The government has formally reopened the highly contentious debate on nuclear power by referring the issue to a parliamentary committee, with it to report by the end of the year.
Energy Minister Angus Taylor has asked the House of Representatives standing committee on the environment and energy to inquire into the nuclear fuel cycle – the first inquiry into the use of nuclear power in more than a decade.
It will consider the economic, environmental and safety questions involved in nuclear power.
The government’s present policy is a moratorium on nuclear power, and Taylor reiterated that.
Labor immediately attacked the move for an inquiry, which follows some backbench stirring in Coalition ranks, including from Nationals Barnaby Joyce and Keith Pitt and Liberal senator James McGrath. Pitt told parliament last month: “No one is suggesting that we build nuclear reactors tomorrow – but we need to be able to look at technologies as they change.”
Tony Wood, energy program director at the Grattan Institute, said an inquiry made sense, in terms of keeping longer term options open.
Wood said Australia’s transition to a zero emissions energy system was most likely to be dominated by solar and wind power supported by gas, pumped hydro and battery storage.
“Today’s nuclear technology is expensive and comes in one size – XXL,” he said.
“Yet there is a circumstance in which things could change. If the cost and reliability in a very high renewables world become problematic AND there is significant progress towards commercially viable small scale nuclear reactors, they might be a serious possibility.
“It therefore makes sense for Australian governments to understand and track these developments if only to keep the option open,” Wood said.
In the terms of reference for the inquiry, Taylor asks for it to “report on the circumstances and prerequisites necessary for any future government’s consideration of nuclear energy generation including small modular reactor technologies in Australia.”
It should cover health and safety, environmental impacts, energy affordability and reliability, economic feasibility, community engagement, workforce capability, security implications, and national consensus.
“The Australian government supports an energy system which delivers affordable and reliable energy to consumers while fulfilling Australia’s international emissions reduction obligations,” Taylor said.
“Successive Labor and Coalition governments have maintained a bipartisan moratorium on nuclear electricity generation in Australia. Australia’s bipartisan moratorium on nuclear energy will remain in place.
“Australia’s energy systems are changing with new technologies, changing consumer demand patterns and changes in demand load from major industries. At the same time the National Electricity Market is seeing a significant increase in capacity in intermittent low emissions generation technologies.”
Shadow energy minister Mark Butler said Taylor’s action showed “the extreme right of the Liberal Party is still dictating the government’s energy policy.”
Butler said nuclear energy was up to three times more expensive than renewables, while “posing significant health and environmental risks”.
“It is dangerous, expensive and consumes vast amounts of precious water at a time Australia faces increased water security threats,” Butler said.
He also raised the political spectre of the siting of power plants.
“If the Prime Minister is open to using nuclear energy, would he be prepared to have a nuclear power plant built in the Sutherland Shire, in his own electorate?
“Research by the Parliamentary Library and the Australian Nuclear Energy Association has confirmed there are dozens of sites around the nation where nuclear power plants could be constructed, including in or near all major coastal cities across Australia,” Butler said.
Last week the body that governs Australia’s energy market released a draft proposal to introduce a demand response mechanism to the wholesale electricity market.
It argues the proposal will unearth some electricity users’ “latent flexibility” to prices in the extremely volatile wholesale market, and that this will potentially promote more efficient use of electricity, more secure power systems, and lower prices.
The move comes after nearly two decades of sustained campaigning, which prompts the question: why doesn’t such a useful-sounding mechanism already exist?
It’s a good question. If this demand-response mechanism does what it is claimed to do, it could be a significant development for the electricity markets in southern and eastern Australia. But the actual proposal is eye-wateringly complex and there is reason to be circumspect.
What is proposed and how does it work?
The Australian Energy Market Commission’s determination is that new market participants, to be known as “Demand Response Service Providers” (DRSPs), will be allowed to offer hypothetical demand reductions into the wholesale market at prices they determine. If the price they offer for such reductions is less than the price at which the market clears, the DRSPs will be paid the market price, as if they were a generator, for these hypothetical reductions.
One obvious difficulty here is the fact that the reductions are hypothetical. They are the difference between the customers’ demand if they did not respond to an enticement to reduce demand – the “baseline” – and their actual demand. Customers (and DRSPs) have an incentive to overstate the baseline, as this increases the volume of the reductions they offer and, if accepted, get paid for.
DRSPs profit from the demand reductions they sell, and so they have an incentive to seek out customers who are willing to reduce demand relative to the baseline.
Retailers that sell electricity to DRSPs’ customers will buy (from the wholesale market) the actual volume of electricity consumed and also the hypothetical demand reduction, and pay the wholesale price for both. The retailer charges the customer for the actual demand and charges the DRSP for the demand reduction at a regulated price equal to the 12-month load-weighted average wholesale price.
