The Commonwealth government called last week for AGL Energy to consider selling its Liddell power station to rival Alinta.
Federal Energy Minister Josh Frydenberg has raised concerns that the scheduled 2022 shutdown of Liddell will affect New South Wales’ energy reliability. It’s suggested the sale would provide a way to keep the ageing power station open past the end of its normal 50-year operating life.
However, AGL responded to government concerns in December 2017 by releasing a replacement plan. Liddell’s theoretical maximum output is 1,800 megawatts (MW), but the firm capacity – the power that can be relied upon at peak time – is 1,000 MW. AGL is confident this can be replaced by a mix of improved efficiency, renewables and demand response.
AGL’s proposal unpacked
Late last year, in response to the Commonwealth government’s pressure, AGL updated its Liddell replacement plan. The updated plan includes generator efficiency upgrades, new natural gas and renewable energy generation capacity, and demand response.
This plan builds on the planned 2022 closure of the Liddell station. Phased investments in new, low-emissions generation and upgrades to existing generation will replace the 1,000 MW of coal-fired power by:
increasing the capacity of AGL’s nearby Bayswater coal-fired power station by 100MW
installing 750MW of high-efficiency gas power (at potential sites in Newcastle and/or elsewhere in NSW)
adding 1,600MW of new renewable generation capacity (wind and solar farms)
providing 100MW of firm capacity from demand response and 250MW from battery storage.
The replacement portfolio is split into three stages. The first aims for 550MW of new generation: 300MW from two solar power plants, to be built by third-party developers, and 250MW from a new gas peaking power station located at Newcastle (or other suitable sites in NSW).
Further, AGL has already approved 650MW of wind projects. The Bayswater efficiency upgrade will add 100MW to the capacity without burning any additional coal.
This, along with the 20MW of demand response, will provide the “firm capacity” required to meet existing customer needs, in line with the federal National Energy Guarantee. The “firm capacity factor” is the proportion of the installed capacity (the theoretical maximum) that can be relied upon to be available at peak time.
The next two stages will progressively add new capacity from renewables, battery storage and demand response to meet the energy needs of AGL’s potential uncontracted customers. Stage 2 and Stage 3 feasibility is expected to start by 2020 and 2021 respectively, for a 2022 delivery.
AGL’s Liddell replacement plan is designed to provide an equivalent amount of energy and dispatchable power at a similar level of reliability.
The plan’s total investment of A$1.36 billion is more than the A$920 million estimate of the 2027 Liddell extension plan, but once operating and fuel costs are included the average cost of replacement generation is more affordable at A$83 per megawatt hour (MWh), compared with extending the life of Liddell at A$106 per MWh.
Though the replacement plan has an installed capacity of 2,900MW, it accounts for a firm capacity of 1,000MW.
The Australian Energy Market Operator has endorsed AGL’s Liddell replacement plan. It said the plan provides more than enough energy and capacity to meet the potential shortfall created by the closure if AGL completes all three stages by the 2022 deadline.
Some of this plan is already under way, as the AGL board has approved the upgrades at Bayswater and Liddell and the new solar and wind power plants. However, the next two stages are dependent on market signals and investments other companies make in new resources.
If stages 2 and 3 of AGL’s plan are not undertaken in time and other market players do not invest, there could be a reliability gap that results in supply interruptions. While this is unlikely to occur, this is exactly the type of problem that the government’s National Energy Guarantee is supposed to fix. The guarantee envisions that retailers carry the responsibility of meeting the required amount for dispatchable energy. Failure to do so would invite financial penalties, with the energy market operator stepping in as the procurer of last resort.
However, AGL has proposed an adequate plan to meet the gap that the Liddell closure would create. It’s ultimately improbable that regulator intervention will be needed.
That said, AGL’s plan is not necessarily the best plan. There are other lower-emission options that are more cost-effective.
A study by the Institute for Sustainable Futures (which I have contributed to) proposes a third “clean energy package”, including renewable energy, energy efficiency, energy storage, demand response and flexible pricing. Rather than selling Liddell, if the Commonwealth is looking for low-cost and reliable solutions, this is the approach it should be pursuing.
