Guest essay by Phil Hutchings
Two days ago, charles the moderator showed us some dumb thinking from the UK‘s efforts to pursue clean power.
Down here in Australia, we’re pretty good at it too…..
Hydro Tasmania has just collected a windfall profit of $48 million from Australia’s soon-to-be-short-lived foray with a $23/t Carbon tax.
You see, Hydro Tasmania is Australia’s largest renewable energy generator. Three years ago, Hydro Tas saw the Carbon Tax coming. So it started a policy of holding back water in its dams to increase its future electricity production. It wasn’t hard to figure out that stored water would be worth a lot more with a tax than without.
But with Australia’s political opposition pledging to scrap the tax if elected, Hydro Tas knew it had a narrow window of opportunity to game the system. So it saved up enough water for almost five months of full production before the tax started on 1 July 20012. That’s 3000 GWh worth of electricity.
Figure – Hydro Tasmania Source saved up water for three years before the Carbon Tax
Source – Frontier Economics (reference below)
Come July last year, Hydro Tas let that stored water flow, maximising its power output in the new world.
Once the Carbon Tax hit Australia’s coal fired generators, wholesale electricity prices jumped immediately. In Tasmania, they averaged $16/MWh higher in 2012-13 than in the prior year.
Net result:
· A cool $48 million of extra profit for Hydro Tas, thank you very much
· More coal burnt before the tax, and less afterwards – so at least it looks like the Carbon Tax is working …. and
· No additional long term renewable generation from Hydro Tas to show for it.
Frontier Economics has put this together, questioning whether the Carbon Tax has played any role at all in reducing greenhouse emissions in our electricity sector. Read on….
Photo Credit – Australian Government (see below if needed)
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Were customers able to use the surge in power, or was it wasted, too?
Slightly picky I know, but that picture shows water going down spillways and not generating electricity.
Hydro Tasmania is owned by the Tasmanian Government. So this is government gaming the carbon tax.
While this makes a good story, the fact that Tasmania came out of drought and Hydro Tas was replenishing its storages from historically low levels needs to be considered as well. I think that this story needed a bit more research!
” I think that this story needed a bit more research!” – that would ruin it surely? A bit like the Murry Salby story. Poor Prof Salby now seems to have been abandoned by WUWT
Alex Cruickshank says:
August 7, 2013 at 1:04 pm
_______________
Oh? Do you have any data/evidence to disprove this story? If Hydro Tas were just the dutiful public servants which you allege, then why did they expend all of the excess stores which they were building up under your scenario?
Luther,
Firstly, I alleged nothing except that the article has ignored an important fact. It did not also check to see if higher than average rainfall had occured in Tasmania like it has in Victoria in recent years, see http://www.melbournewater.com.au/content/water_storages/water_report/zoom_graph.asp
Secondly, it is not necessary to disprove something that has not been proved.
On the article, the graphic needs to show storage levels before the drought as well as levels after the drought to show that water was sequestered. By definition storages must be above the average level half of the time in a long term basis. One cycle of above average storage does not show sequestering, certainly not enough to assert gaming behaviour.
Secondly, the use of above level stored energy to profit from high prices is what would be required of any corporation. You would need to show that the other two hydro participants in Australia (AGL Hydro and Snowy Hydro) did not also respond to the higher pool price.
The evidence presented could have equally supported a heading of “Hydro Tas able to profit from higher rainfall and replenished reserves during high market prices”.
Regards
Alex
Alex: The drought recovery doesn’t explain the sequester of water above the average coupled with the massive release, that just happens to coincide with this tax scheme. Follow the money…
yeah the drought recovery line would work if they didn’t do the massive release… After all according to the doomsday cultists drought should be more common. Thus in turn this dam should be building up its reserves and holding even higher then past normal records.
Nyq Only says:
August 7, 2013 at 1:08 pm
” I think that this story needed a bit more research!” – that would ruin it surely? A bit like the Murry Salby story. Poor Prof Salby now seems to have been abandoned by WUWT
Don’t know about that. But Peter Gleick is sticking to you like a fart in a phone booth.
If it looks like a duck, and it walks like a duck, and it quacks like a duck . . . .
Sure – it could be an evolving swan:
– but where does the smart money go?
Something on both sides- well, maybe – but – if it looks like a duck, and it walks like a duck, and it quacks like a duck . . . .
Why do our gallant politicians, business folk, and state [or quango (interesting – spell checker offered me ‘guano’ for quango)] functionaries realise that?
Auto
Hi Auto. Excellent analogy – see the Australian Platypus: https://www.google.com.au/search?q=platypus&ie=UTF-8&oe=UTF-8&hl=en-gb&client=safari#biv=i%7C2%3Bd%7Cm20u_oAejGa46M%3A. Hope the link works but I just googled Platypus (an Australian Marsupial the looks like a duck if you just see the face 🙂 !)
