Labor states keep the National Energy Guarantee in play but withhold agreement


Michelle Grattan, University of Canberra

The Labor states have kept the National Energy Guarantee (NEG) alive but withheld the in-principle support the federal government had originally hoped to extract from Friday’s meeting of the COAG Energy Council.

The next stage in the NEG battle is the Coalition parties’ crucial meeting on Tuesday, when Prime Minister Malcolm Turnbull and federal energy minister Josh Frydenberg will be confronted by Tony Abbott and other critics who want, in effect, the plan to be made less green.

The Labor jurisdictions are anxious both to ensure that the NEG plan won’t be derailed by the Coalition party room, and to extract concessions from the federal government.

Victoria’s energy minister Lily D’Ambrosio said that her state had withheld its support until conditions that it put earlier this week were met.

D’Ambrosio emphasised that Victoria was “not walking away from the table” but added that Turnbull and Frydenberg needed to “stare down the crazies in their party room”.

Friday’s meeting had at an earlier stage been billed as deadline day for the NEG, but D’Ambrosio said it was “far too soon” to sign off on the policy.




Read more:
What’s your state’s position at the crucial National Energy Guarantee meeting?


Queensland’s acting energy minister Cameron Dick said his state was pleased that Frydenberg “has accepted Queensland’s position that we need the Commonwealth legislation to go through the federal Coalition party room first”.

“The Coalition party room is the biggest risk to energy and price stability, and has been for 10 years, so we need that party room certainty,” he said.

Ministers from the non-Labor states of South Australia and New South Wales said they would have preferred to have moved forward more quickly.

Frydenberg put a positive spin on the meeting, saying that ministers had moved a step closer to implementing the NEG. They had agreed to release an exposure draft of the needed state legislative amendments to implement it. This would be done after a teleconference on Tuesday and the passage of federal legislation through the party room, he said.

“In the words of Energy Security Board Chair Dr Kerry Schott, today’s agreement is a ‘great step forward’,” he said.

But Frydenberg remained intransigent in the face of demands, which have been strongly pushed by Victoria, that the Commonwealth emissions reduction legislation should allow targets to be increased by regulation, rather than requiring more legislation.

Frydenberg said the federal government would not negotiate on that issue, and pointed out that Victoria’s own renewable energy target is enshrined in legislation.




Read more:
Emissions policy is under attack from all sides. We’ve been here before, and it rarely ends well


The Australian Industry Group said that continuing development of the NEG was a positive step. But its chief executive Innes Willox warned: “The COAG Energy Council will soon have to make a real decision or risk condemning Australian industry to years more of damaging uncertainty.”

The Business Council of Australia also welcomed the step forward.

In a round of interviews before the meeting, Frydenberg said he was confident that the governments “will agree to move forward” with the NEG.

“We had a very constructive dinner last night and there was a broad appreciation … of the importance of the National Energy Guarantee, of our responsibilities to deliver lower power prices and to increase the reliability of the system, and the importance of integrating energy and climate policy,” he said.

“So while some of the states maintain some of their concerns with the design, there is broad understanding of the importance of the guarantee.”

The ConversationGreens climate and energy spokesperson Adam Bandt said that the states were “hopefully realising the NEG is a dud”.

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

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Could the NEG bring down power prices? It’s hard to be confident that it will


Salim Mazouz, Australian National University; Frank Jotzo, Crawford School of Public Policy, Australian National University, and Hugh Saddler, Australian National University

The final design document for the National Energy Guarantee (NEG), released this week, contains a range of claims about the policy’s ability to drive down both greenhouse emissions and electricity prices. But still there is precious little detail on how exactly these assertions are backed up.

Specifically, two claims in the new document released by the Energy Security Board (ESB) are difficult to reconcile with other reputable modelling results.

First is the claim that greenhouse emissions will fall further under the NEG than they would in the policy’s absence. But a fine-grained analysis published a week earlier by the Australian Energy Market Operator (AEMO) suggests that the target of cutting emissions by 26% will be met regardless of whether the NEG is implemented or not.

The ESB predicts that emissions will fall further under the NEG (purple line) than without it (orange line). But according to the AEMO’s forecast (blue line), emissions will drop by more than this, even without the NEG. NEG modelling data are approximate, derived from measuring graphics provided in the ESB report.
Hugh Saddler, Author provided

If the AEMO analysis is right, the NEG in its currently proposed form will do nothing to cut emissions.




Read more:
AEMO’s new electricity plan is neither a death knell nor a shot in the arm for coal


The second claim is that wholesale electricity prices will fall by a further 20% under the NEG. But it is hard to see how this will happen, given that the policy is not expected to trigger large changes to the energy landscape. The ESB’s document provides no raw data on this, but if we squint hard at the graphs provided in its modelling summary, we get the following:

Forecast changes to electricity generation capacity under the NEG. Modelling data are approximate, derived from measuring graphics provided in the ESB report.
Hugh Saddler, Author provided

This is not just a technical quibble. Much of the political justification for the NEG rests on the hope that it will deliver cheaper electricity. But how?

