Politicians: please ease off on ‘announceables’ until after the electricity market review



File 20170519 12254 c3w5l8
Current political intervention in the energy market is haphazard and disconnected.
chriscrowder_4/Flickr, CC BY-NC-SA

David Blowers, Grattan Institute and Kate Griffiths, Grattan Institute

A series of dramatic events over the past year, most notably the September statewide blackout in South Australia, have revealed an electricity system under strain, and left many Australians worried about the reliability of their power supply. The Conversation

In response, state and federal politicians have announced a series of uncoordinated and potentially expensive interventions, most notably the Turnbull government’s Snowy Hydro 2.0 proposal and the South Australian government’s go-it-alone power plan.

Yet all of these plans pre-empt the Finkel Review, to be released early next month. Commissioned by state and federal governments and led by Australia’s chief scientist Alan Finkel, the review is expected to provide a new blueprint for the National Electricity Market (NEM).

Clearly, Australia is struggling to manage the transition to a zero- or low-emission electricity grid, and some commentators have concluded that the NEM is broken.

In our report Powering Through, released today, we argue that it is too early to give up on the market. But what we really need is substantial market reforms, rather than piecemeal government investments in various energy projects.

Australia’s troubled transition

The problems are everywhere. Consumers have been hit with a 70% hike in real-terms electricity bills over the past decade, and there is more to come. Wholesale prices for electricity in most eastern states were twice as high last summer as the one before.

New vulnerabilities continue to emerge. The headline-grabber was South Australia’s blackout – the first statewide blackout since the NEM was formed in 1998 – but there have been other smaller blackouts and incidents too.

Poisonous politics means Australia is also failing to stay on track to hit its 2030 climate targets. The mixed messages on climate policy; the seemingly ad hoc public investment announcements; the threat of direct intervention in the activities of the market operator – all of this has created enormous uncertainty for private investors.

Meanwhile, the clock is ticking: Australia has enough electricity generation capacity for now, but more will be needed in the decade ahead.

The energy market is in a difficult transition.
georg_neu/Flickr, CC BY-NC

First, do no harm

There is currently an acute danger of politicians panicking and rushing into decisions that will only push electricity prices higher, and make the task of reducing Australia’s emissions harder.

Already, federal and state governments are committing taxpayers’ money to new energy investments. This is premature, with the Finkel Review’s recommendations not yet released. Stampeding white elephants loom ominously on the horizon.

Given the current uncertainties, it is vital not to grasp for expensive “solutions” or to lock in plans too soon. We do not yet know what technology mix will be needed in the future. Maintaining flexibility through the transition will ensure we can take advantage of the best solutions as they emerge.

‘No regrets’ short-term reforms

There are some “no regrets” moves that can and should be made, to address the short-term risks to the electricity system and buy time to resolve the longer-term ones. Australia should build on existing low-cost mechanisms before making major capital investments or redesigning the market.

The immediate challenge is to reduce the risk of blackouts next summer, in South Australia and Victoria especially. Most blackouts happen because something in the system breaks. Some simple changes to the market rules, like the recent AEMO and ARENA announcement to pay consumers to cut their electricity use, would make a big difference to managing equipment failures when they inevitably arise.

To ensure reserves are on hand, some mothballed generators should be recalled to service. Pleasingly, Origin Energy and Engie have already struck a deal to enable the restart of the second turbine of the Pelican Point generator in South Australia.

The longer-term task

The cheapest and most effective way to reduce long-term risks is to rebuild investor confidence. That requires Australia to agree, finally, on a credible climate policy. A carbon price is the best such policy, but any bipartisan policy that works with the electricity market and is capable of hitting Australia’s emissions targets will be a vast improvement on what we have now.

The transition to a zero-emissions electricity sector will be difficult. Even given a credible climate policy, there are still questions as to whether the current electricity market will be able to meet our future needs. And that’s without even mentioning the gas market, which is frankly a mess.

Politicians should begin by adopting pragmatic market reforms and giving clear direction on climate and energy policy. At the very least, they should wait until Finkel delivers his recommendations.

Hopefully the Finkel Review will define Australia’s energy security and emissions reduction needs, and provide a strong platform for politicians to work from. If so, a competitive market will find the cheapest path to a reliable and low-emissions electricity future.

