Addressing a growing problem

Look at the media today and you will find a raft of stories about the Australian Energy Market Commission’s new analysis taking stock of the east coast power system’s ability to deliver on demand.

Inevitably the media coverage is flavored by the “sinner or saint” view of intermittent renewable energy which is a constant current focus of political argument and side-taking commentary – and by an interpretation of the commission’s work to the effect that the NEM is growing more unstable.

The commission is actually quite clear on its perspective: right now, it says, there is enough power capacity to sustain reliable supply “but we have a growing problem (in) management of the system and more action needs to be taken to integrate weather-driven generation with the grid.” Keeping things like frequency and voltage within technical limits is becoming “more challenging.”

This is rather more moderate language than the Energy Security Board’s description late last year of the NEM’s health – “in intensive care” was the phrase that hit the headlines.

The AEMC this week is at pains to point out how much is being done to address the integration issue – which became joint top of mind nationally (along with angst about energy costs) when the lights went out in South Australia 18 months ago after a big storm. The commission says 10 major steps have been taken to tighten NEM security arrangements and others are coming up in 2018 after four further review processes are completed.

And it also makes a point that should not be overlooked in all the public fuss: “We are focused on addressing the problems we have today as well as looking to what is required for the future.”

Anne Pearson, the commission CEO, notes “it is not well understood that we (currently) have a good supply of available power which makes the system reliable (but) there is a separate problem of maintaining the stability of the system when unexpected breakdowns happen.” In short, she says, the NEM grid has to be managed differently to respond to a changing generation mix.

Writing an op-ed in the Australian today, Pearson adds that the system frequency issues now confronting the grid are “eye-glazing” (for us laymen) but essentially the changed mix is making this aspect harder to control, with less time for the market operator to recover the network from equipment failures before bad things happen.

The big complicating factor, of course, is that all the market changes being pursued, including the “national energy guarantee,” have to implemented without adding to consumer costs – especially for households in the present fevered political environment – and even in a way that enables charges to fall. This is a feat that even Jack of serial fame couldn’t achieve with one bound and, I suspect, it is unlikely to be achieved during the current political season (which runs until after the Victorian, New South Wales and federal elections).

If politicians did not fully appreciate this particular risk, they should be better informed now following publication of a NEG submission to the Energy Security Board from the Australian Competition & Consumer Commission.

In it, Rod Sims, the ACCC chairman, poses a number of questions, including this: “how will the trade-off between reliability and affordability be determined (via the NEG) to ensure that end-users pay no more than the value to them of increased reliability?”

As last weekend’s Batman and SA polls demonstrate, the judgement of the people is not to be taken for granted by politicians and the community is looking at political conjuring tricks with increasingly beady eyes.

The rift between soundbites from politicians and the complexities of power system management, including its interaction with gas supply, is wide and growing wider.

Here, for example, is Sims again in his letter to ESB chair Kerry Schott: “How can the NEG be designed in such a way that it does not impose significant regulatory costs and burden on retailers? Additional regulatory costs ultimately result in higher prices for consumers.”

And again: “If the current contracting instruments in the market need to be redesigned to incorporate emissions and reliability metrics, there is a risk that a series of smaller, less liquid markets (will) develop in place of existing arrangements. Such an arrangement would expose both retailers and generators to more risk and result in higher prices.”

All this stuff, to quote Pearson, is “eye-glazing” for what Prime Minister Paul Keating used to describe as “the mob” – ie us.

The sort of work that the AEMC has undertaken and is continuing to pursue is essential to the efficient functioning of the NEM but it is way too complicated for “the mob” – and it is only part of the interventions being eyed by political leaders and their advisers across a federated government system.

We all know that the NEM cart has flirted with the edge of the ditch a number of times in recent months; keeping it on the road towards a genuinely affordable as well as secure and technically reliable future (let alone a greener one) is a Herculean task and the heavy lifting is far from over.

In closing, the AEMC analysis points to modeling that burgeoning solar PV uptake and more energy end-use efficiency should see NEM power demand stay flat for a while longer before falling by 1.6 per cent by 2026-27.

PS: You may be interested to know that in the seven days from the middle of last Wednesday to the middle of today, including an awfully hot Sunday in New South Wales, the total input of electricity on the east coast (including an estimate of rooftop solar PV) was 3,913 gigawatt hours – of which black coal contributed 2,201 GWh, brown coal 590 GWh, gas plants 396 GWh, hydro systems 288 GWh, wind power 259 GWh, rooftop solar 158 GWh and utility-scale solar 17 GWh. (Source: the OpenNEM widget)

The wheel turns

Josh Frydenberg would be less than human if he did not permit himself a quiet chuckle at the failure of the garage warrior, Jay Weatherill, to win re-election in South Australia yesterday.

At a far more serious level, Frydenberg and Malcolm Turnbull will now be seeing a better prospect for the “national energy guarantee” to be advanced this year because South Australia is the lead State in the legislative process for the NEM and because Weatherill (to quote The Guardian newspaper) was “an implacable, one-man road block to the NEG on the basis that the scheme is not sufficiently friendly to renewables.”

At the same time the failure of the much-hyped Nick Xenephon thrust to be the big influence in the next State parliament will bring some relief to energy retailers, who would not have been looking forward to the wider implications of his populist plan to create the “Community Electricity Trust of SA” to provide electricity to households with an income below $75,000 a year and to small businesses. (Even so, the issue of gentailer market power in the NEM, and not least in South Australia, is not going to go away.)

More broadly, last night threw a bucket of water over the Greens, who were hoping for a boost for their radical policies from the by-election in the federal seat of Batman in Melbourne. The Greens also picked up just 6.6 per cent of the primary vote in South Australia on Saturday, well down on the previous election and half of what Xenephon’s SA Best garnered at its first showing. Victory in Batman would have given the Greens a new launching pad to promote their energy spiel and, inevitably, would have seen federal Labor under Bill Shorten trying again to play catch-up.