Taking the assumptions provided in the ESB’s document, we can attempt to deduce what will be the main drivers of price changes, in rough order of importance:

Contract coverage

The modelling assumes that contract coverage – electricity retailers and generators currently use electricity contracts to manage their exposure to fluctuating prices in the spot market – will increase by 5% under the NEG.

This is based on the notion that the NEG’s reliability requirement – which would require electricity retailers to hold an appropriate portfolio of electricity contracts in dispatchable sources of generation – would incentivise retailers to buy more electricity contracts.

Whether this would indeed drive an additional 5% of contract coverage is rather difficult to ascertain given the information provided. On the face of it, 5% seems a lot given that the reliability requirement is not expected to be triggered, noting that no reliability issues have been identified in the AEMC’s recent reliability standard and settings review and that even the base cases in AEMO’s Integrated System Plan do not trigger reliability problems.

Even if contracting does increase by 5%, how does that push down prices? This is a crucial point and yet it is not backed up by adequate analysis or evidence in the ESB report.

The ESB’s chain of reasoning appears to be: the NEG will result in a greater share of electricity output being sold under contract in anticipation of the reliability requirements kicking in; this will lead to lower spot market prices; this in turn will also pull down prices in the contract markets, reducing average wholesale prices overall.

So it all hinges on retailers changing their wholesale purchasing habits so as to ensure they meet the reliability requirement – even though, as discussed above, the reliability requirement is unlikely to be triggered Moreover, it is hard to believe that contract prices would fall as a result; it seems just as likely that the generating companies that sell those contracts (and which wield significant market power) would raise their prices, not lower them.

More renewables

The ESB assumes that the NEG will deliver an extra 1,000 megawatts of renewable capacity.

But this is an assumption, rather than a modelled outcome. The only justification offered is the ESB’s assertion that “recent renewable investment trends have been in part supported by the likelihood of an agreement to implement the guarantee”.

This is surprising, given that the NEG’s emissions target is so weak as to be ineffective, and ESB’s assumption that the policy will drive down power prices (and therefore profits for renewables generators). Any direct incentive for investment in renewables is highly unlikely to be coming from the NEG; the only plausible reasons would be greater confidence and lower financing costs.

Demand response

Demand response – in which consumers alter their power consumption so as to reduce peaks in electricity demand in exchange for payment – can potentially make a big difference to power prices by reducing the incidence of high-price events.

The use of this strategy is already growing strongly among electricity market participants. But once again, the ESB has given us little evidence to back up its assumption that the no policy case will have lower demand response than under the NEG. It all again hinges on the effect of the reliability requirement on contract coverage and on the extent to which emerging demand response products can take advantage of this. Very little analysis and no evidence to back up the choice of assumptions is contained in the ESB’s policy document.




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Financing cost

The ESB assumes that the NEG will reduce the uncertainty premium – an additional amount required to finance projects in the face of policy uncertainty – by 3 percentage points. It is clear that a policy uncertainty premium currently exists, although it is unclear how high it might be. The Finkel Review assumed it is 3%. So does that mean investment uncertainty would completely disappear once the NEG is legislated?

Certainly not. Given the highly publicised political disagreements (even within the government’s own ranks) about the NEG’s emissions target, it seems likely that substantial policy uncertainty will still linger.

Regardless, this scarcely matters for the price outcomes modelled by the ESB, given that the model is predicting very little new electricity investment and the small amount of additional investment in the model attributed to the NEG is entirely assumption-driven, rather than a modelling outcome.




Read more:
The National Energy Guarantee is a flagship policy. So why hasn’t the modelling been made public?


Overall, the latest policy details don’t inspire confidence that the NEG will actually drive down power prices relative to what will happen anyway. We need a credible analysis of these assumptions, and modelling to tease out the effect of varying them.

It is helpful that the final report by the ESB does include at least a summary of the modelling. From here, it would be useful for the ESB, and the modellers it hired, to provide an investigation of the issues we have outlined here, or to undertake one if this has not yet been done.

The ConversationAs per this week’s open letter from energy analysts calling for the release of the modelling, independent researchers have offered to provide peer review. Let’s hope the ESB takes us up on it.

Salim Mazouz, Research Manager, Centre for Climate Economics and Policy, Australian National University; Frank Jotzo, Director, Centre for Climate Economics and Policy, Crawford School of Public Policy, Australian National University, and Hugh Saddler, Honorary Associate Professor, Centre for Climate Economics and Policy, Australian National University

This article was originally published on The Conversation. Read the original article.