This will typically leave the retailer out of pocket by an amount equal to the difference between the actual wholesale price at which they have “bought” the demand reductions, and the 12 monthly weighted average wholesale price (which will almost certainly be lower, because demand reductions will occur when wholesale prices are higher than average)
Retailers will seek to recover the shortfall from the DRSPs’ customers or, more likely, from all their customers. To the extent that they are unable to recover the shortfall, retailers are likely to try to offload those of their customers that are paid to reduce demand.
This is a simplified description of the arrangement. The complexity of the actual data and money flows between customers, DRSPs, retailers, the energy market operator, network service providers and regulators is enough to provoke a nose-bleed from the most seasoned corporate lawyers.
By now, I am sure you are wondering why all the bother with baselines and hypothetical reductions. Why not simply pay customers for actual load reductions? The answer, in short, is that the pool of possible directly contracted customers is small.
If demand response is to be extended to thousands of customers – as this proposal seeks to do – setting baselines and hence hypothetical demand reductions, with all their unwelcome consequences, is unavoidable.
Will it work?
I am not sure. It is certainly punishingly complex. The energy market operator and regulator will have their hands full ensuring that baselines are not set at a level that prints money for DRSPs and their customers, at the expense of retailers and other electricity users. If the market operator and regulator achieve this without imposing undue cost and administrative burden, this demand-response proposal has promise.
It will be fascinating to see whether DRSPs can indeed flush out the “latent flexibility” in a manner that is advantageous to themselves, the latently flexible, and the rest of us. Like many others, I will be watching with interest.
Update: Following publication, the AEMC clarified they intended to refer to the 12 month load-weighted average wholesale price of energy, rather than the simple average price. The article has been updated to reflect this.
During the conference The Conversation is publishing a selection of articles by the authors of papers being delivered at the conference. Others are here.
Wholesale prices in the National Electricity Market have climbed significantly in recent years. The increase has coincided with a rapid increase in the proportion of electricity supplied by wind and solar generators.
But that needn’t mean the increase in wind and solar generation caused the increase in prices. It might have been caused by other things.
Colleagues Songze Qu and Tihomir Ancev from the University of Sydney and I have examined the contribution of each type of generator to wholesale prices, half hour by half hour over the eight years between November 1, 2010 and June 30, 2018.
We find that, rather than pushing prices up, each extra gigawatt of dispatched wind generation cuts the wholesale electricity price by about A$11 per megawatt hour at the time of generation, while each extra gigawatt of utility-scale solar cuts it A$14 per megawatt hour.
Merit order matters
In Australia’s National Electricity Market, prices are determined at five-minute intervals and averaged over 30-minute intervals for settlement. Generators place bids for supplying electricity to meet the expected demand which are accepted in a “merit order” of cheapest to most expensive.
The final price – awarded to all the bidders accepted – is determined by the final and most expensive bid accepted, which is often a bid by a gas generator.
Wind and utility-scale solar generators bid into the market at low cost because their power is essentially free when the wind is blowing or the sun is shining. They displace higher cost bids, usually from gas or diesel turbines that have high fuel costs. We find this effect on prices (known as the “merit order effect”) has grown as wind and solar generation has grown.
The daily impact of wind and solar on wholesale prices is somewhat lower. A 1 gigawatt per hour increase in daily wind generation
is associated with about a A$1 per megawatt hour decrease in
the average daily wholesale price. The same increase in solar generation is associated with A$2.7 per megawatt hour decrease in daily wholesale electricity prices.
These findings and those of others since 2003 challenge the previous conventional wisdom that mandating renewable generation necessarily increases prices.
So why are prices climbing?
Natural gas prices have been climbing dramatically over the recent years, mainly due to the opening up of east coast export capacity and the integration of the Australian market with international markets. The higher prices have made it more expensive to run gas turbines and have pushed up the price of what is often the last bid to be accepted.
We find the price of natural gas has a strong positive effect on wholesale electricity prices. An increase of A$1 per gigajoule in the natural gas price pushes up wholesale electricity prices by about A$5 per megawatt hour.
Although in recent years the upward price pressure from more expensive gas has overwhelmed the downward pressure from greater wind and solar capacity, it is nevertheless true that wholesale prices are lower than they would have been without renewable generation.
Therefore, a continued expansion of renewables is likely to put downward pressure on wholesale prices for some time.
There’s a case for moving away from gas peaking plants
This means that rather than reconsidering renewables, authorities should reconsider their reliance on gas plants for handling peaks in demand. While peaking plants are more needed with the increased penetration of renewables, there is a case for switching to alternative providers of peaking power, such as large-scale batteries and pumped hydro.
In doing so governments should also consider something else. Wholesale prices that are too low will discourage investment, leading to higher prices down the track.
The lower prices go, the more the government might need to provide investment incentives.
For now, all other things being equal, more wind and solar power means lower wholesale prices. But they’ll have to be watched.
The New York Times reported earlier this month that the United States was increasing its cyber attacks on Russia’s power grid. The attacks are seen as a warning against Russian intrusions into US systems, but one that carries a risk of escalation.
The public reporting of previously covert cyber attacks earned a retort from US President Donald Trump, who accused the New York Times journalists of a “virtual act of treason”.