The danger is that partisan politics will make the best policies untenable. If that happens, we can expect the blame to be shifted onto the market, which will be described as having “failed” – but the truth is that it will have been systematically (if not quite intentionally) destroyed.

More likely still is that governments give up on the market without giving it a chance. Scott Morrison’s budget promise of new federally owned power generation set a worrying precedent. If recent announcements deter private investors, still more government investment will be needed, which will shift yet more risk and cost onto taxpayers.

There’s a real danger of politicians focusing on “announceables” and shying away from the market reforms that will make the biggest difference to the affordability, reliability and sustainability of our electricity supply.

David Blowers, Energy Fellow, Grattan Institute and Kate Griffiths, Associate, Grattan Institute

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

We don’t have a gas shortfall worth worrying about


Dylan McConnell, University of Melbourne

Australia was warned earlier this year that a shortage of gas could create an energy crisis. A report from the Australian Energy Market Operator (AEMO) suggested a shortfall could occur in 3 of the next 13 years. The Conversation

This report was widely reported in the national media, with sensational headlines like “AEMO warns of blackouts as gas runs out”.

A couple of weeks ago, in a dramatic intervention, Prime Minister Malcolm Turnbull declared that there was a shortage of gas supplies for eastern Australia and that certain restrictions may be placed on gas exports.

But do we really need “more gas supply and more gas suppliers”? In a report published today, my colleague Tim Forcey and I review AEMO’s initial report and its results and recommendations. Our work finds there is a shortage of “cheap” gas, but not a gas supply “shortfall”. Moreover, high gas prices combined with falling renewable and storage costs mean that there are cheaper options than developing new gas resources.

What gas shortfall?

AEMO forecast of electricity generated by fuel source, showing AEMO’s forecast supply gap as a thin red line at the top of the stack.
Author

The AEMO report suggests that eastern Australia face a shortfall in 3 of the next 13 financial years – 2018-19, 2020-21 and 2021-22. The largest gap modelled by AEMO is equal to only 0.19% of the annual electricity supply, or 363 gigawatt hours.

In gas supply terms, this is equivalent to only 0.2% of the annual gas supply. But AEMO’s modelling considers a range of possible scenarios, with a variation of roughly plus or minus 5%, far larger than the possible shortfall.

Just 11 days after the report warning of a supply gap, AEMO published updated electricity demand forecasts. In this update, AEMO reduced its forecast electricity demand by roughly 1%. This reduction in demand is more than four times greater than the largest forecast shortfall.

A day later, Shell announced it would proceed with Project Ruby, a gas field with 161 new wells. This was not included in the AEMO modelling process.

Alternatives to gas

Gas has historically been characterised as a transition fuel on the pathway to a zero-emissions power system. The falling costs of renewable energy and storage technologies combined with rising gas costs means this pathway and may indeed be a detour, particularly when taking into account Australia’s climate commitments.

This is also a sentiment increasingly reflected by the industry, with gas producer AGL suggesting that:

the National Electricity Market […] here in Australia could transition
directly from being dominated by coal-fired baseload to being dominated by storable renewables.

Gas generation generally falls into two categories: open cycle gas turbines (OCGT) and combined cycle gas turbines (CCGT). These two technologies effectively play different roles in the energy sector. Open cycle turbines are highly flexible, and are used occasionally over the year to provide peak capacity. Combined cycle turbines, on the other hand, operate continuously and provide large amounts of energy over a year.

Each of these technologies is now under competitive threat from renewable generation and storage. Flexible capacity can also be provided by energy storage technologies, while bulk energy can be provided by renewable energy. These are compared below.

Energy: renewables vs gas

The chart below compares the cost of providing bulk energy with gas and renewable technologies. We’ve represented the price of new CCGT, PV (which stands for photovoltic solar) and wind as the cost of providing energy over the lifetime of the plant.

The other two gas generation costs illustrated, CCGT and Steam, represent the cost of energy from existing plants, at their respective thermal efficiencies. The steam thermal efficiency is similar to that of a highly flexible open cycle gas turbine.

Surprisingly – and depending somewhat on gas price and capital cost assumptions – new renewable energy projects provide cheaper energy than existing gas generators.