Higher energy prices are here to stay – here’s what we can do about it



File 20180702 116129 vahewl.jpg?ixlib=rb 1.1
Australia’s energy prices have doubled since 2015.
Photo by José Alejandro Cuffia/ Unsplash, CC BY-SA

Lucy Percival, Grattan Institute

The good news is that after two years of big rises, wholesale electricity prices have fallen somewhat since mid-2017. The bad news is that prices are still much higher than they have been for most of the past 20 years. And the worse news is that we had better get used to these high prices.

A new Grattan Institute report, Mostly working: Australia’s wholesale electricity market, shows wholesale prices jumped from less than A$50 per megawatt hour (MWh) in 2015 to around A$100 per MWh in 2017. But it finds that most of this increase is the market working as it should. And it urges politicians to tell consumers a harsh truth: high electricity prices, well above A$50 per MWh, are here to stay.

The best thing our political leaders can do to keep a lid on electricity prices is to help create stable, bipartisan energy and climate-change policy. This will encourage new investment so Australian households can get low-cost, high-reliability, and low-emissions electricity.




Read more:
A high price for policy failure: the ten-year story of spiralling electricity bills


Why prices went up

For most of the past 10 years, Australia’s National Electricity Market (NEM) was oversupplied and powered by low-cost fuels in old power stations. Then things suddenly changed. Big, coal-fired power stations were closed – Northern in South Australia in 2016, followed by Hazelwood in Victoria in 2017. So supply was reduced, pushing prices up. At the same time, gas and coal prices rose rapidly, increasing running costs for electricity generators, which pushed up prices even further.

Our report shows about 60% of the wholesale price rises were caused by the
fundamental changes in supply. The NEM now needs new investment, particularly because more old generation assets, such as the Liddell power station, will be turned off in coming years as they reach the end of their working life. But the electricity produced by new generators of any type, including coal, is expected to cost more than the electricity produced by the old legacy assets.

Up to 40% of the wholesale prices rises of recent years were caused by the higher
input costs for generators. Coal and gas are two of the main inputs to electricity produced in the NEM (which covers Queensland, NSW and the ACT, Victoria, South Australia and Tasmania). Coal prices nearly doubled between 2015 and 2017; gas prices more than doubled. As a result, wholesale electricity prices increased so generators in the NEM could cover their costs of generating electricity. The direct cost of higher fuels to generators is up to A$4 billion a year.

Higher fuel costs for one generator can increase revenue for all generators, because all generators get paid the same spot price. If the generator that is setting the price at a given time needs a higher price to cover their costs, all other generators that produced electricity at that time also get a higher price, even if their costs have not risen. This encourages new investment in cheaper generation and is the market working as it should.

But a small amount – about 2% – of the wholesale price rises of recent years was caused by generators “gaming” the system. And that is certainly not the market working for consumers.

Big generators can game the system by using their market power to create artificial supply scarcity, which forces short-term price spikes. It is not illegal. Currently it is within the market rules for generators to bid up the price of their electricity until just 67 seconds before it is needed. By then it is often way too late for other generators to respond with lower prices. It’s a bit like Uber surge pricing but with no warning. Ultimately, the consumer cops the bill.

So what can be done?

Our report has three main suggestions.

First, politicians should be honest with the electorate, and explain why prices are unlikely to fall to the levels seen in 2015. Historic oversupply in the NEM is disappearing, gas prices are unlikely to fall back to where they were in the past, and new-build generation, including coal, is expected to need revenue well above A$50 per MWh to be viable.

Second, governments should finally provide Australia with stable energy and climate-change policy to make the transition to new generation technologies as smooth as possible. This would also reduce risk for new investment, which lowers financing costs and electricity prices.




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The ConversationThird, the Australian Electricity Market Commission should change the rules to eliminate, or at least limit, “gaming” by electricity generators.

Lucy Percival, Associate, Grattan Institute

This article was originally published on The Conversation. Read the original article.

Federal government sets sights on August approval for National Energy Guarantee



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Josh Frydenberg met with state energy ministers in Melbourne the latest round of discussions over the National Energy Guarantee.
AAP Image/Luis Ascui

Michael Hopkin, The Conversation

Federal energy minister Josh Frydenberg says he is confident of securing state governments’ support for the National Energy Guarantee, with a final decision now timetabled for August.

At a meeting today, state energy ministers agreed to progress towards a final version of the policy, which aims to ensure a reliable electricity supply while also cutting the sector’s greenhouse emissions by 26% by 2030.

Details of the policy were first unveiled in October 2017, after the federal government opted against Chief Scientist Alan Finkel’s recommended Clean Energy Target. It features two components: a “reliability guarantee” and an “emissions guarantee”.



The Conversation, CC BY-ND

Under the latest iteration of the policy, developed by the Energy Security Board, electricity retailers would be required to ensure they do not exceed a certain level of greenhouse emissions per unit of electricity sold. They would also be expected to invest in extra generation capacity in advance of any forecast shortfall, so as to ensure reliability.

