Inverted J Curve – Gas, and RET recommendation predictions

Time to make predictions: Gas prices will rise through an ‘inverted J curve’ response and world political pressures – antidote – devalue our Dollar. The outcome of the Australian Renewable Energy Target Review will recommend ‘constraint payments’ to be paid to renewable sources such as wind farms.

Gas prices will rise very soon, but not because of domestic pressure, but more because we will ‘promise’ it to be exported. Japan says thank you, as will others. This prediction is not new and it may have been part of the detail not yet released to the public over our new trade agreement. But the actual more recent driver is energy security concerns because of the Russian threats to gas supplies.

The evidence comes from Russia itself and the letter released by the Kremlin says that ‘if Ukraine does not settle its energy bill, Gazprom will be “compelled” to switch over to advance payment, and if those payments are not made, it “will completely or partially cease gas deliveries”. Mr Putin added that Russia was “prepared to participate in the effort to stabilise and restore Ukraine’s economy” but only on “equal terms” with the EU”.

Why is that so scary? Nearly one-third of the EU’s natural gas comes from Russia.

Co2Land org previously said we tend to borrow policy from overseas and then rebadge as a new idea here. Our Eastern seaboard National Electricity Market is a prime example. It should follow then what is happening in the UK will happen here (albeit the gas supply market is their greater influence and here we have the coal supply as the influence).

You might note that also recently posted by CO2Land org was that our Conservative brigade finds it ‘unpopular’ for wind farms to be ‘forced’ onto local rural communities. They will find it reassuring that the UK are it is “Long unpopular among some Conservative MPs from rural constituencies, onshore wind turbines appear to have incurred the wrath of the Prime Minister as well”. We do not have to be a guru to work out that this tactic will be mimicked in Australia, anytime soon.

There is the pointer to this likely development? Plans to restrict wind farms to seas around Britain will need much larger subsidies from consumers, experts say.

Newspaper reports suggest that the Conservative Party will include a pledge to limit onshore turbines in next year’s election manifesto.

But a member of a working group reviewing UK wind energy said this would require increased subsidies of around £300,000 per turbine per year.

Prof Richard Green said this would have a knock-on effect on electricity bills.

The dilemma for our politics is, just as they in UK promised the next few years will be difficult for the better good – they limit subsidies and toughen planning laws to make wind farms unviable in the countryside. The issue will be that to do so will make alternative energy more expensive to build and run. Why? As the UK report points out that “onshore wind energy is more expensive than electricity from coal or gas, but wind is one of the cheapest sources of low carbon power”. It is going to be very difficult to eliminate a energy source with a low carbon benefit! Forget arguments about Carbon Price (Carbon Tax sometimes called for emotive responses), this is about the need to respond to business pressures for them to be competitive, and like it or not gas prices are going up and wind is looking good in terms of low carbon benefit. Add to that the energy storage capability being developed and game set and match.

In the mean time (interim) constraints being put on renewable generation may well include payments to not participate in the market. This would allow traditional coal fired generators to at least run until the end of their economic life.

Is this fair? Glass half full or half empty – depends on your view.

 

 

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