But the story has been useful in generating discussion about the reasons for – and potential consequences of – such actions. It also raises the question of how vulnerable Australia’s power grid is.
So let’s take a look at who is capable of carrying out these kinds of attacks, how they work, and whether Australia is doing enough to protect itself.
Recent events may be newly reported, but the events themselves aren’t that new. Russian cyber attacks on US infrastructure may have been going on for years. According to the New York Times report, the US may have been undertaking similar intrusions in Russia since 2012.
While the story is limited to discussing cyber conflict between the US and Russia, there are many nation states with the ability to carry out such attacks.
To make things more complex, non-government actors can also launch cyber attacks. That includes individuals, organised crime groups, and proxies for nation states.
Why are we learning about this now?
When we talk about cyber security, and how to defend against threats from nation states, we’re usually talking about protecting confidential information. But when it comes to power grids, confidentiality isn’t particularly important. What is important is continuity of service, also called “availability”.
An adversary’s power availability would be a high-priority target during a conflict. Outside of conflict, the only logical rationale for a nation state to intrude on such systems would be to undertake reconnaissance and deploy malware that can remain dormant until needed.
In this regard, it doesn’t make sense that the US would intentionally leak its efforts, as appears to have been the case. It would prompt Russia to find the malware and, by disclosing intrusion techniques, it would “burn capabilities”.
Additionally, evidence of attacks could lead to an escalation of cyberwar between the US and Russia. Escalation is unlikely as long as responses to counter cyber attacks are undertaken in line with the principles of necessity and proportionality. But the uncertainty of attribution and consequences creates a potential for miscalculation in conducting cyber attacks.
The New York Times article was notable because it suggested the US president gave his commanders authorisation to undertake cyber attacks without his oversight. To avoid miscalculation, a balance is needed between a speedy response in cyber “active defence” and the kind of proper deliberation that will ensure the response is appropriate.
To date, there is no evidence that nation-state delivered attacks have resulted in power outages in the US or Russia. The apparent leak to the New York Times may not relate to a specific counterattack against the Russian power grid. Instead, it may be a form of diplomacy intended to signal US willingness and capability to counterattack.
Critical infrastructure is a term that refers to chemical production plants, power stations, oil platforms, and water pump stations. The technology that operates such infrastructure is called “operational technology” (OT). OT is a cyber-physical system that controls electricity generators and valves that mix chemicals in vats or transfer gas through pipelines.
To understand the threat, it helps to contrast OT with information technology (IT).
Confidentiality is a primary consideration for IT staff, who are focused on securing data from threats. They are well practised in patching vulnerable systems under their control. In an OT environment, availability is the primary driver, so keeping the plant working is considered more important than protecting against cyber threats.
Another difference between the IT and OT worlds is the lifetime of assets. OT system devices are built to last a long time before replacement. Using legacy OT technology that still works in itself is not a problem, as long as that technology is separated from other systems.
But the IT and OT worlds are converging to enable remote control and access to real-time plant operating data. Aside from the tension between priorities of confidentiality and availability, this convergence opens up OT vulnerabilities to attack.
When OT systems were developed decades ago, there was little thought of security, since most systems were only accessible on-site or through dedicated networks. With IT-OT convergence, keeping systems secure becomes a priority, but not at the expense of availability. Stopping a system, either for an update or due to a cyber attack, results in lost revenue and impact upon customers who could, for instance, lose power to their homes.
Have we seen successful attacks in the past?
Cyber attacks on Ukrainian power stations in 2015 and 2016 affected more than 200,000 customers, and provided lessons for the rest of us.
These events showed that an attack was more than just theoretical in the domain of energy systems. Engineers needed to physically visit each substation to return systems to operation.
As similar technology is used worldwide, the power grids of other nations are potentially vulnerable. Additionally, the malware used to command and control attacks is increasingly available for hire as cyber crime moves to a service-based model. And more sophisticated tools mean attackers require less skill to locate and attack internet connected devices.
In 2016, Australia’s Chief Scientist Alan Finkel released a review into the future security of the national electricity market. Following advice that the cyber threat to the national energy market was increasing, Finkel recommended stronger security measures be put in place.
By 2017, some action had been initiated to mitigate threats in the energy sector. Subsequently the Security of Critical Infrastructure Act 2018 was passed. The Act contains elements to help the government better appreciate the risk and to make certain directions to service providers to increase security.
The government is reportedly considering a proposal to enable the Australian Signals Directorate (ASD) to access the networks of companies operating critical infrastructure to defend them against cyber attacks.
In 2018, the Australian Energy Market Operator (AEMO) released the first annual report into the cyber preparedness of the market, identifying that current provisions are inadequate. AEMO has established a framework for operators to assess their security maturity, and strengthen measures.
Notwithstanding these efforts, recent reports suggest the number of attacks on critical infrastructure is growing. Meanwhile, the ability to prevent, detect or respond to these attacks remains low.