Grattan Institute energy analyst David Blowers wrote this week that although the 26% emissions target is far too modest, the policy could deliver much-needed bipartisan political support. It would create investment certainty and then could be ramped up later.

But RMIT’s Alan Pears previously wrote that the government’s slow and modest policy ambition has been overtaken by the breakneck pace of change in renewables and energy efficiency.

Economic analysts have voiced fears that the policy’s “technology-neutral” approach is a stalking-horse for coal and may put the brakes on renewable energy investment in Australia.

Frydenberg today confirmed that the policy will not prevent states from pursuing their own more ambitious renewable energy targets. But he said the overall emissions reduction target for the electricity sector will not be increased beyond 26% by 2030.

“States can knock their socks off with their own renewable energy schemes, as long as they meet their reliability obligations under the National Energy Guarantee,” he said.

The ConversationAsked about the views of the Monash Forum, a grouping of Coalition MPs that has agitated for new government-funded coal-fired power stations, Frydenberg said he did not expect any new coal stations to be built. But he said it was likely that Australia’s 20 existing coal power stations would continue to attract private investment.

Michael Hopkin, Section Editor: Energy + Environment, The Conversation

This article was originally published on The Conversation. Read the original article.

AGL’s plan to replace Liddell is cheaper and cleaner than keeping it open


span>Kriti Nagrath, University of Technology Sydney

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.

https://datawrapper.dwcdn.net/oFy9x/1/

AGL is relying on the market

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.

Levelised cost of energy based on information sourced by AGL including: the capital cost of the Liddell life extension works as advised by Worley Parsons (Advisian). AGL’s discount rate in line with their commercial target returns. Westpac Banking Corporation’s forecast of the Newcastle coal price discounted based on the lower calorific value required for power station coal. A carbon emissions cost has been included as per AEMO’s ‘moderate’ 2015 scenario.
AGL’s NSW Generation Plan

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.

The ConversationA 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.

Kriti Nagrath, Senior Research Consultant, University of Technology Sydney

This article was originally published on The Conversation. Read the original article.

As the Libs claim South Australia, states are falling into line behind the National Energy Guarantee


Kate Griffiths, Grattan Institute

Former prime minister Paul Keating used to say that when you change the government, you change the country. On Saturday South Australians changed their government, and now the country’s energy policy could finally change – and for the better, if current policy uncertainty is put to bed.

Prime Minister Malcolm Turnbull certainly seems to think it will. He is already claiming the SA election result as an endorsement of his National Energy Guarantee.




Read more:
How the National Energy Guarantee could work better than a clean energy target


Incoming Liberal Premier Steven Marshall has consistently supported a national approach to energy policy, and on his first day in office he pledged to end South Australia’s go-it-alone approach.

But while South Australia’s support is vital, the National Energy Guarantee – which aims to reduce greenhouse gas emissions and ensure reliability in Australia’s National Electricity Market – is not a done deal yet.

Designing the guarantee

The independent Energy Security Board recommended a National Energy Guarantee last October, and the Turnbull government quickly adopted it as policy.

In November, at a meeting of the COAG Energy Council, New South Wales, Victoria and Tasmania voted for work on a detailed design of the guarantee. South Australia and the ACT voted against (Queensland was absent).

The weekend’s election result seems to have brought South Australia into the tent; it certainly draws a line under the tensions between the outgoing premier, Jay Weatherill, and Federal Energy Minister Josh Frydenberg, which bubbled over in a public stoush last year.

But the ACT government still has concerns about the guarantee, and all states will be holding out for more detail on the policy.

In February the ESB released a consultation paper on the design of the guarantee, which indicated that there is much work still to be done.

The design should not be rushed – getting the detail right is crucial if Australia is to tackle climate change and maintain a reliable electricity supply at lowest cost.

The guarantee is a means to an end, not the end itself. It is neither pro-coal nor pro-renewables. It is a mechanism to achieve national targets. The emissions target itself – a 26-28% cut in greenhouse gas emissions relative to 2005 levels by 2030 – remains a political choice of the federal government.

The design must be sufficiently robust to produce the desired outcomes, but should also be flexible enough to allow the emissions target and required level of reliability to change over time. People’s preferences change, new technologies are emerging, and current and future governments will almost certainly need to increase emissions targets under the Paris Agreement.

A design that is flexible in response to alternative political choices has a much better chance of getting unanimous support from the states and territories. A state or territory supporting the guarantee need not endorse the current target.

What next for renewables?

Weatherill famously declared South Australia’s election to be “a referendum on renewable energy”. His defeat almost certainly means that South Australia’s 50% renewable energy target, which Weatherill had pledged to extend to 75%, will be abolished.

But South Australia’s wind, solar and battery projects aren’t going anywhere. While there has been some concern about the future of individual projects, the change in policy won’t affect existing solar and wind farms. Marshall has promised to honour existing contracts. South Australia remains the location of choice for many projects under the federal Renewable Energy Target.