The main point of my criticism is the same as we have against the AGW crowd. They need to ignore the short term or limited information and look at the bigger picture for more information that supports or disproves the thesis. In this case a few years of data does not support the assertion of gaming.
Regards
Alex
Here in the BC interior the hydro utilities empty their reseroirs by generating at max before the freshet every year. This is to allow the maximum capture of the spring melt. I have never seen water carried over from season to season. That would cause a risk of flooding and waste reservoir capacity.
Let’s face it the Government of Australia painted a “kick me” sign on the back of its pantaloons. Did they really think no one would read the sign and take them up on it? I say bravo for Hydro Tas for underscoring the idiocy of the Carbon Tax with a drop kick from 25 out, right thorugh the uprights.
“·No additional long term renewable generation from Hydro Tas to show for it.”
Ummm.. I think you will find a significant increase in wind turbine numbers on the upper west coast of Tassie.
Put there by Hydro Tas.
Even Labor dismiss the power of the Carbon Tax. then Minister for
Climate Change, the Hon Greg Combet dismissed the carbon tax
playing any role in the plant’s (Kurri Kurri aluminium smelter- single biggest electrical user for its grid, NSW) closure, citing instead that low aluminium prices combined with the strong Australian dollar as the reasons for decision to shut the plant. -Access Economics
Alex Cruickshank:
re your post at August 7, 2013 at 2:35 pm
http://wattsupwiththat.com/2013/08/07/law-of-unintended-consequences-number-eleventy-zillion-and-one/#comment-1383892
You are ignoring the simple truth that Hydro Tas would have been incompetent if they had not gamed the system in such an obvious way. The company gained $48 million of extra profit with no additional cost.
That Hydro Tas did game the system is to their credit. And it is to the discredit of the Government which established the Carbon Tax in the manner it did.
Richard
HI Billy.
———–
Billy says:
August 7, 2013 at 2:28 pm
Here in the BC interior the hydro utilities empty their reseroirs by generating at max before the freshet every year. This is to allow the maximum capture of the spring melt. I have never seen water carried over from season to season. That would cause a risk of flooding and waste reservoir capacity.
————
The Australian hydro systems all have to do double or triple duty, providing irrigation and drinking water storage as well as generation capacity. In addition, the country is prone to droughts (just out of a 10 year one!) and therefore all (except the Rocky Valley system) are multi-year storages.
You are correct, though, that all systems need to empty out sufficient space to absorb the expected inflows for any year to prevent “over-topping”, which is a waste.
Regards
Alex
Alex Cruickshank says:
August 7, 2013 at 2:35 pm
Sorry to be pedantic, but the platypus is not a marsupial. It’s a monotreme, along with the four echidna species.
Marsupials can’t be aquatic. Their joeys would drown.
HI milodonharlan, good pickup! :-). Alex
All solar power owners who are getting more back from feed-in tariffs than they pay for mains power could also be accused of rorting the system – at the invitation of our green-blinkered governments. Fortunately, I was in a position to take advantage of this largesse and have made several $000s profit over the past 3 years (of course, accruing this to be able to pay for power in the future /sarc).
Whilst these schemes are pushed on the populace, people and organisations will take advantage of them. The problem is the short-sighted thinking of the politicians who think they know how we as individuals as well as businesses will react to their plans. My State Government (SA in Oz) budgetted for <10,000 house-hold solar systems – the last I heard is that we have reached 140,000 systems. Of course, they changed the tariffs far too late to keep the financial burden to the amounts they budgetted for.
With this blowout of solar systems and the most wind generator (rated) capacity in OZ, coincidentally SA also has the highest electricity rates in Oz. These rates are blamed on the maintenance/replacement costs of the poles and wires, rather than the monies being paid out for green dreams.
Gary Pearse wrote at August 7, 2013 at 12:38 pm
Were customers able to use the surge in power, or was it wasted, too?
———–
Hydro Tas is connected into the Australian National Electricity Market, which covers eastern Australia and South Australia. The energy would therefore have displaced other generation and been fully used. It would have had the effect of (slightly) lowering the pool price from its carbon price inflated value.
Alex
This is astonishing. Where does the $48 million come from? Which companies pays into the pool to enable $48 million to be transferred for this scam?
Can the companies that must pay into the carbon pool raise their prices to pass the carbon tax costs onto consumers?
William Astley said at August 7, 2013 at 3:31 pm
This is astonishing. Where does the $48 million come from? Which companies pays into the pool to enable $48 million to be transferred for this scam?
Can the companies that must pay into the carbon pool raise their prices to pass the carbon tax costs onto consumers?
————-
William, all energy generated is sold into the NEM pool and purchased at the spot price by retailer, who on-sell it to customers. As I alluded before, the $48 mill would have come at the expense of other generators and, if anything, the cost to retailers would have been slightly lower.