It will be a mistake to see the SA poll outcome as being all about energy – Reuters, for example, in its report today asserts the result is “a blow to national renewable energy plans” and bizarrely “the vote was seen as a choice between solar and wind energy, pushed by Labor, and coal, backed by Turnbull’s conservative government” — although the issue obviously played a prominent role in the election campaign.

Perhaps the most significant influence of all on the outcome is that the Electoral Commission’s reworking of State seat boundaries required Weatherill and Labor to win seats to hold office – and that was always a bridge too far, given the baggage he and his government were carrying. Steven Marshall led the Liberals in 2014 to victory in the popular vote but couldn’t muster enough seats to take office.

It seems Marshall and the Liberals will have a clear majority in the new parliament, enabling them, depending on the outcome in the State’s upper house, to wield their new broom rather than just wave it.

Whatever this means for policies within the State, the big national implication of the poll result is that Frydenberg and Turnbull now have a better opportunity to use the rest of this year to advance the NEG in an environment where there is some chance that the wildly unpopular upward trend in energy prices in eastern Australia will be depressed and just possibly reversed.

From an industry perspective, the bugger factor remains that this is still likely to be a work in progress at the time of the next federal election (which realistically needs to be before May next year) and Shorten frequently gives the impression on this issue of being Weatherill writ large. There can be no investor confidence about a NEM built around a NEG until the federal poll is out of the way.

Meanwhile,to counter the green boosters, who can be relied on to describe the SA election outcome as a version of the invasion of the Daleks for renewables, it is worth recording what the incoming Liberal government actually said during the campaign: “The State Liberals fully support renewable energy, but there must be a sensible transition to renewable sources which does not compromise the integrity of the grid and leave South Australians vulnerable to blackouts and massive prices.”

The SA Liberals have a three-cornered energy plan: to achieve greater security of supply for the State, to lower its power bills and to be part of the push to meet a national renewable energy target.

Marshall declared: “Our energy policy will be practical, not ideological.” He added: “A Liberal government’s discussions with the energy supply industry will not have a bias towards any particular technology. All options must be on the table if we are to resolve the current crisis in reliability and affordability of electricity supply.”

High on the list of a Marshall government’s desires is a new high voltage transmission line linking SA and New South Wales – which would allow the former to better export its excess wind generation and to rely on access to black coal generation when there is a lack of wind.

Nonetheless, the practicalities of politics in a State with a community that likes renewable energy (despite their fortunes in the past having been built to a not inconsiderable extent on Cooper Basin gas) dictated a Liberal election promise to subsidize battery installation in 40,000 homes and provision of a $50 million fund towards the development of new storage technologies. (Why a small State in Australia wants to throw money at storage R,R&D given what is going on in the world to drive this technology beats me, but that’s politics.)

Now that this election’s done and dusted (more or less, counting continues), attention will turn to the 20 April meeting of the CoAG Energy Council in Melbourne, with Energy Security Board chair Kerry Schott telling a forum last week “I really do believe the worst is over on the (electricity) price front.”

Game-changing or game?

April 20 is now an important date on the Australian energy calendar for 2018. It is when the CoAG Energy Council, following the South Australian election on Saturday, will meet in Melbourne to next consider the “national energy guarantee,” which Josh Frydenberg described in the past week as a “critical component” of future policy.

The next card to be played in this process, due in the near future, will be the Australian Energy Market Operator’s evaluation for the federal government of AGL’s post-Liddell plan.

And not unimportant to the discussion will be a report the Australian Energy Regulator is to publish at the end of this month on the impact on the NEM supply/demand balance of the closure of Hazelwood power station.

Both reviews, one imagines, will feature in the Energy Security Board advice to the ministerial council as will the board’s reporting of its latest consultations on the NEG that finished last week.

What follows?  Providing that CoAG agrees to direct the ESB to continue its NEG work, a high-level design paper will need to be produced and then papers on specific elements over the next few months. The federal government’s aim is to finalise the design of the NEG before the end of the year to enable drafting of legislation and rules to begin.

In an op-ed in the Australian Financial Review, Environment & Energy Minister Frydenberg has continued his dogged advocacy for the measure. Its implementation, he says, “will have a significant impact on the wholesale market.” By integrating energy and climate policy, “we will have a mechanism that will bring more certainty for investment and at the same time put a premium on reliability which is needed to address the volatility plaguing South Australian and Victoria.”

In continuing to needle South Australia’s and Victoria’s Labor regimes over their renewables approach, he points out that “alarmingly” wholesale prices have spiked above $5,000 per megawatt hour nine times in the former State and six times in the latter – “and nowhere else in the NEM” – so far this financial year.

Responses to the ESB’s consultation paper are now starting to emerge: green-related interests continue to leap up and down about the NEG’s perceived support for coal power and others are fretting about the future state of competition in the east coast market.

A collective of 10 retailers representing 10 per cent of the NEM’s sales have voiced concerns about making “significant, costly changes that (may) have dire consequences.” Given the track record of intervention in the market over the past decade, this is a not unreasonable point.

The retail group sums up the challenge like this: “The problem policymakers are working to solve is the imbalance between electricity supply and demand, particularly diminishing reliable (firm or dispatchable) power over the next five years due to displacement of large, dispatchable, carbon-intensive power plants. This, and poor policy and planning, have led to market concentration in firm generation and price increases, exacerbated by gas availability and cost.”

The nub of their worries emerges as “(holding) retailers responsible for generator reliability, emissions and investment is a misplaced risk (with) a range of market implications.” One outcome they fear is that the NEG will see even more market power in the hands of the “big three” NEM gentailers.