For many critical infrastructure systems, OT is a sunk investment that would be expensive to replace. Implementing substantial security improvements to upgrade the legacy energy environment will also be expensive, and it’s likely that costs will be passed onto customers. But there are cost-effective ways of improving security, including threat/vulnerability system monitoring. Some companies in Australia are doing this.
Cyber warfare is a reality. We should expect that cyber criminals and nation states adversaries could have some impact our lives in future by attacking critical infrastructure, such as the electricity grid.
Securing our infrastructure is a priority for the government and increasingly recognised as such by the market participants. The cost and need for security mitigations may seem unpalatable to many, but steps need to be taken to prevent a return to the dark ages.
New housing in Australia must meet minimum energy performance requirements. We wondered how many buildings exceeded the minimum standard. What our analysis found is that four in five new houses are being built to the minimum standard and a negligible proportion to an optimal performance standard.
There have been calls for these minimum standards to be raised. However, many policymakers and building industry stakeholders believe the market will lift performance beyond minimum standards and so there is no need to raise these.
What did the data show?
We wanted to understand what was happening in the market to see if consumers or regulation were driving the energy performance of new housing. To do this we explored the NatHERS data set of building approvals for new Class 1 housing (detached and row houses) in Australia from May 2016 (when all data sets were integrated by CSIRO and Sustainability Victoria) to December 2018.
Our analysis focuses on new housing in Victoria, South Australia, Western Australia, Tasmania and the ACT, all of which apply the minimum six-star NatHERS requirement. The other states have local variations to the standard, while New South Wales uses the BASIX index to determine the environmental impact of housing.
The chart below shows the performance for 187,320 house ratings. Almost 82% just met the minimum standard (6.0-6.4 star). Another 16% performed just above the minimum standard (6.5-6.9 star).
Only 1.5% were designed to perform at the economically optimal 7.5 stars and beyond. By this we mean a balance between the extra upfront building costs and the savings and benefits from lifetime building performance.
The average rating is 6.2 stars across the states. This has not changed since 2016.
The data analysis shows that, while most housing is built to the minimum standard, the cooler temperate regions (Tasmania, ACT) have more houses above 7.0 stars compared with the warm temperate states.
The ACT increased average performance each year from 6.5 stars in 2016 to 6.9 stars in 2018. This was not seen in any other state or territory.
The ACT is the only region with mandatory disclosure of the energy rating on sale or lease of property. The market can thus value the relative energy efficiency of buildings. Providing this otherwise invisible information may have empowered consumers to demand slightly better performance.
The fact that these improvements aren’t being made suggests there are significant barriers to the market operating efficiently. This is despite increasing awareness among consumers and in the housing industry about the rising cost of energy.
Eight years after the introduction of the six-star NatHERS minimum requirement for new housing in Australia, the results show the market is delivering four out of five houses that just meet this requirement. With only 1.5% designed to 7.5 stars or beyond, regulation rather than the economically optimal energy rating is clearly driving the energy performance of Australian homes.
Increasing the minimum performance standard is the most effective way to improve the energy outcomes.
If we continue to create a legacy of homes with relatively poor energy performance, making the transition to a low-energy and low-carbon economy is likely to get progressively more challenging and expensive. Recent research has calculated that a delay in increasing minimum performance requirements from 2019 to 2022 will result in an estimated A$1.1 billion (to 2050) in avoidable household energy bills. That’s an extra 3 million tonnes of greenhouse gas emissions.
Our research confirms the policy proposition that minimum house energy regulations based on the Nationwide House Energy Rating Scheme are a powerful instrument for delivering better environmental and energy outcomes. While introducing minimum standards has significantly lifted the bottom end of the market, those standards should be reviewed regularly to ensure optimal economic and environmental outcomes.
An Easter weekend in an election campaign might be a bit of a challenge for a pair of leaders who were atheists. But fortunately for Scott Morrison and Bill Shorten, declared believers, it wasn’t a problem.
Both attended church services during the so-called campaign cease-fire that the main parties had proclaimed for two of the four days.
Morrison on Sunday was pictured in full voice with raised arm at his Horizon Pentacostal church in The Shire, where the media were invited in. On Friday he’d been at a Maronite Catholic service in Sydney.
Sunday morning saw Shorten at an Anglican service in Brisbane, his family including mother-in-law Quentin Bryce, former governor-general.
Neither leader was hiding his light under a bushel.
Church, chocolate and penalty rates
Sunday was an opportunity to wheel out the kids, chasing Easter eggs (Shorten) or on the Rock Star ride at Sydney’s Royal Easter Show (Morrison). This was campaigning when you’re not (exactly) campaigning.
The minor players weren’t into the pretend game. For them, the relative restraint on the part of the majors presented rare opportunity. Usually Centre Alliance senator Rex Patrick would have little chance of being the feature interview on the ABC’s Insiders.
But while Friday and Sunday were lay days for the major parties Saturday was not (and Monday won’t be either).