The real scandal in the Australian scene is that:
1. the carbon price has inflated the energy costs for customers (yes, it is passed through on average) but most (possibly all) of the income from the tax is being spent on compensation and other give-aways. It is a real wealth transfer between some generators to others and from people earning average of better wages to others.
2. the impact on carbon dioxide output is minimal (even if CO2 was significant in the scheme of things!)
Regards
Alex
Alex Cruickshank, Your gaming WUWT nicely. Are you enjoying the windfall from your carbon tax scam? ALP takes long walk in the outback next month LOL!!!
Sunup commented on Law of Unintended Consequences Number Eleventy-Zillion and One.
Alex Cruickshank, Your gaming WUWT nicely. Are you enjoying the windfall from your carbon tax scam? ALP takes long walk in the outback next month LOL!!!
——————-
Again, poor research. Facts only people! (although we both hope for the same election outcome!)
Alex
The Law of Unintended Consequences sometimes produces surprisingly positive results!
A few years back, at the University of Wisconsin – Madison campus, the Sierra Club and other misguided Luddite types succeeded in forcing the closure of the small coal fired plant that powered the UW-Madison campus.
Then Wisconsin Governor Doyle (since retired by the electorate) decided to convert it to a ‘renewable biofuel’ power plant, ostensibly to be fueled by crop residues, wood chips, and old wood pallets trucked in from area farms and businesses. The citizens were assured this would only cost $251 Million and would establish Wisconsin as the leader in ‘coal to biofuel’ conversions. …. Or not. It would have required at least 2.3 times more tonnage of ‘biomass fuel’ to achieve the equivalent BTU yield of coal. This would have required a much larger plant footprint to accommodate storage of the larger pile of ‘biomass’ fuel as well as for local and regional trucking access to deliver the new fuel. The plant would have had to burn 20% natural gas along with the biofuel, to assure reliable combustion. As the story link below highlights, citizens of greater wisdom began to question the true viability of the plant.
http://dailyreporter.com/2009/05/20/more-cheaper-biofuels-needed-for-power-plant/
This spawned several new examples of the Law of Unintended Consequences. The irrational environmentalism that was the driving force behind closing the coal fired plant and conversion to a ‘biofuel’ power plant became a small but significant negative for Gov. Doyle in the WI gubernatorial race of 2010. He was defeated by Scott Walker, who immediately scuttled the ‘biofuel’ conversion and made it a 100% natural gas fired power plant, with minimal conversion costs to the taxpayers and the next lowest fuel cost to coal. Gov. Walker also ushered in balanced budgeting for the state, much needed reforms to public employee union contracts, defunded the construction plans for the 90 mph max. ‘high speed train’ boondoggle, and ended many other inefficient and out right stupid state spending projects.
Sometimes the Law of Unintended Consequences has real, positive results!
MtK
Alex Cruickshank said @ur momisugly August 7, 2013 at 3:54 pm
I am a self-funded retiree living in southern Tasmania. The financial year that finished a little over a month ago showed that I earned a gross income of ~$AU10,000. AFAICT the carbon tax means almost everything I purchase costs more. According to the government, since I don’t qualify for the OAP, or unemployment benefit, the compensation I receive is exactly nothing. Nil, zilch, zero, nada, diddly-squat… And you have the gall to refer to this as “real wealth transfer … from people earning average o[r] better wages to others”.
Also, FWIW, my last electricity bill was $AU515.63 for 1,533 KWHr, or $AU0.34/KWHr, According to the bill, some 5.8% ($AU29.91) is carbon tax. I seem to recall the treasurer, Wayne Swann, referring to people who claimed that the carbon tax had increased the cost of doing business as “liars”.
The Pompous Git commented on Law of Unintended Consequences Number Eleventy-Zillion and One.
According to the government, since I don’t qualify for the OAP, or unemployment benefit, the compensation I receive is exactly nothing. Nil, zilch, zero, nada, diddly-squat… And you have the gall to refer to this as “real wealth transfer … from people earning average o[r] better wages to others”.
—————–
You are correct, I over-simplified that bit. Please amend that clause to “from people who have to pay the higher prices without any or sufficient compensation to those who have been fully or over-compensated”.
In general, though, you and I are on the same page in that the tax just increased costs for no real benefit, harming some and benefiting others.
Regards
Alex
What a political con job. The captive consumers pay the tax as the cost is passed along. Obama never really gave up on this approach but his party ran away in shock from the grassroots outrage.
Tasmania – subsidised by everybody else, highest jobless in Australia, economy that make Haiti look good! The greens just love it – the rest of us are sick of it!
Governments hate profit. But until they outlaw it, companies will always game the system to the disadvantage of the government and or people.