Comparison of energy cost from new and existing gas with new renewable energy generation. The range of solar (PV) and wind costs reflect different capital cost assumptions, while the range of gas costs reflects gas price assumptions. CCGT refers to Combined Cycle Gas Turbine.
Author

Flexible capacity: storage vs gas

The next chart compares the cost of providing flexible capacity from gas and storage technologies (again, taking the cost over the lifetime of the plant).

In this analysis we compare the cost of capacity from OCGT with that from diesel and various storage technologies, including battery and Pumped Hydro Energy Storage (PHES). As can be seen, storage technologies can compete with OCGT in providing flexible capacity, depending on technology and capital cost.

Comparison of flexible capacity cost from gas (OCGT), diesel and storage technologies generation, including battery and Pumped Hydro Energy Storage (PHES) . The range of costs reflect different capital cost assumptions.
Author

Another option, not shown here, is demand response. This is the strategy of giving consumers incentives to reduce their energy use during critical times, and is cheaper again.

What is clear is AEMO’s forecast gas shortfall is very small, and that it may have already been made up by revised demand forecasts and new gas field developments. But the question of how Australia should deal with any future shortfall invites a larger debate, including the role of gas in our electricity system, and whether the falling costs of renewable energy and storage technology mean we’ve outgrown gas.


The short-lived gas shortfall: A review of AEMOs warning of gas-supply ‘shortfalls’ was prepared by Tim Forcey and Dylan McConnell.

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.

Three charts on: the incredible shrinking renewable energy job market


Paul Burke, Australian National University

This is the first piece in our new Three Charts series, in which we aim to highlight interesting trends in three simple charts. The Conversation

Australia is embarking on a transition from an electricity system that relies largely on coal to one that may one day be 100% renewable. Last week’s closure of the Hazelwood coal-fired generator was an important milestone on this path.

The development of the renewables sector has not, however, been a smooth ride.

Estimates released by the Australian Bureau of Statistics suggest that the number of direct full-time equivalent jobs in renewable energy activities has continued to fall from its 2011-12 peak. Over a period in which the Australian economy saw around 600,000 additional people get jobs, employment in the renewables sector has been going backwards.

https://datawrapper.dwcdn.net/7pTc0/2/

A small employer

The renewables sector is estimated to have directly provided only 11,150 full-time equivalent jobs in 2015-16. The Australian labour force exceeds 12.6 million people. The sector thus makes a small contribution to national employment, although one that is quite important in some local economies.

Around half of the jobs in renewables in 2015-16 were in installing (and maintaining) rooftop solar systems. Hydroelectricity generation provides 1,840 full-time equivalent jobs, a number that is likely to increase if pumped storage is to make a larger contribution to smoothing Australia’s electricity supply. Biomass provides 1,430 full-time jobs, and the wind industry around 620.

The fact that renewables is a small employer – especially once installations are up and running – is not a bad thing. If renewables were labour-intensive, they would be expensive.

https://datawrapper.dwcdn.net/FS39f/2/

Up then down

The rise and then fall in renewables jobs is primarily a result of what has happened to installations of rooftop solar. The annual number of small-scale solar installations (PV and solar water heaters) skyrocketed over the four years to 2011. This rapid growth was spurred by generous feed-in-tariffs, rebates, and rules for federal government solar credits. There was also a national program to install solar panels on schools.

When these arrangements were curtailed, uptake fell. Annual installations of small-scale solar PV and water heaters are down by more than 60% from their peak. We are still installing a lot of new systems (more than 183,000 in 2016), but fewer than before. Employment estimates for small-scale solar closely track installation rates. The decline in employment in the wind energy sector is also worth noting.

The largest fall in renewables jobs has been in Queensland, a state that substantially tightened its feed-in-tariff scheme for rooftop solar in several steps from 2011 on. Queensland also holds the title of having Australia’s highest residential rooftop solar PV penetration rate (32%). South Australia is not far behind, at 31%.

https://datawrapper.dwcdn.net/NGD1p/1/

Ramping up large-scale renewables

Recent years of policy uncertainty and backtracking have not helped the rollout of large-scale renewables. The termination of Australia’s carbon price and downwards renegotiation of the Renewable Energy Target had chilling effects on investment.