ERM Power’s Jon Stretch offers their alternative view “We suggest a lighter touch safety net model which would ensure the benefits that liquid markets bring to price transparency and hedging efficiency remain for competition and consumer outcomes. It would avoid the risks and costs associated with change in law complexities to existing retail and wholesale electricity contract arrangements. Our model requires no penalties or costly compliance mechanism.”

He concedes that “like the current NEG, our alternative involves a degree of centralist planning and procurement that isn’t ideal” but argues “our proposal addresses the fact that loss of market liquidity and market power abuse are greater risks under the current option than is the risk of (generation) over-build.”

The Academy of Technology & Engineering (ATSE) says there are numerous design challenges facing the NEG, including minimizing the complexity of its mechanisms and their associated compliance costs and dealing with the “high risk” of increasing the power of the incumbent,vertically-integrated gentailers.

“It is important,” the academy adds, “to ensure that emerging technology-based solutions will be able to contribute to reducing prices through effective competition.”

One of the “big three” gentailers, AGL Energy, includes competition in its submission to the ESB, listing five principal design points it believes the measure must manage:

  1. The greatest regulatory efficiency possible, which consists of minimal disruption to existing markets at the lowest net cost to customers.
  2. Ensuring the NEM achieves its pro-rata share of Australia’s international commitment for emissions reductions with a view to ramping up to a potential of net zero emissions by 2050.
  3. Providing direction on the appropriate mechanisms by which market reliability can be maintained as a result of increasing amounts of intermittent generation.
  4. Enhancing existing operation of the market and also considering other market reforms and reviews.
  5. Delivering a competitive, transparent, efficient, and liquid market.

The company’s chief economist, Tim Nelson, in sending its submission to the ESB, writes that “in our view, there may not be a compelling need to make significant structural changes to the existing operation of the NEM to drive better reliability outcomes.”  He adds: “The best way of reducing wholesale prices over time is by increasing supply through policy certainty on emissions reductions, which may necessitate a further refinement of the existing market settings to ensure market reliability. In meeting these objectives, consideration of a lowest cost approach that utilizes improved market settings and existing market infrastructure should be a genuine option for policymakers to consider.”

For its part, Origin Energy, while saying the overall objectives of the NEG are “sound,” says that “placing the point of liability at the retail level for the reliability and emissions obligations adds a layer of complexity to the design which is unnecessary.”

And EnergyAustralia, declaring “we favor simplicity,” urges that the NEG should put the emissions guarantee on generators, not retailers; doing it the other way round will “threaten liquidity in the financial markets.”

Standing back and looking at what’s going on, it seems obvious that, while consumers are obsessed by the cost of their power – Energy Consumers Australia says the NEG “must be about delivering the transition in a way that lowers bills” – and environmentalists are obsessed about using the electricity market to meet a high level of carbon abatement, the chief issues for progressing the measure are complexity, time and politics.

With respect to the latter, it is interesting to see the Property Council, representing owners and investors in a $670 billion sector, expressing the view in its submission that the NEG is an opportunity to depoliticize energy policy in Australia. Seriously? Almost four decades of being involved in energy issues tells me that there is fat chance of this happening, no matter how right it is to wish it would.

As the council itself says in the same breath: “In the past decade Australia has lost its advantage in reliable and competitively priced energy due to the ongoing and highly partisan debate on energy and climate change policy.”

The national interest, for example, will not stop Labor working to thwart a win on energy for the federal government, so the immediate elections that matter are in South Australia next weekend and in Victoria in November while the standing of Turnbull’s administration (including public faith in its ability to cut energy costs) is being weakened opinion poll by opinion poll.

The NEG’s complexity plays in to this situation: the ESB has 79 questions in its discussion paper. Working through them in a way acceptable to all east coast governments by August (the Frydenberg/Turnbull aim) and capable of delivery through legislation before next summer (and the arrival of the campaign season for the New South Wales election) seems a tall order.

(As an indicator of public sentiment, a recent Essential Report opinion poll shows 73 per cent of respondents believe their cost of living has worsened in the past 12 months and 75 per cent say this is true of their electricity prices.)

Above all, with the NEG,  are politicians seeking a game-changer or continuing to play games?

Assessing ADGO

Last week was a pretty big one in the energy arena, starting with the surprise announcement by newly-formed Australian Industrial Energy of its LNG import plan, encompassing the many aspects of the Australian Domestic Gas Outlook conference and ending with the federal government cutting a deal to buy all of Snowy Hydro from Victoria and New South Wales for $6 billion.

It also was a week that saw a former State premier, Colin Barnett, single-handedly lift the issue of a west/east gas pipeline back in to the mainstream debate through his engagement at ADGO.

It was a week in which the Australian Competition & Consumer Commission signalled, both via ADGO and in an appearance at Senate Estimates hearings, that it sees the east coast market as still being “incredible tight” and posing a threat to the operations of manufacturers.

And it was a week in which the Victorian government, facing an election in November, signalled (via an address to ADGO by State Treasurer Tim Pallas) that it will defy pressure to pursue onshore gas developments as the east coast’s biggest offshore gas production area, the Gippsland basin, reaches the end of its existing operations.

(The other State government facing widespread pressure over its handling of gas developments is New South Wales and its Energy Minister, Don Harwin, given a prime speaking slot at ADGO, pulled out on 24 hours’ notice, claiming other commitments. He later tweeted about a visit to a wind farm near Goulburn that day.)

The core message from the ACCC’s chairman, Rod Sims, is “the fundamental problem of a lack of both sufficient and divergent sources of gas supply, particularly in the south, needs to be addressed and this needs to happen soon, given the lags in bringing supply to market.”

“Soon” looks different to a factory owner confronted with “now” decisions about business viability and gas suppliers confronted with all the requirements of development.

It is apparent from ADGO that “soon” in terms of supply is most likely to be the LNG import projects of AIE and AGL Energy, the former focused on Newcastle, the latter on Victoria, should they proceed.