For Labor, Easter has meshed nicely with one of the key planks of its wages policy – restoration of penalty rate cuts by the Fair Work Commission. Even on Sunday, Shorten pointedly thanked “everyone who’s working this weekend”.
It was the start of Labor’s campaign focus turning from health to wages this week, when it will cast the election as a “referendum on wages”.
Turnbull resurrects the NEG
The weekend standout, however, was the intervention of Malcolm Turnbull, who launched a series of pointed tweets about the National Energy Guarantee (NEG).
Turnbull was set off by a reference from journalist David Speers to “Malcolm Turnbull’s NEG”.
“In fact the NEG had the support of the entire Cabinet, including and especially the current PM and Treasurer. It was approved by the Party Room on several occasions”, the former prime minister tweeted.
“It had the support of the business community and energy sector in a way that no previous energy policy had. However a right wing minority in the Party Room refused to accept the majority position and threatened to cross the floor and defeat their own government”.
“That is the only reason it has been abandoned by the Government. The consequence is no integration of energy and climate policy, uncertainty continues to discourage investment with the consequence, as I have often warned, of both higher emissions and higher electricity prices.”
He wasn’t finished.
“And before anyone suggests the previous tweet is some kind of revelation – all of the economic ministers, including myself, @ScottMorrisonMP, @JoshFrydenberg spent months arguing for the NEG on the basis that it would reduce electricity prices and enable us to lower our emissions.”
“I see the @australian has already described the tweets above as attacking the Coalition. That’s rubbish. I am simply stating the truth: the NEG was designed & demonstrated to reduce electricity prices. So dumping it means prices will be higher than if it had been retained. QED”
“The @australian claims I ‘dropped the NEG’. False. When it was clear a number of LNP MPs were going to cross the floor the Cabinet resolved to not present the Bill at that time but maintain the policy as @ScottMorrisonMP, @JoshFrydenberg& I confirmed on 20 August.”
(Frydenberg, incidentally, has lost out every which way on the NEG. As energy minister he tried his hardest to get it up, only to see it fall over. Now he is subject to a big campaign against him in Kooyong on climate change, including from high-profile candidates and GetUp.)
Turnbull might justify the intervention as just reminding people of the history. But it is damaging for the government and an Easter gift for Labor – which is under pressure over how much its ambitious emissions reduction policy would cost the economy. It also feeds into Labor’s constant referencing of the coup against Turnbull.
Turnbull’s Easter tweets are a reminder
the Coalition sacrificed a coherent policy on energy and climate for a hotchpotch with adverse consequences for prices;
it dumped that policy simply because of internal bloodymindedness, and
the now-PM and treasurer were backers of the NEG, which had wide support from business.
Shorten has strengthened his commitment on the NEG, indicating on Saturday he’d pursue it in government even without bipartisan support.
“We’ll use some of the Turnbull, Morrison, Frydenberg architecture, and we will work with that structure,” he said.
Given the hole it has left in the government’s energy policy, pressing Morrison on the economic cost of walking away from the NEG is as legitimate as asking Shorten about the economic impact of his policy.
The shortlist features six renewable electricity pumped hydro projects, five gas projects, and one coal upgrade project, supplemented by A$10 million for a two-year feasibility study for electricity generation in Queensland, possibly including a new coal-fired power station.
The study is unnecessary, because the GenCost 2018 study by CSIRO and the Australian Energy Market Operator already provides recent cost data for new power generation in Australia. It shows that new wind and solar farms can provide the lowest-cost electricity, even when two to six hours’ worth of storage is added.
Hence there is no economic case for new coal-fired power in Australia. After a century of coal, it should not be subsidised any longer.
While Queensland and Victoria have state government policies to drive the rapid growth of large-scale solar and wind, New South Wales does not even have a renewable electricity target. Yet the retirement of large, old coal-fired stations is in the pipeline: Liddell, nominally 1,680 megawatts, in 2022 and Vales Point, nominally 1,320MW, possibly in the late 2020s.
Coal baron Trevor St Baker bought Vales Point from the NSW government for the token sum of A$1 million in 2015. He wants to refurbish it and run it until 2049 – and his plan has made it onto the government’s shortlist.
Given that Vales Point is now arguably a A$730 million asset, St Baker has made a huge windfall profit at the expense of NSW taxpayers, and so a government subsidy to upgrade it would be unjust.
Unfortunately, the newly elected NSW Liberal-National Coalition government has no policies of substance to fill the gap left by retiring coal stations with large-scale renewable electricity. It will therefore be up to the federal government after the May election to provide reverse auctions with contracts-for-difference, matching the policies of the ACT, Victorian and Queensland governments. Also, increased funding to ARENA and the Clean Energy Finance Corporation is needed for dispatchable renewables (those that can supply power on demand) and other forms of storage.
Driving the change
The transition to renewable electricity is already well under way, as even the federal energy minister Angus Taylor admits. The low costs of solar and wind power are driving the change. To maintain reliability, dispatchable renewables (as opposed to variable sources such as solar and wind) and other forms of storage are needed in the technology mix.