Malcolm Turnbull is now connected to the National Broadband Network (NBN) at his Point Piper home on a 100 megabits per second (Mbps) plan, it was revealed in Senate Estimates yesterday. But only because his department intervened to avoid delays affecting other customers.
And while the Prime Minister might be happy with his NBN connection, that’s not the case for the 2.5 million customers waiting on a connection through their pay TV or cable service who have been left in limbo.
Rather than meeting its objective of connecting 90% of homes and workplaces with broadband speeds of up to 100 Mbps, the NBN is looking more like a giant sponge. It soaks up public infrastructure dollars and returns high prices, long delays, unacceptably slow data speeds and service standards that are now the subject of an ACCC investigation.
As a result, a growing number of competitors are bypassing the NBN by undercutting prices and beating performance standards.
The latest challenge to the NBN came after South Australian Premier Jay Weatherill denounced the “very poor NBN outcome” and last week announced A$35 million in funding for an Adelaide fibre network alternative if he is reelected in March 2018.
The plan was warmly welcomed by Mighty Kingdom, an app and games developer who told the ABC, “I don’t have what I need to get me to the rest of the world.”
This follows news announced last year that Adelaide City Council is working with TPG to deliver an NBN-alternative broadband service to local businesses. The service promises fibre internet up to 100 times faster than the NBN, at lower prices, and with no installation costs for city businesses or organisations.
Another telco start-up, DGtek is offering its customers a full fibre alternative service.
Upon its launch in 2016, DGtek’s founder David Klizhov said:
“Ideally the NBN would have worked if it was fibre to the home, but it’s taken quite a lot of time and we thought that we could have a go at the Australian market using technology that’s been implemented already overseas.”
DGtek uses Gigabit Passive Optical Networks (GPON) and runs it directly into tightly packed homes with the dense population of inner Melbourne. As a sweetener, DGtek offers free internet service to government organisations – such as schools and hospitals – in areas they service.
The threat from 5G and other new technologies
New entrant competition is not the only threat to NBN Co. Optus and Telstra are both launching 5G services in 2019. This represents a quantum leap in wireless technology that could win away millions of current and potential NBN customers.
While Vodafone CEO Inaki Berroeta has said that 5G is unlikely to replace the NBN in Australian homes, Optus Managing Director of Networks Dennis Wong recently told BIT Magazine:
Everyone has heard of concepts like self-driving cars, smart homes, AI and virtual reality, however their full potential will require a fast and reliable network to deliver. Seeing 5G data speeds through our trial that are up to 15 times faster than current technologies allows us to show the potential of this transformative technology to support a new eco-system of connected devices in the home, the office, the paddock and in the wider community.
According to iiNet, it is made up of fibre and copper and provides a faster connection than ADSL and most NBN plans. The network is independent from Telstra and differs to NBN in that iiNet’s VDSL2 network uses its own copper lines.
Levelling the field for smaller players
The huge capital requirements of rolling out telecoms infrastructure has always acted to deter more competition in the Australian market. But following a regulatory decision of the ACCC in 2017, smaller entrants can now enjoy cost-based access to some of the largest networks – including Telstra, TPG and Opticom – allowing them to better compete both with the big telcos, and with the NBN.
By providing access to superfast broadband access service (SBAS) and the local bitstream access service (LBAS), new entrants will be able to sell NBN-like fixed line superfast broadband wholesale.
So where to for the NBN?
Yesterday the government released a working paper forecasting that demand for bandwidth will double for households with high internet usage over the next decade. The report also suggests that the NBN is equipped to meet those needs.
However, cost, technology and customer service problems continue to threaten the commercial success of the NBN. Without a radical rethink, it is doomed to fail its initial mission.
The Conversation fact-checks claims made on Q&A, broadcast Mondays on the ABC at 9.35pm. Thank you to everyone who sent us quotes for checking via Twitter using hashtags #FactCheck and #QandA, on Facebook or by email.
Q&A AUDIENCE MEMBER: Hi. Renewable energy is more carbon-efficient, and now cheaper, than coal and other fossil fuels …
MATT CANAVAN: Thanks, James. Look, I don’t accept that renewables are, at the moment, cheaper than coal.