As a mark of how times and circumstances can change, veteran manufacturing executive Peter Dobney of Orora Group, a frequent speaker at ADGO, wryly complained in a panel session this week that he was mocked at the event five years ago when he raised recourse to importing LNG to NSW………

This, it seems to me, should be borne in mind when dissing the pipeline from Western Australia to Moomba about which former WA leader Barnett is so passionate. The Australian Financial Review, which along with The Australian provided extensive ADGO coverage, sees the west/east pipeline as a threat to the LNG import plan, but a case can be made, looking out to 2030, for “all hands on deck” for eastern domestic gas supply, never forgetting the ongoing critical role for the fuel in power supply to the dominant demand areas of the country (NSW, Queensland and NSW).

A thread running through all this is the need for greater competition on the east coast energy scene, a strong pursuit of the ACCC’s Sims but also a topic that comes up continuously now in the general debate and which was well-canvassed at ADGO.

James Baulderstone, who is fronting the Australian Industrial Energy import project, argued  at the conference that the mooted AGL development will entrench a market incumbent while AIL is “a completely new entrant with a focus on the forgotten sector of commercial gas buyers suffering from sky-high prices.”

Users, whether representing manufacturing or power generation, were vocal at ADGO on the issue of prices and the fact that more supply without shifting costs down will not alleviate their problems.

Baulderstone told ADGO that his project (offering 40 petajoules of gas a year to the 140 PJ New South Wales market) will be the equivalent of discovering a large new field right off the coast of Greater Sydney, a point that could also be made about the AGL import plan focused on Victoria. This focus raises in my mind just how many other such deals could be pursued as others view the AIE/AGL game plans? In practical terms, it would seem perhaps another two.

Again, to come back to Dobney’s point, how fascinating that this stuff can now be discussed without suggestions about loss of mental marbles.

Their potential doesn’t change the fact, as Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association declared at ADGO, that the policy approach to the gas supply issue in southern States represents “failure on a grand scale.”

Not surprisingly, the States deny this. Pallas was at pains to point to the Andrews Labor government’s support for new exploration offshore Victoria. Harwin emerged from his wind farm foray to tell Fairfax Media that “there is no moratorium in NSW; we have a Gas Plan with science-based regulation – we are taking a sensible approach.” Which, of course, is cold comfort to 500 large industrial users and 33,000 small businesses in NSW freaking out about their gas contract problems or the million household customers considering their much higher bills.

The approaches by the Andrews and Berejiklian governments, both described by Malcolm Turnbull last September as “comprehensive failures” in this respect, sees gas reaching their States from Queensland carrying a transport price tag of $2 to $4 per gigajoule. That’s not a “Gas Plan” for today’s consumers – it is a dog’s breakfast. As the Energy Users Association’s Andrew Richards said in an ADGO panel discussion: “There is a great level of frustration and desperation (among industrial consumers). We need a price correction, not a softening of high costs. Too many (factories) are concerned about whether they can survive long enough to enjoy (mooted) future benefits.”

And, in terms of end-supply costs, the continuing strong efforts by governments of both stripes in Queensland, is not really a solution for southern consumers. (Queensland Natural Resources Minister Anthony Lynham gave an ebullient talk, back to back with Pallas, announcing new acreage releases with any gas found earmarked for domestic use – “further demonstrating we are a reliable and affordable gas producer” – which both in terms of time and final price prospects does not cut today’s mustard in Melbourne and Sydney.)

Pallas declared his government, in imposing onshore gas project bans, was looking out environmentally for the State’s $13 billion food and fibre industry with its 190,000 employees – which drew a riposte later from a Victorian manufacturing executive in the audience that the food and fibre businesses badly needed an adequate supply of competitively-priced gas.

The C-word (as in “cost”) was again perhaps the most used one at ADGO.

The harsh reality was summed up by EnergyAustralia’s Mark Collette. “After 30 year of an ubiquitous resource with constant availability and stable prices, the golden age of gas is over, “ he told attendees. “Cheap gas has gone.”

Collette and his colleagues have since announced plans to evaluate new gas-fired generation, as well as energy storage, in Victoria.

Not surprisingly, a fair bit of discussion at ADGO revolved round the impact of gas availability and cost for generators in a market environment where increased investment in intermittent renewables and impending further closure of coal plants creates opportunities for the “bridge” technology – and the determination of the Turnbull government to forge ahead with “Snowy 2.0” raises issues about its role.

The conventional outlook is for NEM generation use of gas in 2020 to be half what it was (200 petajoules) in 2010 and then to rebound to this level by the mid-Twenties.

The advent of LNG imports could change this trajectory – AIE’s thinking encompasses feeding gas to generation in NSW, including possibly new plant – and how this plays out seems very likely to be a topic high on the agenda of future ADGOs.


Big week in gas

The upstream petroleum industry was quick to seize on the International Energy Agency’s report on Australia last week.

The message to policymakers from the IEA executive director, Fatih Birol, “could not be clearer,” declared Malcolm Roberts, chief executive of the Australian Petroleum Production & Exploration Association. “The number one step Australia can take to deliver secure and affordable energy is to remove bans on unconventional gas projects.”

Later this week – from Wednesday to Friday – Roberts and a slew of other key stakeholders in the gas imbroglio will have an opportunity to review where things stand at the Australian Domestic Gas Outlook conference on Sydney. Speakers will include the federal Resources Minister, Matt Canavan, the New South Wales Minister for Resources, Energy & Utilities, Don Harwin, the Queensland Minister for Natural Resources, Mines & Energy, Anthony Lynham, the Victorian Treasurer and Minister for Resources, Tim Pallas, and the former federal energy minister Ian Macfarlane, now chief executive of the Queensland Resources Council.

Canavan has been pushing the point this month that the Turnbull government has delivered on its quest to reduce domestic gas prices, declaring that the threat of export controls has seen them fall from as much as $20 per gigajoule to $8 to $9 since April, “a fair level, a level that reflects the world price.”