The National Energy Guarantee would not replace or preclude state targets for renewable energy. They achieve different things. A renewable energy target is aimed at guiding and shaping industry investment, rather than specifically reducing emissions (although states have used renewable energy targets in recent years to attempt to cut emissions in the absence of a credible federal scheme).




Read more:
Will the National Energy Guarantee hit pause on renewables?


South Australia is likely to continue to contribute strongly to a national emissions reduction target, with or without a local renewable energy target. High levels of intermittent renewable energy in the state will require backup generation and demand response to meet the reliability obligation.

Under the guarantee, states and territories can still choose to deliver greater emissions reductions than the federal target. They can do this through renewable energy targets or more direct emissions policies. But individual states that want to pursue these deeper cuts could end up doing the heavy lifting for the nation, unless states can collectively agree to beat the national target.

Unanimous support still needed

The COAG Energy Council will meet again on April 20 to discuss the future of the National Energy Guarantee. With South Australia’s support looking much more likely this time around, the policy can be expected to remain on the table. But all states and territories will no doubt reserve judgement until they have the final design, and that won’t be until the second half of 2018.

The ConversationAustralia is edging closer to finally having a national, integrated, energy and climate policy. We’ve been here before, and previously have let the perfect become the enemy of the good. Let’s not make that mistake again – let’s get a foundation in place to build on. So many politicians have fallen trying. But perhaps Weatherill will be the last.

Kate Griffiths, Senior Associate, Grattan Institute

This article was originally published on The Conversation. Read the original article.

Tesla’s ‘virtual power plant’ might be second-best to real people power



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Researchers talk to Bruny Islanders who have signed up to an experimental new method of managing energy.
Chris Crerar

Hedda Ransan-Cooper, Australian National University; Archie Chapman, University of Sydney; Paul Scott, Australian National University, and Veryan Anastasia Joan Hann, University of Tasmania

The South Australian government and Tesla recently announced a large-scale solar and storage scheme that will distribute solar panels and batteries free of charge to 50,000 households.

This would form what has been dubbed a “virtual power plant”, essentially delivering wholesale energy and service systems. This is just the latest in South Australia’s energetic push to embrace renewables, make energy cheaper and reduce blackout-causing instability.




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Explainer: what can Tesla’s giant South Australian battery achieve?


The catch is that more than a third of the costs of a power system are in the distribution networks, as are most of the faults. A virtual power plant on its own can’t necessarily solve the problems of costly network management.

The bundling of batteries together to power a network doesn’t consider the needs of either households or the network.

To address these problems, we’re trialling technology in Tasmania that intelligently controls fleets of batteries and other home devices with the aim of making networks more flexible, reliable, and cheaper to operate.

The Bruny Island Battery trial

Part of what we need to transition to a more reliable and cleaner grid is better control of power networks. This will improve operation during normal times, reduce stress during peak times, and remove the need for costly investment over the long term.

For instance, sometimes the network simply needs more energy in one particular location. Perhaps a household doesn’t want the grid to draw power from their battery on a particular day, because it’s cheaper for them to use it themselves. Most models of virtual power plants don’t take these different needs into account.

Bruny Island in Tasmania is the site of a three-year trial, bringing together researchers from the the Australian National University, the University of Sydney, the University of Tasmania, TasNetworks and tech start-up Reposit Power.




Read more:
Charging ahead: how Australia is innovating in battery technology


Thirty-three households have been supplied with “smart battery” systems, charged from solar cells on their roofs, and a “controller” box that sits between the house and the power lines.

Participants are paid when their batteries supply energy to the Bruny Island network, which is sometimes overloaded during peak demand. Their bills will also go down because they’ll be drawing household power from their battery when it is most cost-effective for them.

In a world first, Network-Aware Coordination (NAC) software coordinates individual battery systems. The NAC automatically negotiates battery operations with the household (via the controller box), to decide whether the battery should discharge onto the grid or not.

In these negotiations, computer algorithms request battery assistance at a price that reflects the value to the network. If the price is too low for the household, for example because they are better off storing the energy for their own use later in the day, the controller will make a counter-offer to the network with a higher price.

The negotiation continues until they find a solution that works for the network, at the lowest overall cost.

The NAC-based negotiation is half of the economic equation. Battery owners will also be compensated for their work in supporting the grid. The trial team are working out a payment system that passes on some of the networks’ savings created by avoiding diesel generator use on Bruny Island.

Solving big problems

The problem of co-ordinating Australia’s 1.8 million rooftop solar installations in one of the longest electricity networks in the world is not trivial.

Distributed battery systems, such as in Tesla’s South Australian proposal, represent one possible future. The question that we’re exploring is how to coordinate large numbers of customer-owned batteries to work in the best interests of both the consumer and the network.