– Excerpt from a question posed by Q&A audience member James Newbold to then-Resources Minister Senator Matt Canavan on Q&A, July 17, 2017.
One of the biggest debates underway in Australia (and around the world) is about electricity, and how it should be generated. One of the major pressure points is prices.
During an episode of Q&A, audience member James Newbold said renewable energy is “now cheaper than coal and other fossil fuels”. Senator Matt Canavan (then-Resources Minister) disagreed, saying: “I don’t accept that renewables are, at the moment, cheaper than coal.”
The Conversation contacted Matt Canavan’s spokesperson for sources to support his statement but did not hear back before deadline. Nonetheless, we can test his statement against publicly available data.
What do the data show?
Based on the electricity generated now by old coal-fired power stations with sunk costs (meaning money that has already been spent and cannot be recovered), Matt Canavan was right to say: “I don’t accept that renewables are, at the moment, cheaper than coal.”
In 2017, the marginal cost of generating power from an already existing coal station is less than $40/MWh, while wind power is $60-70/MWh (explained below). So why do peoplesay renewables are now cheaper than coal?
Well, they’re often talking about what would be the cheaper option if old coal-fired power stations were replaced today – in other words, the new-build price.
Making the distinction between the cost of existing energy generation, and the cost of new-build energy generation in this debate is very important. Comparing the two is like comparing apples and oranges.
Current prices are based on existing installations, while new-build prices compare the costs of different technologies if their operating lives started today. This matters because Australia’s existing coal-fired power stations are ageing and will need to be replaced.
Comparing new-build prices is more complicated than comparing current costs, as I’ll discuss later in this FactCheck.
How do we measure the cost of electrical power?
Let’s cover the basic terminology first.
Electrical energy is measured in kilowatt-hours – the units generally used for metering and charging residential electricity use. One kilowatt-hour represents the amount of energy a device that draws one kilowatt of power (like a household heater, for example) would use in one hour.
A megawatt-hour is 1,000 times larger, and it’s what we typically use to measure large electricity loads or generators. So when we’re comparing the cost of electrical energy generated by different sources, we’ll be talking about Australian dollars per megawatt-hour ($/MWh).
Comparing prices for different sources of electricity
There are a few things we need to take into account when we’re calculating the cost of electricity created by different technologies.
First, we need to factor in how much it costs to establish the source in the first place – whether that’s a coal-fired power station, a wind farm or a hydro-power plant. Then we need to factor in how much it costs to operate, fuel and maintain that facility over its lifetime.
These factors and the cost of capital (like the interest rate) are commonly combined into a metric called the “levelised cost of electricity” (or the LCOE). This provides a measure of the total cost in current dollars per unit of electrical energy generated ($/MWh) over the lifetime of the facility.
We also need to know the time frame in question. A coal-fired power station that’s nearing the end of its operating life may have recovered its original capital investment. So the marginal cost of coal-fired electricity may be low, compared to the levelised cost of a new wind farm that’s yet to recoup its initial capital cost.
Using the levelised costs of electricity created by different technologies does always not provide a perfect comparison. Comparing such different technologies will never be comparing apples with apples. But it’s the best measure we’ve got for a simple “plug-and-play” replacement of a single generating source.
A similar price was struck in March 2016 when the Australian Capital Territory government conducted its second “wind auction”. The government uses wind auctions to buy contracts for future energy supplies. The lowest price in the 2016 auction yielded around $60/MWh in current prices. This figure is based on a flat rate of $77/MWh for 20 years and assuming around 3% inflation, which is the upper end of Australia’s inflation rate target of 2-3%.
Combining the total price range for that auction with this inflation range gives around $60-$70/MWh in current prices, with wind farms currently operating in that adjusted range.
So, based on the marginal cost of energy generated by existing coal-fired power stations with sunk costs, Canavan is correct in saying that renewables are not “at the moment, cheaper than coal”.
However, the story is different if we are talking about new-build electricity prices. And this is often where conversations and debates become confused.
Why new-build electricity prices matter
Coal-fired power stations in Australia have operating lives of around 50 years. As can be seen from the table below, nine of Australia’s 12 biggest operating coal-fired power stations are more than 30 years old.