He told media the government reserves the right to use the “gas security mechanism” to trigger action next year if these prices do not hold.

More exact numbers for gas charges were provided late last month by consultants Oakley Greenwood in a report to the CoAG Energy Council. They said the average delivered price for large industrial customers, a key part of the economy and large direct and indirect employers, is $10.08 per GJ, with the wholesale segment $9.19.

Both Canavan and APPEA keep pointing out that the size of bills being paid by consumers in southern States would be lower if their governments removed impediments to local production.

Roberts says the governments in Victoria and NSW “should squirm” when faced with the Oakley Greenwood data. “Victoria now has the most expensive wholesale gas in the market and NSW is almost entirely reliant on inter-state supplies.”

All of which makes the announcement overnight by a joint venture, Australian Industrial Energy (helmed by Andrew Forrest with former Santos executive James Baulderstone as the management leader), to bring LNG to a NSW regasification site rather interesting. I see it reported that the project aims to be provide 100 petajoules a year to the southern market, equal to about 75 per cent of the NSW demand.

A key question will be “at what price?”

There can be no return to the era of $3 to $4 per GJ prices because of the costs involved in bringing new resources, including those in Victoria and NSW, to market. The petroleum industry argument is that between $7 and $9 is the price manufacturers should expect to be the new normal if adequate resources can be made available.

Another key question is whether or not such fuel availability as presaged by the Australian Industrial Energy concept could spark investment in a new gas-fired power station and, if so, where? And by whom?

Such a development would wipe the smiles off faces of green activists who have seen baulking gas development as a strong ploy in promoting wind and solar (and now batteries) in Victoria and NSW.

In context, here, the apparent inevitability, based on current projects, that the 2020 federal renewable energy target of 33,000 gigawatt hours annually will be met is a factor no-one contemplating a new fossil-fuelled power station can ignore.

Whatever flows from the AIE announcement, I imagine it will be the talk of the coffee breaks at ADGO this week.

Meanwhile, with energy costs now recognized as a major impediment to manufacturing competitiveness (a theme that has run through the previous five ADGO forums since 2013), another key question is what level of “demand destruction” – that is consumer companies closing down activities – will be seen between now and 2020? The Australian Financial Review, which has broken the Australian Industrial Energy news this morning, reckons recent Australian Energy Market Operator modeling suggests a loss of demand equal to 22 small manufacturers.

Overshadowing all of the above is the issue of global oil prices – to which gas prices are linked. If they rise, our gas prices will rise – that’s the petroleum merry-go-round for you.

Canavan’s case if that his government’s actions over the past year have helped prevent domestic gas prices here being higher than they were overseas (a comparison that carries its own contention). The government, of course, has the added challenge of supporting Australia’s strong position in the international LNG trade – a significant economic factor now – while being seen to ensure domestic supply.

And through it all endures the issue of finding an acceptable political solution to the highly-charged issue of regulating access to new gas resources across the country.

It’s going to be a lively three days at ADGO, I imagine.

Golden opportunity

Experts among stakeholders will pore over the Energy Security Board consultation paper on the “national energy guarantee” in the next three weeks; what interests me right now is the commentary with which the famous five – Kerry Schott, Claire Savage, Paula Conboy, John Pierce and Audrey Zibelman – open the exercise.

They cut straight to the chase: the NEG is an opportunity to resolve some of the most vexing issues bedeviling the NEM, but it “cannot solve all of these issues alone.”

This brings us back to a point that has been made over and over again during the past five years – there is no silver bullet to address Australia’s energy and climate policy mess but there is probably a fair bit of silver buckshot and, even then, some solutions will come with their own baggage.

As the ESB says, “15 years of policy instability have complicated long-term investment decisions and required responses (the paper says “requited,” typos creep in everywhere) for (power) system reliability and security have not been forthcoming.”

This, the five add, “has left our energy system vulnerable to escalating prices while being both less reliable and secure.”

That “15 years” says such a lot about how we have institutionalized ineptitude in energy management across the political system (we are talking late-term Howard through Rudd, Gillard and Abbott to Turnbull here and that’s just the federal scene; the States are as much to blame as anyone for today’s situation). Turnbull and Frydenberg are entitled to say they are trying hard to address the “crisis” they have inherited but, even so, the Coalition government is as riven by dissension on energy and climate issues as CoAG itself.

The five’s claim for the NEG is that, if CoAG backs the plan, it “will provide a clear investment signal so the cleanest, cheapest and most reliable generation gets built in the right place at the right time.” That’s really a huge statement, given the source (ie it’s not pollie-speak) and that delivery of such a promise requires years, not months, and expenditure of many billions of dollars (when support infrastructure is taken in to account, as it must be) in a political environment that shows signs of being even messier than in the past 15 years.

Another important point is also set out in the ESB’s opening salvo: “Over the past decade policymakers have attempted to design the perfect emissions trading scheme and every attempt has failed.”

Let’s not loose sight of the fact that those who failed are not just politicians but the Treasury, Prime Minister & Cabinet Department and the various contortions of the environment and energy bureaucracies plus assorted expert advisers.

The five assert that their NEG is just a requirement on retailers to ensure that what they buy is in line with the abatement target politicians agree to set for power generation.

How hard is it for CoAG first ministers to agree such a target? Answer so far: apparently much too hard.

Perhaps we should force them to listen to the tale of how Alexander dealt with the impossibility of unraveling the Gordian Knot – he took his sword and sliced through it.

For me, what this passage in the paper highlights is (a) the critical need for the CoAG leaders to take the high ground on this key point and (b) just how hard this is going to be in a period of four State elections, and very possibly a federal one, in barely a year.