Those events are now behind us. With continued reductions in the cost of renewables, brighter days for the sector appear to be ahead, especially if our governments get policy settings right.

We can expect particularly rapid growth in jobs installing large-scale solar PV. Just last week, for example, it was announced that South Australia is to have a large new solar farm.

Paul Burke, Fellow, Crawford School, Australian National University

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

With battery storage to the rescue, the Kodak moment for renewables has finally arrived


Kevin's Walk on the Wild Side

Image 20170319 6133 1xq9awd
AAP/Lukas Coch

David Holmes, Monash University

Who would have thought that, scarcely five weeks after Treasurer Scott Morrison, paraded a chunk of coal in parliament, planning for Australia’s energy needs would be dominated by renewables, batteries and hydro? The Conversation

For months now, the Coalition has been talking down renewables, blaming them for power failures, blackouts, and an unreliable energy network.

South Australia was bearing the brunt of this campaign. The state that couldn’t keep its lights on had Coalition politicians and mainstream journalists vexatiously attributing the blame to its high density of renewables.

But this sustained campaign, which would eventually hail “clean coal” as Australia’s salvation, all came unstuck when tech entrepreneur Elon Musk came out with a brilliant stunt: to install a massive battery storage system in South Australia “in 100 days, or it’s free”.

The genius of the stunt was not to win an instant contract to…

View original post 1,204 more words

Gas crisis? Energy crisis? The real problem is lack of long-term planning


Kevin's Walk on the Wild Side

Image 20170317 6113 1aln8fl
The long view: energy policy needs to stay firmly focused on the horizon.
Mattinbgn/Wikimedia Commons, CC BY-SA

Alan Pears, RMIT University

If you’ve been watching the news in recent days, you’ll know we have an energy crisis, partly due to a gas crisis, which in turn has triggered a political crisis. The Conversation

That’s a lot of crises to handle at once, so lots of solutions are being put forward. But what do people and businesses actually need? Do they need more gas, or cheaper prices, or more investment certainty, or all or none of the above? How do we cut through to what is really important, rather than side details?

The first thing to note is that what people really care about is their energy costs, not energy prices. This might seem like a pedantic distinction, but if homes and businesses can be helped…

View original post 780 more words


Why we need an ‘energy Landcare’ to tackle rising power prices

Image 20170224 32692 1tle6t8
This array in Indiana is one of a growing number of “community solar gardens” in the US.
Robford15/Wikimedia Commons, CC BY-SA

Nicky Ison, University of Technology Sydney

Rising electricity prices have become a fact of life in Australia – and are likely to be so for a few years to come. The Conversation

However, while the cost of generating electricity will rise as cheap but ageing coal power stations go offline, that doesn’t mean your electricity bills need to follow suit.

Households and businesses can take greater control of their energy future and slash their power bills in a range of cost-effective ways. Solar panels and battery storage are among the most obvious strategies. But not everyone can afford them, which is why we are seeing the rise of community projects that aim to give more people access to clean energy.

Australia now has more than 1.6 million solar roofs. Last year 6,750 battery storage systems were installed, up from just 500 in 2015.

Yet many households and businesses are still effectively “locked out” of this energy revolution. Many renters, apartment-dwellers and lower-income households face a series of market barriers that make these options hard to access.

Renters often find that their landlord does not want to invest in solar. Those living in apartments can have the same problem with their strata or body corporate, with the added problem of not always having access to their own roof.

Poorer households typically can’t afford solar panels or batteries, even if they would save money over the longer term. On top of the expense, buying solar panels and other clean energy products can be complicated and confusing.

Club together

The good news is that there are several initiatives around Australia that aim to get around these barriers. One example is Darebin Solar $avers, a collaboration between local government, community and industry that has installed solar panels on 300 low-income households in Melbourne’s northern suburbs. There was no upfront cost to these households, ensuring they were financially better off from day one.

Another example is the community solar gardens model, which has become popular in the United States. Solar gardens work by installing a central solar array, generally near a population centre. Energy customers are invited to buy (or subscribe to) a share in a handful of the array’s solar panels. The electricity generated is then credited on the customer’s electricity bill. Often, poorer households are offered discounts to be able to participate.

One issue with these kinds of schemes, however, is that they are complicated to set up. They usually involve many partner organisations – at least one of which has to have an interest in ensuring that users are better off. It is hard to see how the market can deliver these schemes on its own.