The primary feature of virtual power plants, to lump together resources, runs counter to what is required for targeted distribution network support. Nor do virtual power plants necessarily have to act in the best interest of householders.




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In contrast, we’re trialling technology that acts in the financial interests of householders, to earn value from their batteries by providing location-specific services to networks, at a time and price that suits the customer.

As currently conceived, the South Australian scheme may not be the most cost-effective solution to dealing with our evolving electricity system’s needs. The Bruny trial shows a different possible future grid – one which allows people to produce and store energy for themselves, and also share it, reducing pressure on the network and allowing higher penetrations of renewables.

The Conversation
The Bruny trial is funded by ARENA, and is a collaborative venture lead by The Australian National University, with project partners The University of Sydney, University of Tasmania, battery control software business Reposit Power, and TasNetworks.

Hedda Ransan-Cooper, Research fellow, Australian National University; Archie Chapman, Research Fellow in Smart Grids, University of Sydney; Paul Scott, Research fellow, Australian National University, and Veryan Anastasia Joan Hann, PhD Candidate – Energy Policy Innovation, University of Tasmania

This article was originally published on The Conversation. Read the original article.

China wants to dominate the world’s green energy markets – here’s why



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xieyuliang / shutterstock

Chris G. Pope, University of Sheffield

If there is to be an effective response to climate change, it will probably emanate from China. The geopolitical motivations are clear. Renewable energy is increasingly inevitable, and those that dominate the markets in these new technologies will likely have the most influence over the development patterns of the future. As other major powers find themselves in climate denial or atrophy, China may well boost its power and status by becoming the global energy leader of tomorrow.

President Xi Jinping has been vocal on the issue. He has already called for an “ecological civilization”. The state’s “green shift” supports this claim by striving to transition to alternative energies and become more energy efficient.

But there are material benefits as well. China’s proactive response has impacted on global energy markets. Today, five of the world’s six top solar-module manufacturers, five of the largest wind turbine manufacturers, and six of the ten major car manufacturers committed to electrification are all Chinese-owned. Meanwhile, China is dominant in the lithium sector – think: batteries, electric vehicles and so on – and a global leader in smart grid investment and other renewable energy technologies.

This is only a start. There are modest projections that just 20% of the country’s primary energy consumption will come from non-carbon sources by 2030. Nonetheless, China’s sheer size means Beijing’s aggressive pursuit of emergent and expanding renewables markets should not be ignored. After all, dominating such markets has strong material benefits, while pioneering a green revolution provides intangible benefits in terms of state image and prestige.

So what are these benefits? First, concerns over environmental degradation are very real in China, owing to issues such as air, food and water pollution, and should be acknowledged. Beijing doesn’t want food and water scarcity or smoggy skies either, whether for altruistic environmental reasons or concerns over its popular legitimacy.

But it is worth also considering the geopolitical implications of climate change leadership. Take the US for example, historically the largest carbon emitter. The country had previously been active in climate policy, if somewhat hypocritical (support for hydraulic fracturing, for instance). But the current Trump administration is forthright in its baseless denial of climate change, having withdrawn from the Paris Agreement. It has also hired climate deniers to head its environmental agencies and other offices of power.

Contrast this with China, which is becoming increasingly proactive. In 2016 it became the largest shareholder in a new Asian Infrastructure Investment Bank which, along with the BRICS-established New Development Bank, invests heavily in green energy. The two institutions are seen as potential competitors to the IMF and the World Bank.

Of course, the situation is not black and white with China “going green” and everyone else sitting idly by. The Shanghai Cooperation Organisation (SCO), which commits to political, economic and military integration across Eurasia, the world’s largest landmass, for instance, comprises of nations with strategic interests in exporting hydrocarbons and coal. However, the same is true for the more environmentally aware Obama administration which advocated forcefully the Trans-Pacific Partnership that would have overriden attempts to establish green industries and constrained signatory states to its agreements with big business ahead of climate change action.

To this end, former president Obama argued that it was necessary for the US to shape the rules of global trade to US benefit. That being the case, what about China? As a major power, it is strengthening its international agency by pioneering these multilateral alternatives, many of which heavily invest in green energy projects. Through development banks or Asian trade agreements, China can provide an alternative vision to an international integration ostensibly based on the universal values espoused by the US and its chief allies.

“Going green”, then, while undeniably necessary, is a useful image or value to uphold as it serves to legitimate Chinese international and regional leadership. In this sense, it mirrors the way G7 nations espouse “democracy” or “freedom”. Going green also happens to be economically viable for those that have the funds to invest, contributing to China’s transition from the world’s manufacturing base to a truly major power.

The ConversationChina’s response to climate change combined with the size of its economy has thrust it to the centre of a global shift. Large-scale funding through Chinese-led multilateral frameworks could see a new energy system emerge – led by China. This would greatly extend its influence on the international political economy at the expense of those major powers unable or unwilling to respond.