In preparation for the retirement of those older coal-fired stations, policymakers, energy companies and other investors are debating whether to replace them with new coal-fired power stations, or other types of energy generation. This is where the comparison of new-build costs comes into play.
FactChecks rely on data from events that have already occurred. So we can’t say with factual certainty whether or not renewables would be cheaper than coal as a new-build energy source, because no coal-fired power stations have been built recently.
But we do have recent prices for the cheapest form of new-build renewable energy, which is newly-installed wind power.
And we do have recent levelised price projections for the cheapest new-build fossil fuel energy, which is supercritical coal power.
These projections for new supercritical coal power are higher than the recent prices for newly-installed wind power (outlined earlier in the FactCheck) at around $60-70/MWh in current prices over the 20-year contract period (which is similar to a levelised cost).
So, if we look at recent wind power prices and recent price projections for new supercritical coal power, it’s reasonable to say that – as things stand today – wind power would be the cheaper new-build source of electricity.
There are important additional factors that need to be taken into account when considering the costs of new-build coal-fired electricity and new-build renewable electricity as we look further into the future. Three of the main considerations are:
upgrades to the energy grid (including energy storage) to balance the use of intermittent renewables, especially once renewable energy exceeds around 50% of all energy supply (this would increase the price of renewables)
improvements in technology (this is expected to reduce the price of renewables more so than coal).
It is possible to make educated assumptions about how these factors would affect prices in the future. But I won’t include those projections in this FactCheck, for two reasons:
firstly, we are yet to see the outcomes, and
secondly, the Q&A audience member and Canavan were discussing prices as they are “now” and “at the moment”.
So that’s what I’ve addressed in this FactCheck.
Based on the electricity generated now by old coal-fired power stations with sunk costs, Matt Canavan was right to say: “I don’t accept that renewables are, at the moment, cheaper than coal”. In 2017, the marginal cost of generating power from an already existing coal station is less than $40/MWh, while wind power is $60-70/MWh.
The Q&A audience member may have been talking about new-build prices.
Based on recent prices for newly-installed wind power of around $60-70/MWh, and recent price projections for new supercritical coal power at around $75/MWh, it is reasonable to say that – as things stand today – wind power would be cheaper than coal as a new-build source of electricity. – Ken Baldwin
The author has provided a sound FactCheck that covers a lot of the complexities around a challenging issue. I would add one remark which doesn’t detract from the author’s verdict.
The cost of new-build coal is likely to be higher than reported in the FactCheck.
The author was correct to point out that the introduction of a price on carbon emissions would increase the cost of new-build coal-fired electricity.
The mere possibility of the introduction of a price on carbon or carbon regulation in the future actually affects the costs of new-build coal-fired electricity today. The risk of increased costs or regulation for emission intensive generators manifests itself as a higher “risk premium” applied to current financing costs. The overall effect is a higher weighted average cost of capital (basically, a higher average interest rate) for emission intensive generation.
In the Finkel review, the weighted average cost of capital for coal is projected to be 14.9%, compared to 7.1% for renewables. Risk adjusted financing costs would result in the levelised cost of new coal being higher than the figures presented in the FactCheck. – Dylan McConnell
The cost of electricity produced from a new wind farm is competitive with the best estimates for the cost of electricity produced from a new coal station, and cheaper than the cost of new coal quoted in very reputable analyses (CO2CRC 2015 and CSIRO 2017).
As noted by the author, the comparison in this FactCheck does not include the cost of intermittency for renewables. Recognising that no technology runs 100% of the time, there is a backup cost to be added to wind to make it as firm (or stable) as a fuel-based plant. Available costs for such backup, such as large scale battery or pumped storage, are based on estimates and are the subject of much current study.
New wind with backup could very well be very competitive with new coal, particularly if the cost of emissions is recognised. However, at present, the contention either way is unproven. – Tony Wood
The Conversation’s FactCheck unit is the first fact-checking team in Australia and one of the first worldwide to be accredited by the International Fact-Checking Network, an alliance of fact-checkers hosted at the Poynter Institute in the US. Read more here.
