 

As the REC price rises it might be reasonable to expect a significant increase in present wind generation in eastern Australia before resource limitations distance and demand management issues begin to limit further expansion. This additional capacity is more likely to be located in Victoria, Tasmania and SA than in NSW or Queensland. 
 
As discussed in more detail later, owners of existing accredited renewable power stations that are not located in new, more marginal locations, could then expect very substantial 'wind-fall' profits as the REC price is driven upwards.  Most hydro-power predated the REC arrangements and is excluded for these very reasons. 
 
To overcome this difficulty it was hoped that the REC scheme would be short lived and be replaced by a cap-and-trade emissions  trading scheme (ETS).  But this now appears to be politically untenable.   

 

 

 

 

 

 


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Travel

Italy

 

 

 

 

A decade ago, in 2005, I was in Venice for my sixtieth birthday.  It was a very pleasant evening involving an excellent restaurant and an operatic recital to follow.  This trip we'd be in Italy a bit earlier as I'd intended to spend my next significant birthday in Berlin.

The trip started out as planned.  A week in London then a flight to Sicily for a few days followed by the overnight boat to Napoli (Naples).  I particularly wanted to visit Pompeii because way back in 1975 my original attempt to see it was thwarted by a series of mishaps, that to avoid distracting from the present tale I won't go into.

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Fiction, Recollections & News

Merry Christmas

 

 

 

2020 was a terrible year. Last Christmas I wished you a better 2021. But, alas, it was not all beer and skittles.

On the bright side, there were no bushfires and the floods were less damaging. The drought has certainly broken. The bush is recovering well.

But in July Covid-19 reasserted itself and cases grew rapidly so the death-rate also began to rise steeply in NSW. 

A total 641 are now dead due to Covid-19 (to date). Yet, as NSW has a population 8.2 million, this still translates to one of the lowest Covid-related death rates in the world.

Victoria has been slightly worse hit with 1,436 deaths to date. Still exceptionally low by world standards. And the smaller states have remained largely Covid-free. Thus 2,072 dead in eighteen months, due to Covid-19, in Australia, has added negligibly to the expected annual death-rate from all causes (around 165,000 a year). Unless things go horribly wrong next year, the historical impact of Covid-19 will be mainly economic.

That economic impact, due to border closures, both overseas and interstate, and to the cost of assistance to businesses and individuals has been significant. While our children's generation learnt to work from home and the State kept essential services and construction running safely, tourism and entertainment businesses were badly hit.

The lock-downs also caused a lot of stress to our children with school-age kids. So, Wendy spent many days supervising the on-line-home-schooling of our grandchildren, Vivienne and Billy. I helped for a single day. I'm still dining out on that one!

The scare in this State was well-timed. Almost everyone rushed to get their 'two shots' of whichever vaccine was available. So, a country leading: 94.82% of the NSW population over 16, is now vaccinated - with the rollout to younger children well underway.

So far, this has borne fruit and, despite rising case numbers, we currently have less than 200 Covid-cases in hospital in NSW and just eight of those are on a ventilator. So, the borders are opening; masks are voluntary; QR check-in is no longer required in shops; and proof of vaccination is no longer mandatory in bars, gyms and sporting venues. Come and get it!

Predictably, case numbers are rising hourly, so the unvaccinated will soon be infected. This brave minority have opted to rely on natural immunity - nature's way.

The 'natural' case fatality rate (CFR) for Covid-delta is around 2% but could be lower, we hope, for Covid-omicron. It's more deadly with age. So, I'm guessing that only about one in a hundred of the unvaccinated are in the running for a (posthumous) Darwin Award.

Both Wendy and I have had our boosters in preparation.

We hope to travel again in 2022. The last time we saw our German grandchildren in the flesh was in 2019. 

Thanks to WhatsApp we can still get together face-to-face and I can report that both Tilda (4) and Leander (7) understand and speak English, in addition, of course, to their native German. Leander's English is now excellent. Yet it's not quite like us being there or them being here.

Those of you who read last year's message will find what follows familiar. I've barely changed a word.

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Opinions and Philosophy

Issues Arising from the Greenhouse Hypothesis

This paper was first written in 1990 - nearly 30 years ago - yet little has changed.

Except of course, that a lot of politicians and bureaucrats have put in a lot of air miles and stayed in some excellent hotels in interesting places around the world like Kyoto, Amsterdam and Cancun. 

In the interim technology has come to our aid.  Wind turbines, dismissed here, have become larger and much more economic as have PV solar panels.  Renewable energy options are discussed in more detail elsewhere on this website.

 


 

Climate Change

Issues Arising from the Greenhouse Hypothesis

 

Climate change has wide ranging implications for the World, ranging from its impacts on agriculture (through drought, floods, water availability, land degradation and carbon credits) mining (by limiting markets for coal and minerals processing) manufacturing and transport (through energy costs) to property damage resulting from storms.  The issues are complex, ranging from disputes about the impact of human activities on global warming, to arguments about what should be done and the consequences of the various actions proposed.  The following paper explores some of the issues and their potential impact.

 

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