Batteries excel at responding rapidly to changes in supply and demand, on timescales of tens of milliseconds to a few hours. But they would be very expensive for covering periods of several days, even at half their current price. So there is a temporary role for open-cycle gas turbines (OCGTs) to meet demand peaks of a few hours, and to fill lows of several days in wind and/or solar supply.
Small-scale pumped hydro, in which excess local renewable electricity does the pumping, has huge potential for storage over periods of several days, but takes longer to plan and build, and has higher capital cost per megawatt, compared with OCGTs.
Small-scale pumped hydro should be the top priority for the federal program. In particular, the off-river proposal by SIMEC Zen Energy, which is part of Sanjeev Gupta’s GFG Alliance, will use a depleted iron ore pit and provide cheap, reliable, low-emission electricity for both GFG’s steelworks at Whyalla and other industrial and commercial users.
Hydro Tasmania’s proposed “Battery of the Nation” would involve building a new interconnector across the Bass Strait, together with possibly three new pumped hydro plants. It’s very expensive and is already receiving A$57 million in federal funding. Its inclusion in the shortlist is worrying because it could soak up all the program’s unspecified funding for pumped hydro.
Furthermore, the need to greatly increase Tasmania’s wind capacity to deal with droughts appears to be an optional extra, rather than an essential part of the project.
Little information is available for the other shortlisted pumped hydro projects. UPC Renewables is proposing a huge solar farm, together with pumped hydro, in the New England region of NSW. In South Australia, Sunset Power (trading as Delta Electricity, chaired by Trevor St Baker), in association with the Altura Group, is proposing an off-river pumped hydro project near Port Augusta, and Rise Renewables is proposing the Baroota pumped hydro project. BE Power Solutions, which does not have a website, is proposing pumped hydro on the Cressbrook Reservoir at Crows Nest, Queensland.
Pumping for Snowy 2.0 (which is not part of the program) will be done mostly by coal power for many years, until renewables dominate supply in NSW and Victoria. Therefore, I give low priority to this huge and expensive scheme.
To sum up, new coal power stations and major upgrades to existing ones are both unnecessary. They are more expensive than wind and solar, even when short-term storage is added – not to mention very polluting.
A few open-cycle gas turbines may be acceptable for temporary peak supply during the transition to 100% renewable electricity. But the priority should be building pumped hydro to back up wind and solar farms. This will keep the grid reliable and stable as we do away with the old and welcome the new.
Scott Morrison’s government is struggling with a fresh crisis,
the combination of a bitter domestic within the Nationals and the
conflicting imperatives of pitching to voters in Australia’s north and south on the highly charged issues of energy and climate change.
Former deputy prime minister Barnaby Joyce on Monday turbocharged his push to regain the Nationals leadership with a media blitz.
Obviously the former Nationals leader would like his positions back
now (despite saying “we’ve got to go to the polls with the team
we’ve got”) but if that’s not possible he’s staking his claim for
after the election.
There was a manic edge to Joyce’s Monday interviews, focused on leadership and championing coal. Explaining why, while he wouldn’t move for a spill, he’d feel no “guilt” about standing if the opportunity came, he described himself as the “elected deputy prime minister of Australia”. That claim was based on occupying the position when the Coalition won the election.
Bizarrely, he also questioned that emissions could be measured. “It is a self-assessment process by the major emitters … And then it’s compiled by the government. So basically, it’s a proposition about a supposition,” he said on the ABC.
Although these days he sounds more over-the-top than ever, Joyce resonates with Queensland Nationals fearing a loss of seats – they have boundless faith in his campaigning power, and are highly critical of the ineffectiveness of party leader Michael McCormack.
One of their key KPIs for McCormack has been that he must successfully pressure Morrison for the government to underwrite coal-fired generation.
But McCormack hasn’t been able to deliver, and that became obvious on Monday, when Morrison indicated the government won’t be nominating a Queensland coal project for underwriting.
“For such a project to proceed, it would require the approval of the Queensland state government,” the Prime Minister said.
“Now, the Queensland state government has no intention of approving
any such projects at all. So I tend to work in the area of the
practical, the things that actually can happen”.
Annastacia Palaszczuk might derive some wry amusement to find the
PM sheltering behind her skirts.
The Queensland rebels are less amused, seeing this as evidence that
McCormack has lost the battle (if he ever joined it) and worrying the Prime Minister is “cutting Queensland adrift to sandbag Victoria”.
Morrison certainly knows that to embrace a coal project would be
counterproductive for the Liberals in Victoria, where a number of
seats are at risk.
But it is not just Victoria, or even just Liberal seats.
A hard-fought state election is underway in NSW, and the Nationals have much at stake.
They have several seats on or near the north coast where concern about climate change would top commitment to coal.
Lismore is a case in point, where the Nationals have their member retiring, and polling is showing a strong Green vote.
The regional vote is seen as crucial to the NSW election outcome,
and it is very volatile.