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Wayne Zschech, the Australian-born pastor of Calvary Chapel Kaharlyk, just south of Kiev in Ukraine with a population 15,000, says he will never forget the events that took place in the early hours of Wednesday, October 14th, when attackers smashed a window at the church building, where he and his family live, and threw a Molotov cocktail (petrol bomb) into the building, reports Dan Wooding, founder of ASSIST Ministries.
In an interview he gave me during my recent visit to Kiev, he re-lived the horrifying turn of events that could have caused the deaths of himself and his family as they slept.
“It all started when my wife Olya woke up in the morning to feed the newborn baby and she said she could smell smoke,” said Wayne. “We actually live in the church building and that night, there were six of us (including his mother-in-law) who were sleeping. We had actually sent the kids to school at eight o’clock in the morning and my wife said again that she could ‘really smell smoke.’ So we looked out the back window and there was smoke billowing out of the back of the church.
“Suddenly, it was all hands on deck. I called the fire brigade and then started finding where the fire was coming from. We originally thought that it was an electrical short because it’s an old building. I began opening up all the doors – because I didn’t want the fire brigade knocking them down – and looking in the basement trying to find where the fire was coming from.
“I kept going down into the basement and when I came up for air on the third or fourth occasion, I just happened to walk around the side of the building and suddenly the whole situation became clear. Someone had thrown a Molotov cocktail through the side of the building into our children’s ministry room and had also left spray painted markings on the side of the building saying, ‘Get out of here, you sectarians.’ So suddenly it put a big a whole new spin on the situation.”
I asked Wayne if he had ever experienced trouble before and he replied, “Not directly. We’ve had a couple of youths smashing windows and so we had to put security screens on our apartment, but nothing like this. There was no warning.”
Sitting next to Pastor Zschech was his assistant pastor, American-born Micah Claycamp, who is married with four children, who then described what he saw when he arrived at the church that morning.
“I had come to the church to do a language lesson and, as I walked in, I saw a big hose running from the back of the church into the room that had been firebombed and I could smell smoke,” he said. “They had just finished cleaning everything up and I went around to the side of the building and saw what had been spray painted and started talking to Wayne who had got the situation figured out and he told me what exactly had happened.
“This was the first big thing we’ve seen in our town. It is pretty quiet for the most part. I don’t feel threatened living there but this obviously is a situation that is a lot different and when you walk into something like this it makes you appreciate the things that you see God do, the unseen things. It makes you realize how much God protects our lives in ways you don’t see every day. So it just makes you more appreciative of His protection.”
I then asked Wayne how an Australian from Brisbane whose family hailed from the Prussian part of Germany finished up in a small town in Ukraine.
“Well, to be perfectly honest, I think God played a trick on me,” he smiled. “I graduated from school and wanted to get into the Royal Australian Air Force (RAAF) and when I applied for the Australian Defence Force Academy I got the chickenpox and so they didn’t let me in that year, even though my academic achievements were fine.
“So I quickly did a deal with God and said, ‘I’ll give you a year of my life’ and the next thing I knew three months later I was in Ukraine and started a Bible-based English schooling programs in communist government schools where kids were learning about Jesus. I was just seventeen years old at the time and began travelling all over the country and I’ve been here ever since. That is some sixteen and a half years now.”
Had he seen big changes in the country?
“Yes, many changes,” he said. “We’ve had currency changes and also seen mindset changes. We see economic things going on and we’ve learned a lot of things. But along the way, I found a beautiful Ukrainian girl and we have a wonderful marriage and we have three Ukrainian kids.”
Wayne then spoke about how he got involved in this Calvary Chapel.
“Well, I got tricked also into becoming the pastor of this church in what was then a village,” he said. “The founding pastor who moved with me from Kiev to Kaharlyk went back home to Australia to do his deputation work and a couple months later, he wrote me an email saying that he was ‘not returning to be the pastor of the church.’ He added, ‘So congratulations. You’re the pastor.’ So not only did I become a missionary by hook or by crook but also became a pastor and I’m thrilled.
“I never wanted to be those things but God has turned things around totally and I’m absolutely content and happy and it’s a very exciting life to see what God is doing despite the fact that humans would have had other choices.”