Moving along, the ESB is attempting to create a framework of eight steps for the NEM. They are:

  1. Forecasting the reliability gap: AEMO forecasts whether the reliability standard is likely to be met (or not) in any NEM region over a forecast period.
  2. Updating the reliability gap: AEMO updates the forecasts of any reliability gap over time, as the market changes, for example to reflect a notification of retirement of a particular generator.
  3. Triggering the requirement: If a reliability gap has been identified, the market would be expected to react and start to invest in new capacity or offer additional existing capacity to the market to close the gap. When a gap persists, there will be a point in time in advance of any forecast reliability gap at which the reliability requirement is ‘triggered’ and retailers are then expected to respond.
  4. Qualifying instruments: Retailers will be incentivized to make investments or enter into contracts that underpin new investment that can alleviate the identified gap. Participants will need to know what instruments will ‘qualify’ for meeting the reliability requirement. Retailers will be required to demonstrate that they have entered sufficient eligible contracts to cover their share of the peak demand requirement at the time of the reliability gap.
  5. Allocating the requirement: If there is an identified gap and the obligation has been triggered, there will be a defined process for filling or allocating the gap to retailers.
  6. Compliance: At the compliance date, the AER will need to assess whether retailers have met their reliability requirement.
  7. Procurer of last resort: If retailers do not meet the requirement by the compliance date, AEMO will need to procure resources to fill any remaining gap.
  8. Penalties: Penalties will need to be assigned to retailers that have fallen short of their reliability requirement.

Of course, the imps of detail will immediately start to nip at this approach – just wait for the submissions – but, as a bridge across the market swamp, it makes broad sense to me.

The ESB devotes most of the 58 pages of the discussion paper to addressing NEG detail with a broad brush, but the five rightly make the point that a key element is the capacity of governments to work together in a federal system, which has been the great big failure through this century to date.

Fatih Birol of the International Energy Agency, on his brief visit to Australia, told the politicians that the NEG, at least conceptually, represents a “golden opportunity.” Given what else was going on last week, was anyone in federal parliament alone even listening?

Reading the coverage of the ESB statement in the mainstream and greenstream media in the past several days, I doubt that anyone in the community other than energy nerds will have got anything they can understand from it – and therefore there is no community pressure on governments in eastern Australia and in Canberra to knuckle down and create the environment for the “golden opportunity” to be seized.

What we need is a modern Paul Keating, modern Wayne Goss and modern Nick Greiner, at the pinnacle of power and public influence, to run with this – and we don’t have them, do we?

Review reaction

It depends where you stand.

An Australian Associated Press report declares the International Energy Agency review of Australia, released in Canberra last week, is a criticism of this country’s lack of a long-term climate policy and a call for “a swift embrace of electricity market reform.” This echoes Labor’s Mark Butler, who says the agency’s 244-page paper highlights the federal government’s energy and climate policies’ failures.

Environment & Energy Minister Josh Frydenberg, however, sees the report as aligning with the reforms the Turnbull government has under way. He also told the House of Representatives, in a week the body politic was deeply distracted by the Barnaby Joyce affair and coverage of the energy report was minimal, the IEA supported his view that “the States should lift their mindless bans and moratoriums on gas development.”

The Greens, you won’t be surprised to know, believe the IEA “has made it clear that the overwhelming majority of pollution cuts will come from renewables and energy efficiency and this is where the federal government should be spending its money.”

The Energy Efficiency Council also heralds a focus on the need for the government “to ramp up its ambition on energy efficiency across all economic sectors including building, industry and transport.” It adds: “The global experts have run the ruler over Australia’s policy settings and found that our current effort on energy efficiency is not up to snuff.”

The Minerals Council welcomes acknowledgement by the agency that Australia is a “cornerstone” of global energy markets and sees the review as consistent with its stance that technology neutrality should underpin national energy policy.

According to The Australian newspaper, which stole a march on its peers through a day-before interview with IEA executive director Fatih Birol, the agency sees the “national energy guarantee” as “a promising opportunity to integrate reliability, affordability and climate policies” in electricity supply.

As for the IEA itself, the agency media statement on its paper diplomatically has praise for the way the federal government is emphasizing the need for energy security and resilience in its policy approach. (PV Magazine, reporting on the review, accuses the agency of being “adept at framing its analyses in terms that are palatable to political interests and incumbent energy market players.”)

You probably need to go to page 191 of the report to gain a straightforward insight in to what the IEA really thinks. But, en route there, it is worth alighting briefly on an earlier sentence that is no less true because it is a statement of the bleeding obvious: “Energy policy governance in Australia is very complex and fragmented; it suffers from frequent changes of policy and institutions at (a national) level.” In this assessment summary, the IEA opines that current national policies, with respect to the power sector, are unlikely to help achieve the carbon abatement goals to which the federal government committed in the Paris agreement. It goes on: “While the current trends point in the right direction, the sector is not sustainable in terms of affordability and security.”

The IEA says: “Policy uncertainty drives the fast retirement of coal capacity and equally undermines future investment in any low carbon technology. Emissions reduction policy in Australia has been marked by fast and frequent U-turns and uncertainty, notably around carbon pricing. Many attribute the high electricity prices in Australia to this uncertainty and it is clear that the closure of old coal plants can lead to higher prices and windfall profits for remaining plants.”

It also asserts that “an emissions reduction goal for the power sector and a related mechanism are critical” and it believes that “such a mechanism should provide clarity for the exit of capacity but that it could be combined with low-carbon capacity auctions and demand response to encourage the entry of new capacity on the basis of locational signals in the NEM.”

Then the agency adds: “The NEG can be an effective market-based mechanism if the government can ensure more competition, better interconnections among the NEM regions and stringent rules for the integration of renewable energy capacity in to the system. The NEG cannot solve all issues and it could create new barriers and windfall profits if those elements are not considered.”