Where markets fail, it is typically governments’ job to step in and help. So how can governments go about helping people get access to affordable clean energy?

In the United States, the Obama administration set a national target of 1 gigawatt of solar panels to be installed on low- to moderate-income homes by 2020 as part of the Clean Energy Savings for All program. The National Community Solar Partnership brought together 68 organisations to help set up community solar gardens and make them easier to access.

This week, Australia’s second national Community Energy Congress in Melbourne will hear from Barack Obama’s climate and energy adviser, Candace Vahlsing, who will outline how these policies can help ensure wider access to green energy.

In Australia, a proposal to establish a network of 50 Regional Energy Hubs is gaining traction. The federal Labor Party, Greens and Nick Xenophon Team all made commitments in the lead-up to the 2016 federal election.

The Regional Energy Hubs proposal is modelled on the Moreland Energy Foundation, a non-profit organisation in inner-north Melbourne set up in 2000 in the wake of Victoria’s energy privatisation. The foundation has a team of energy and engagement experts working with households, businesses, community groups and governments on innovative approaches to implementing sustainable energy supply – the Darebin Solar $avers program being one example. The idea would be to set up dozens more similar organisations, all linked together across the nation.

The program can be thought of as like Landcare but for clean energy. Landcare is a nationwide network of volunteers who care for our land and water, with the aim of boosting both environmental protection and agricultural productivity. Similarly, energy hubs would aim both to make energy more environmentally friendly, and to make clean energy more affordable and accessible.

This is why we have to move past just talking about “costs” and start thinking about investment. Modelling by Marsden Jacobs and Associates shows that every dollar of government investment in community energy can leverage A$10-17 of community investment. At the same time, this delivers many other benefits to communities: closer connections between neighbours; opportunities to learn new skills or access new income streams; easing social inequity; and improving health.

Given the myriad possible solutions to our energy challenges, we need to nut out what works best, and where. The best way to do this is by putting all of our heads together – local government, state government, federal government, private enterprise, innovators in the clean energy sector, and the communities that stand to benefit. That way we can make the clean energy transition fairer and more accessible to all.


The second national Community Energy Congress is taking place in Melbourne on February 27-28.

Nicky Ison, Senior Research Consultant, Institute for Sustainable Futures, University of Technology Sydney

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

RISING TIDE PROTEST IN NEWCASTLE: COAL INDUSTRY THE TARGET


Climate change activists under the ‘Rising Tide’ banner conducted what was called on the day the ‘People’s Protest’ in Newcastle yesterday. The protest was an attempt to shut down the Port of Newcastle in Australia, which is the largest exporter of coal in the world.

Despite the protesters claim that they had successfully blockaded the harbour, the authorities had previously arranged for there to be no shipping movements on the day in the interests of safety. The protesters used kayaks and various home-made ‘boats’ to form the blockade near Horseshoe Beach. About 500 people took part in the protest.

A police presence was very active during the protest to ensure safety and to prevent any form of crime.

Rising Tide is preaching a message of anti-coal and pro-renewable energy for our future.

NSW Greens MP Lee Rhiannon took part in the protest.

The protesters block the harbour entrance

The protesters block the harbour entrance

 

The police maintained an active presence

The police maintained an active presence

The police maintained an active presence

The police maintained an active presence

ELECTRIC CARS COMING SOONER RATHER THAN LATER


In great news for the environment and consumers it seems that ‘green cars’ will be arriving in Australia sooner rather than later, with infrastructure for electric cars to be set up in Brisbane, Sydney and Melbourne within four years. The project is a joint venture between AGL, Macquarie Capital and Better Place.

The project aims to set up recharge stations for electric cars at workplaces, homes and shopping centres. It is thought that some 250 000 recharge stations will be built in the project. Such projects have already been set up in Israel and Denmark.

Macquarie Capital is to raise $1 billion to build the recharging network, with AGL to supply renewable energy for the project. Better Place will actually build the network.

Should the project go ahead and the infrastructure be built, motorists will be able to dump petrol and diesel vehicles and move to electric ones. This will of course be a great relief from rising fuel costs and help protect the environment from further greenhouse gas emissions.