The destabilisation in the federal party is the last thing the NSW
Nationals need right now. If the state Nationals do badly on March 23, there will be recriminations and that will flow back into the federal backbiting and panic.
How McCormack will go managing his rebellious party in the coming
weeks is problematic.
He displays poor judgement under pressure, as he did on Monday, after Joyce said the Nationals could pursue policies in their own right because “we are not married to the Liberal Party”.
“I understand when you have a marriage that it’s a two-way
relationship,”. McCormack shot back. “You don’t always get what you
want, but you have to work together … That’s what I do with the
The man who lacks “cut through” had cut through, in an unfortunate way, to Joyce’s marital failure.
On Monday night, the row over coal took a new turn, threatening a
dangerous further escalation.
A batch of moderate Liberals, in a co-ordinated effort, waded into the debate, with public comments opposing taxpayer funds being used to build or pay for any new coal-fired power station.
They included Trevor Evans, Jason Falinski, Tim Wilson (who likes to call himself “modern” rather than “moderate”), Trent Zimmerman, Jane Hume – and Dave Sharma, the candidate for Wentworth.
Their comments were made under the cover of supporting the Prime Minister, but they had been wanting to say their piece for quite a while.
Once again, raging energy and climate wars are burning out of control in government ranks.
It is understandable that the Trump administration might want to support the U.S. nuclear industry, which is shrinking at home. However, the congressional report raised concerns that the group seeking to make the sale may have have sought to carry it out without going through the process required under U.S. law. Doing so could give Saudi Arabia U.S. nuclear technology without appropriate guarantees that it would not be used for nuclear weapons in the future.
A competitive global market
Exporting nuclear technology is lucrative, and many U.S. policymakers have long believed that it promotes U.S. foreign policy interests. However, the international market is shrinking, and competition between suppliers is stiff.
Private U.S. nuclear companies have trouble competing against state-supported international suppliers in Russia and China. These companies offer complete construction and operation packages with attractive financing options. Russia, for example, is willing to accept spent fuel from the reactor it supplies, relieving host countries of the need to manage nuclear waste. And China can offer lower construction costs.
Saudi Arabia declared in 2011 that it planned to spend over US$80 billion to construct 16 reactors, and U.S. companies want to provide them. Many U.S. officials see the decadeslong relationships involved in a nuclear sale as an opportunity to influence Riyadh’s nuclear future and preserve U.S. influence in the Saudi kingdom.
Why does Saudi Arabia want nuclear power?
With the world’s second-largest known petroleum reserves, abundant untapped supplies of natural gas and high potential for solar energy, why is Saudi Arabia shopping for nuclear power? Some of its motives are benign, but others are worrisome.
First, nuclear energy would allow the Saudis to increase their fossil fuel exports. About one-third of the kingdom’s daily oil production is consumed domestically at subsidized prices; substituting nuclear energy domestically would free up this petroleum for export at market prices.
Saudi Arabia is also the largest producer of desalinated water in the world. Ninety percent of its drinking water is desalinated, a process that burns approximately 15 percent of the 9.8 million barrels of oil it produces daily. Nuclear power could meet some of this demand.
Saudi leaders have also expressed clear interest in establishing parity with Iran’s nuclear program. In a March 2018 interview, Saudi Crown Prince Mohammed bin Salman warned, “Without a doubt, if Iran developed a nuclear bomb, we will follow suit as soon as possible.”
As a member in good standing of the Treaty on the Non-Proliferation of Nuclear Weapons, Saudi Arabia has pledged not to develop or acquire nuclear weapons, and is entitled to engage in peaceful nuclear trade. Such commerce could include acquiring technology to enrich uranium or separate plutonium from spent nuclear fuel. These systems can be used both to produce fuel for civilian nuclear reactors and to make key materials for nuclear weapons.
US nuclear trade regulations
Under the U.S. Atomic Energy Act, before American companies can compete to export nuclear reactors to Saudi Arabia, Washington and Riyadh must conclude a nuclear cooperation agreement, and the U.S. government must submit it to Congress. Unless Congress adopts a joint resolution within 90 days disapproving the agreement, it is approved. The United States currently has 23 nuclear cooperation agreements in force, including Middle Eastern countries such as Egypt (approved in 1981), Turkey (2008) and the United Arab Emirates (2009).
The Atomic Energy Act requires countries seeking to purchase U.S. nuclear technology to make legally binding commitments that they will not use those materials and equipment for nuclear weapons, and to place them under International Atomic Energy Agency safeguards. It also mandates that the United States must approve any uranium enrichment or plutonium separation activities involving U.S. technologies and materials, in order to prevent countries from diverting them to weapons use.
American nuclear suppliers claim that these strict conditions and time-consuming legal requirements put them at a competitive disadvantage. But those conditions exist to prevent countries from misusing U.S. technology for nuclear weapons. I find it alarming that according to the House report, White House officials may have attempted to bypass or sidestep these conditions – potentially enriching themselves in the process.