Importantly, if rather lost in the argy-bargy of reactions, the IEA points out that, to accommodate higher shares of variable renewables in the NEM, governments overseeing the market must prioritize measures to safeguard system stability, enhance grid infrastructure, including interconnections and regularly upgrade technical standards

The agency also asserts what we all know to be true but locally mostly despair of its achievement: joint CoAG leadership is required to achieve the integration of energy and climate/environment policies both nationally and in the NEM. In the absence of a federal political consensus on how to address these issues, it says, “policies at the levels of the States/Territories are evolving in an unco-ordinated manner leading to fragmented markets and sub-optimal outcomes.”

Specifically, the IEA recommends that a “national, stable and integrated energy and climate policy framework” should be designed for 2030 via collaboration between the nine governments with integrated policy packages for energy efficiency and renewable energy. It also calls for work to “ensure that low-emission technology support is market-based and guided by energy system-wide network planning and locational signals.”

Elsewhere in the document, it comments that “a more flexible (market) system with new system services, updated technical standards and grid codes and appropriate network investments, including new interconnectors, remains critical to ensuring stability.” There is nothing here, however, about the fact that we can’t have this on the cheap.

Meanwhile Mark Butler apparently can’t see the irony in Labor’s continuing obfuscation about its RET plans and the comment in his media statement highlighting the IEA pointing out “there is a lack of visibility for business, consumers and policymakers alike with regard to the pace and magnitude” of the energy transformation. Nor does he highlight the agency observation that “markets can most effectively deliver desired investments and outcomes when investors have visibility” of what politicians really intend to do and all the implications – which isn’t surprising, I suppose, given the carry-on by the left of politics about undoing utility privisatization.

Frydenberg,for his part, ignores in his media statement the warning that the NEG “is not a silver bullet and could create new (market) barriers and windfall profits.”

There are two other points from this review that that I think should be underscored – and both have been completely ignored by the media to date.

First, the IEA comments: “Australian States and Territories have large subsidy schemes for households to support their energy bills, notably vulnerable consumers. However, such subsidies are often not well targeted and can fail to encourage consumers to save energy. Government aid programs should be reformed to support consumers’ action on energy efficiency (including renovation or fuel switching as well as flexible tariffs and metering).”

Second, it observes: “Tariffs for grid use will need to evolve. Payments should not only be based on how many kilowatt hours are drawn from the grid. Rather, these should reflect the costs that consumers cause to the grid. For example, consuming electricity during times of peak demand in distribution grids should be more costly than during times when there is much spare capacity. Such an approach will also help limiting financial transfers between customers with and without residential PV systems. Under current arrangements, there is a risk that the cost of the grid has to be allocated to less and less energy, in turn increasing grid charges and further encouraging customers to displace grid consumption.”

Why are these not news?

FOOTNOTE: For the statistically minded, it is interesting to see in the IEA report’s data a comparison between 1990 and 2016 in terms of electricity generation shares. With output going up from 154.3 terawatt hours to 257.5 TWh (this is national, not just the NEM), coal plants’ share has fallen from 78.7 per cent to 63.4, oil is unchanged at 2.3 per cent, natural gas more than doubled (9.3 per cent to 19.6), hydro is well down – from 9.2 per cent to 5.9 – and wind power up from zero to 4.7 per cent with solar PV up from zero to 2.7 per cent. What will it be in 2025, let alone 2030? This period (1990 to 2016), by the way, is when Australia’s population rose from 17.17 million to 24.37 million and GDP, says the IEA, rose from $US673 billion in constant value dollars to $US1,521 billion.

Hasten carefully

What east coast energy supply system we will have by the end of 2019 is not an idle question and this point has been accentuated in the past couple of months by a number of developments.

There is, for example, a notable interest in some quarters, mostly green-leaning, in playing off the Australian Energy Market Operator in its current guise against the rule-maker, the Australian Energy Market Commission, portraying the latter as being too conservative, too wedded to reliance on the competitive market and too slow to pursue changes (that it is believed will advance wind and solar power and batteries) in an environment where to quote one report this morning “the (grid) genie is out of the bottle.”

This perspective got a run last week in an Australian Financial Review story about the need asap for a “strategic reserve mechanism” as part of the effort to ward off generation-related supply failures.

The commission’s attitude can be summed up by a paragraph from a discussion paper on NEM reliability it published just before Christmas: “Some form of a safety net, such as a limited and targeted ability for a system operator to pay a premium for capacity that is not otherwise being traded in the market, is appropriate in the event that the market is expected to fail to meet the reliability standard. Given the costs that can be associated with such safety nets, it is important to understand what the existing limitations are with the current safety net in the NEM, the Reliability and Emergency Reserve Trader (RERT), before a balanced solution to these limitations can be developed and assessed to make sure it is in the long-term interests of consumers.”

Behind the agitation led by the warriors of the green revolution is a growing desire in some quarters (by no means all environmentalists) for a return to central planning in power supply, taken to its extremes in recent days by the Greens, hell-bent on winning the Batman by-election in Melbourne, calling for networks to be renationalized (in the States where they have been privatized), and Labor, desperate to cling to the federal seat, making noises that might, in the dark with the light behind them, be taken for an interest in considering the point (at least until the poll closes).

It is interesting to read the AEMC’s comments on central planning in its reliability paper (for which responses closed last week).

“Historically, it has been common for governments around the world to own and operate electricity infrastructure – including generation assets. Australia was no exception. Prior to the start of the NEM, central planners (that is, governments or their agencies) would decide when to invest in new generation, what types of plants to build (for example, base-load, mid-merit or peaking) and where they would be located. The chief advantage of this pure central planning approach is that it can generally be expected to deliver a reliable power system. Put simply, public funds can be allocated directly to try and make sure that the desired level of reliability is met; it is a simple way to make sure that there is enough generation to ‘keep the lights on’ for an acceptable amount of the time

“However, the problem with this approach is associated with high cost to consumers. It is generally accepted that central planners perform this capital investment function far less effectively than private firms and individuals.