Chris G. Pope, Researcher, University of Sheffield

This article was originally published on The Conversation. Read the original article.

Household savings figures in Turnbull’s energy policy look rubbery


Michelle Grattan, University of Canberra

The big questions about Malcolm Turnbull’s energy policy will be, for consumers, what it would mean for their bills and, for business, how confident it can be that the approach would hold if Bill Shorten were elected.

The government needs to convince people they’ll get some price relief, but even as Turnbull unveiled the policy the rubbery nature of the household savings became apparent.

Crucially, the policy aims to give investors the certainty they have demanded. But the risk is this could be undermined if Labor, which is well ahead in the polls, indicated an ALP government would go off in yet another direction.

And most immediately, there is also the issue of states’ attitudes, because their co-operation is needed for the policy’s implementation. Turnbull talked to premiers after the announcement, and the plan goes to the Council of Australian Governments (COAG) next month.

Turnbull describes the policy as “a game-changer” that would deliver “affordability, reliability and responsibility [on emissions reduction]”.

Unsurprisingly – given it would end the subsidy for renewables, rejecting Chief Scientist Alan Finkel’s recommendation for a clean energy target – the policy sailed through the Coalition partyroom with overwhelming support.

Finkel later chose to go along with it rather than be offended by the discarding of his proposal. The important thing, he said, was that “they’re effectively adopting an orderly transition” for the energy sector, which was what he had urged.

In the partyroom Tony Abbott was very much a minority voice when he criticised the plan; his desire for a discussion of the politics was effectively put down by a prime minister who had his predecessor’s measure on the day.

The policy – recommended by the Energy Security Board, which includes representatives of the bodies operating and regulating the national energy market – is based on a new “national energy guarantee”, with two components.

Energy retailers across the National Electricity Market, which covers the eastern states, would have to “deliver reliable and lower emissions generation each year”.

A “reliability guarantee” would be set to deliver the level of dispatchable energy – from coal, gas, pumped hydro, batteries – needed in each state. An “emissions guarantee” would also be set, to contribute to Australia’s Paris commitments.

According to the Energy Security Board’s analysis, “it is expected that following the guarantee could lead to a reduction in residential bills in the order of A$100-115 per annum over the 2020-2030 period”. The savings would phase up during the period.

When probed, that estimate came to look pretty rough and ready. More modelling has to be done. In Question Time, Turnbull could give no additional information about the numbers, saying he only had what was in the board’s letter to the government.

So people shouldn’t be hanging out for the financial relief this policy would bring. Although to be fair, Turnbull points to the fact it is part of a suite of measures the government is undertaking.

Business welcomed the policy, but made it clear it wanted more detail and – crucially – that it is looking for bipartisanship.

The Australian Chamber of Commerce and Industry said the policy’s detail “and its ability to win bipartisan and COAG support will be critical”. Andy Vesey, chief executive of AGL, tweeted that “with bipartisan support” the policy would provide investment certainty.

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The Australian Industry Group said it was “a plausible new direction for energy policy” but “only bipartisanship on energy policy will create the conditions for long-term investment in energy generation and by big energy users”.

It’s not entirely clear whether the government would prefer a settlement or a stoush with the opposition on energy.

Turnbull told parliament it had arranged for the opposition to have a briefing from the Energy Security Board, and urged Labor to “get on board” with the policy.

But Labor homed in on his not giving a “guarantee” on price, as well as the smallness of the projected savings. Climate spokesman Mark Butler said it appeared it would be “just a 50 cent [a week] saving for households in three years’ time, perhaps rising to as much as $2.00 per week in a decade”.

But while the opposition has gone on the attack, it is also hedging its bets, playing for time.

“We’ve got to have … some meat on the bones,” Butler said. “Because all the prime minister really announced today was a bunch of bones.”

“We need detail to be able to sit down with stakeholders, with the energy industry, with big businesses that use lots of energy, with stakeholder groups that represent households, and obviously state and territory governments as well, and start to talk to them about the way forward in light of the announcement the government made today,” he said.

The initial reaction from state Labor is narky. Victorian Premier Daniel Andrews said it seemed Finkel had been replaced by “professor Tony Abbott as the chief scientist”, while South Australia’s Jay Weatherill claimed Turnbull “has now delivered a coal energy target.”

These are early days in this argument. Federal Labor will have to decide how big an issue it wants to make energy and climate at the election. Apart from talking to stakeholders and waiting for more detail, it wants to see whether the plan flies at COAG.

If it does, the federal opposition could say that rather than tear up the scheme in government, it would tweak it and build on it. That way, Labor would avoid criticism it was undermining investment confidence.

The ConversationBut if there is an impasse with the states and the plan is poorly received by the public, the “climate wars” could become hotter.

https://www.podbean.com/media/player/sk78v-786f19?from=site&skin=1&share=1&fonts=Helvetica&auto=0&download=0

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.