I then asked Wayne what Kaharlyk was like when he first arrived.
“We are about 80 kilometers (nearly 50 miles) south of Kiev and it was a town that had been in economic ruin as most of the country had been after the collapse of the Soviet Union,” he said. “Unemployment was rife. There were no jobs, no income and there was lots of mental and cultural baggage as the country was trying to reacclimatize to the real world situation.
“Now some 12 years later, we’re basically on the outskirts of Kiev although obviously the town hasn’t moved geographically. But it’s a thriving little town. It hasn’t grown numerically that much but you can definitely see there are changes. There are people moving out of Kiev to come and live in our town. That was never in our plan and we’re also seeing bits of investment coming in and things like that show what was once basically dead is now starting to show signs of life.”
I then asked him to describe the types of people who attended his church.
“We’re a young church and we’re different from the mainstream Orthodox and older style Baptist churches,” Wayne explained. “But the truth is that we are reaching out to orphans, to the elderly and we have a beautiful mix of all those generations in between. When you see a grandmother coming with her son and her grandson to church, you see the wholesomeness that the Gospel brings when God enters a family’s life.
“Back in the early days everyone was warned about people like us saying that these are the people ‘you’ve been warned about for all those years’ and that ‘they’ve come here to hypnotize you and take all your money.’ But that was more then based out of ignorance.
“We had an Orthodox priest back then and we had some very serious chats with him and he said, ‘Look publicly, I have to hold the government line or the Orthodox line, but personally I see that you’re a brother in Christ. So that was good. I wouldn’t call that major persecution, but I can understand the fear from their side.”
He then spoke about a unique business he has begun in the town.
“We decided that we had to become producers so people can put bread on the table and we have to show how God is in everything,” said Wayne. “So we have started a little mushroom-growing enterprise and now we’re making biodiesel. We actually collect oil from a number of restaurants, including McDonald’s Ukraine, and we make biodiesel and sell it and save money for the church and make money for the church and employ people and reinvest into the local town.”
Micah then said that he runs his car on biodiesel which he says smells like “fried chicken.”
“I can run it and I haven’t had any problems at all,” he said. “It’s also cheaper and I’ve put advertisements on the van to let people know the phone numbers so that people know what’s going on.”
It was Micah that picked me up at the Kiev (Borispol) Airport and drove me to my hotel and I have to confess that I didn’t catch a whiff of fried chicken from the exhaust of the van, though I did have a bad cold at the time.
I concluded by returning to the topic of the firebombing and asked Wayne if he had further thoughts about it.
“As soon as we discovered that it was intentional, you can just imagine the situation in your mind with totally charged different emotions,” he said. “We were targeted from the side of the building so that everyone in the town walking past it could see the damage and the spray painting.
“It was basically a political statement in that respect. The fact that the family was asleep in the building when it happened my mother in-law was staying at the time and she said that she heard some banging around at five o’clock in the morning and we looked at the fire damage and we see that it was a real a miracle. There was a fire but the damage was minimal. It should have been so much worse. What turned out to be a couple thousand dollars worth of damage when we could have lost the whole room.
“If they, for some, reason had chosen another window to throw it in, just the next window, the floor boards are totally bear there we don’t have thick linoleum on them, so the fire would have spread immediately. There’s a big air gap right under those boards and it runs right to our family’s bedrooms.”
I concluded by asking Wayne what his prayer needs were at this time.
“That Christ would be glorified to the maximum through this and the next circumstances and that He would save people and that the Christian body locally and throughout the world would pray harder to understanding the privileges that we have in our situations and that God can change them any time that He wants.”
Micah then added his prayer request: “That our church would grow together in this as they would see that God allows these things to happen to strengthen the body, to cause our eyes to be back upon Him and that for His glory to be done and bring more people to Christ.”
By the way if the name Zschech rings a bell with you, he is related to Darlene Zschech, who is perhaps most famous for the chorus "Shout to the Lord," a song that is sung by an estimated 25 to 30 million churchgoers every week, who has married in the Zschech family. “I was a Zschech first,” laughed Wayne.