According to the congressional report, within days of President Trump’s inauguration, senior U.S. officials were promoting an initiative to transfer nuclear technology to Saudi Arabia, without either concluding a nuclear cooperation agreement and submitting it to Congress or involving key government agencies, such as the Department of Energy or the Nuclear Regulatory Commission. One key advocate for this so-called “Marshall Plan” for nuclear reactors in the Middle East was then-national security adviser Michael Flynn, who reportedly served as an adviser to a subsidiary of IP3, the firm that devised this plan, while he was advising Trump’s presidential campaign.
The promoters of the plan also reportedly proposed to sidestep U.S. sanctions against Russia by partnering with Russian companies – which impose less stringent restrictions on nuclear exports – to sell reactors to Saudi Arabia.
Flynn resigned soon afterward and now is cooperating with the investigation into Russian interference in the 2016 campaign. But IP3 access to the White House persists: According to press reports, President Trump met with representatives of U.S. industry, a meeting organized by IP3 to discuss nuclear exports to Saudi Arabia as recently as mid-February 2019.
Rules for a Saudi nuclear deal
Saudi leaders have scaled back their planned purchases and now only expect to build two reactors. If the Trump administration continues to pursue nuclear exports to Riyadh, I believe it should negotiate a nuclear cooperation agreement with the Kingdom as required by U.S. law, and also take extra steps to reduce nuclear proliferation risks.
This should include requiring the Saudis to adopt the International Atomic Energy Agency’s Additional Protocol, a safeguards agreement that give the agency additional tools to verify that all nuclear materials in the kingdom are being used peacefully. The agreement should also require Saudi Arabia to acquire nuclear fuel from foreign suppliers, and export the reactor spent fuel for storage abroad. These conditions would diminish justification for uranium enrichment or opportunities for plutonium reprocessing for weapons.
The United States has played a leadership role in preventing nuclear proliferation in the Middle East, one of the world’s most volatile regions. There is much more at stake here than profit, and legal tools exist to ensure that nuclear exports do not add fuel to the Middle East fire.
And who wouldn’t enjoy a bit of a stoush between the big bad generators and the government, trying to break them up on our behalf?
Even if it was largely tangential to keeping prices low.
The “big stick” of forced divestiture, where the government through a court could order an energy company to sell off bits of itself, never made it to a vote in the final chaotic fortnight of parliament just finished.
It will be the subject of a Senate inquiry that will report on March 18. After that, parliament is set to sit for only seven days before the election, so its possible it’ll never happen, under this government.
It found against forced divestiture, but thought along similar lines to the government in some respects.
The legislation presented to parliament this month bans three types of misconduct:
electricity retailers’ failing to pass on cost savings
energy companies’ refusing to enter into hedge contracts (agreements to buy and sell at a particular price) with smaller competitors
generators’ manipulating the spot (short term) market, for example by withholding supply.
It imposes civil penalties for the first, forces companies to offer contracts for the second, and provides for divestiture orders for the third, after they have been recommended by the government and approved by the Federal Court.
There are good reasons for the government to act on the three behaviours, although each of the its proposed solutions raises concerns.
The ACCC wants something similar but different
Firstly, the ACCC did not identify the legislation’s first target as a major cause of high prices. They did observe that it is complicated to shop around and the offers are confusing, and sometime next year Australian governments will force retailers in some states to offer fairer default offers at an affordable price.
But it not clear why the energy sector has been singled out as an industry whose retailers have to pass on cost savings, and not supermarkets or banks or airlines or petrol stations, or any other kind of industry.
Secondly, the ACCC most certainly did raise concerns about dominant generator-retailers preferring not to enter into hedge contracts with competitors, particularly in South Australia.
It recommended that the Australian Energy Market Commission impose a “market making obligation” forcing large, so-called gentailers to buy and sell hedge contracts.
Its recommendation has the same intent as the one proposed by the government, although it has the advantage of being administered by a regulator that already exists.
Thirdly, the ACCC also concluded that concentration in the wholesale market means higher prices. Its report focused on the bidding activity of the Queensland government owned generator Stanwell Corporation.
The ACCC recommended giving powers to the Australian Energy Regulator to investigate and fix such problems.
It considered a divestiture mechanism of the kind in the government’s leglislation, but rejected it as extreme.
Its own less extreme recommendations would “if implemented, be a better means to restore competition to a level which serves consumers well”.
Breaking up corporations is a broader question
There may well be a case for breaking up corporations whose size prevents or substantially lessens competition. It happens overseas.
The government cites the example of the United States Sherman anti-trust legislation. It has been in place since 1890 and has been famously used to break up Standard Oil and AT&T. The ACCC does not have this power.
There is debate about whether it would work in the much smaller market of Australia.
It’s worth considering divestment powers broadly, rather than rushing to introduce them in one sector of the economy in what was to have been the leadup to Christmas because of a concern that its prices were too high.
The ACCC has already delivered a comprehensive report on the means to bring them down.
The government would be better served acting comprehensively on its recommendations.