Federal government unveils ‘National Energy Guarantee’ – experts react


Alan Pears, RMIT University; Anna Skarbek, Monash University, and Dylan McConnell, University of Melbourne

The federal government has announced a new energy policy, after deciding against adopting the Clean Energy Target recommended by chief scientist Alan Finkel.

The new plan, called the National Energy Guarantee, will require electricity retailers to make a certain amount of “dispatchable” power available at all times, and also to reduce the electricity sector’s greenhouse emissions by 26% relative to 2005 levels by 2030.

The government says it will save the average household up to A$115 a year after 2020, while also ensuring reliability. Below, our experts react to the new policy.


Read more: Infographic: the National Energy Guarantee at a glance


“The federal government will be even less important in energy policy”

Alan Pears, Senior Industry Fellow, RMIT University

Business, state governments and the energy industry have been clamouring for more certainty from the federal government. Now they have it: the federal government will be even less important in shaping energy and climate policy than in the past, leaving states and territories, local government, business and households to focus on driving the energy revolution and cutting emissions.

The new policy will impose a reliability obligation on energy retailers, who will presumably have to select an appropriate mix of energy suppliers to meet it, and the devil will be in the detail. If the required proportion of dispatchable electricity is reasonable, and if retailers and new renewable energy generators are free to decide how to deliver it, then the cost and difficulty of compliance may be modest.

For example, retailers and generators could piggyback on the demand response capacity volunteered for the ARENA Demand Response project. This could help accelerate the rollout of a variety of energy storage solutions, in turn reducing the market power of the big generators and driving down energy prices.

On the other hand, if the options are limited, the obligation could increase the market power of the gas industry, meaning no relief from high wholesale prices.

It will also be interesting to see if the obligation is applied across all new generation. If so, it could significantly increase the cost of new coal generation, as retailers would have to cover the risk of failure of a large generation unit, as well as managing its slow response to changing demand.


“Australia’s electricity sector can cut emissions more”

Anna Skarbek, Chief Executive, ClimateWorks Australia, Monash University

The key question is whether the emissions guarantee will be strong enough for Australia to meet its current and future climate obligations under the Paris Agreement.

Electricity creates more than one-third of Australia’s total emissions. If we don’t reduce the emissions in our electricity, then we don’t unlock other emissions reduction opportunities such as electric vehicles.

If the National Energy Guarantee aims at cutting emissions by only 26% by 2030 then other sectors across the economy would have to make greater emissions
reductions sooner.

But our research shows that Australia’s electricity sector can cut emissions by 60% below 2005 levels by 2030. Harnessing this potential will help us to reach future targets that progressively increase under the Paris Agreement.

If you don’t achieve deep emissions reductions in the electricity sector, a major strengthening of policy will be needed for the other sectors where there is less momentum currently. For example, stronger action would be needed in transport, buildings, industry and land.

Australia’s climate policy, which is being reviewed before the end of the year, will need to cover more than just the electricity sector. Other measures should include the introduction of vehicle emissions standards, a more stringent
national building code, a dramatic improvement in the uptake of energy efficiency measures across industry and stronger incentives for reforestation.


How the reliability guarantee will work

Dylan McConnell, Researcher at the Australian German Climate and Energy College, University of Melbourne

Under the NEG retailers are responsible for ensuring continuous supply of energy. But retailers don’t always generate the energy they sell. In order to meet the NEG’s reliability obligation retailers will most likely enter into cap contracts with generators.

Unlike other kinds of contracts, which impose a fixed price, cap contracts only come into play when high demand pushes energy prices over a certain pre-agreed level. At that point, generators with flexible dispatchable power guarantee that they will provide extra energy.

The extreme peaks, where the price heads to A$14,000 per megawatt hour – only come a couple of times a year, if at all. To compensate generators for building all that extra capacity, retailers pay a daily premium. Cap contracts essentially act as insurance: they protect retailers from extremely high prices during intense demand, and they offer generators the chance of steep profits.

Cap contracts are a standard part of the market, and retailers already used them to manage their risk exposure. The Energy Security Board has said:

This reliability guarantee would require retailers to hold forward contracts with dispatchable resources that cover a predetermined percentage of their forecast peak load.

If the new reliability standards are in line with retailers own internal guidelines, the impact on the market should be minimal. But if the government imposes higher standards, retailers will have to purchase more cap contracts (or build their own dispatchable power plants).

If demand for cap contracts increase, it would most likely encourage investment in gas and hydro power plants.


The ConversationThis article was updated on October 18.

Alan Pears, Senior Industry Fellow, RMIT University; Anna Skarbek, CEO at ClimateWorks Australia, Monash University, and Dylan McConnell, Researcher at the Australian German Climate and Energy College, University of Melbourne

This article was originally published on The Conversation. Read the original article.