“Private investors pursuing profits invariably have superior information about their own forward-looking costs and are subject also to important capital and take-over market disciplines. They will consequently be striving to produce their output at a lower cost than their competitors and to maximise their returns.

“In contrast, central planners generally:

  • have access to only highly imperfect information, that is, much like an economic regulator, they face an asymmetric information problem in that they cannot estimate accurately the respective costs and benefits of different investment options (and)
  • do not have very strong incentives to ensure that the industry is operating at least cost, that is they are not subject to the same market disciplines and may be motivated primarily by ‘keeping the lights on’ at whatever the cost, for reasons of political expediency.

“Centrally planned electricity generation consequently tends to be significantly more expensive to consumers than market-based investments since it passes the risk of ‘getting it wrong’ on to consumers.”

So far as I can see, none of the media types have felt the need to convey this admirably succinct case for the competitive market to their readers or viewers while headlining the nationalization demands.

To all the above the commission adds: “The basic idea of the existing reliability framework in the NEM is to deliver the desired outcomes through the market mechanism as much as possible, albeit within specified price limits. As the supply/demand balance tightens this should manifest in higher spot and contract prices that should provide a spur for efficient entry and expansion that addresses any potential problems before they transpire. Those market-based initiatives are assisted by further information provided by AEMO in various publications and it is only after all else has failed that direct interventions are used as a last resort to minimise the likelihood of involuntary load shedding.”

Well, that’s the theory; the practice, especially since 2016, is for government to knee-jerk in response to every latest piece of news that plays badly in the media, piling interventions or proposals for interventions on top of each other.

Perhaps the core issue is that the “we want it now” brigade, including some politicians and certainly including those who ache for fresh ways to trip up coal-fired power, are for fast moves in new directions, aided and abetted by the media for whom heat and movement is almost always their preference, while the “conservative” AEMC sees its duty in, as it puts it, helping to create “a coherent package for the future” that requires “a detailed design of reforms likely to provide balanced solutions that will address the needs of an evolving system.”

My South African high school had as its motto “festina lente” – which is a Latin take on a Greek adage that roughly translates as “make haste slowly.” Don’t indulge, in other words, in heedless hurrying – which is good advice in many areas of life and should certainly apply to pursuing change in our economically and socially critical power supply market.

The activists, on the other hand, are pushing for use of the new Energy Security Board to bypass the AEMC’s examination of this issue and get CoAG (that is politicians) to make a quick decision on new reliability moves in an election year…………

Data games

Propaganda by the warriors of the “clean energy revolution” – by which they don’t mean nuclear – continues to rely rather too heavily for my taste on pea and thimble word and data games.

A case in point is a current bid to impress on us that, in 2017, more electricity was made from selected renewables than from coal for the first time in the European Union. (Described by some in the media as “the continent as a whole;” take that pesky Russians, the Swiss and a few others like Serbia.)

This, declares boosters, is the tipping point (defined as a threshold for “abrupt and irreversible change”) in European power supply,

But let’s read the fine print.

What is being promoted is that power produced from wind, solar and biomass in the EU last year exceeded that from brown and black coal by 679 terawatt hours to 669 TWh.

However, this outcome includes 196 TWh of biomass-based production, still considered a renewable energy source in Europe despite rising concern in green circles that burning wood pellets is not really a good idea for the environment. In Britain in particular there is a barrage of criticism from green groups, who charge that use of wood-based biomass drives deforestation internationally. Europe is now consuming about 20 million tonnes a year of wood pellets in power generation, importing them from the US, Russia, the Ukraine and Belarus.

In other words, this latest triumph of renewables over coal in the EU is rather a contrivance.

You can break down the union data to 44.4 per cent fossil fueled generation and 30 per cent renewables, as some of the boosters do, but it needs to be appreciated that the latter also includes 9.1 per cent from hydro-power (in a rather poor year for European rain and snow).

Another way of describing the 2017 European situation is that the long-established conventional sources of power (coal, gas, oil, nuclear and hydro) last year contributed just over 79 per cent of electricity – versus 11.2 per cent for wind power (at 364 TWh double what it supplied in 2011) and 3.7 per cent for photovoltaic solar (119 TWh). Oh, and six per cent for biomass.

The 184 TWh rise in production from wind farms this decade has involved a massive outlay since 2011 – construction of 85.3 gigawatts of capacity in seven years, taking the total for this technology to 153 GW.

Nonetheless, the largest single contributor to electricity generation across the EU last year was nuclear – 25.6 per cent, more than double the output of wind farms from 119 GW of reactors. The second-largest was gas (19.7 per cent). Together, they provided almost half the union’s power from non-emitting and low-emitting sources.

For many casual Australian readers of the media (which means those who skim the headline and the first 2-3 paragraphs of a story if they still read newspapers and don’t rely on social media for their “news”), this claimed European triumph of renewables over coal is likely to be reinforcement of the argument by green advocates (including the Labor party as it sweats on outrunning the Greens in the Batman by-election and the upcoming Tasmanian and South Australian polls) that there is no impediment to pursuit of 40-50 per cent renewable power here in the relatively near future.

Now the European Commission, the policymaking energy room of the union, also has a new proposal before the EU parliament and member states: to chase a target for 2030 of 27 per cent of non-hydro renewables (up from 17 per cent in 2016). Sure, the European parliament had earlier voted to pursue 35 per cent – but, to quote a German report, “many national governments are opposed to pursuing a more ambitious binding target.” Put less politely, the EU parliament is a windbags’ castle and the decisions are really made by the EC working with national governments.

From the vantage point of Australia, this is relevant to the local push for a much-increased RET because carefully-massaged EU “news” is used quite frequently to bolster the local greens’ argument. And our alternative federal government – which could be in office by next summer if you take heed of the weekend’s media suggestions that, no matter what he might say, Turnbull is planning a spring election – is committed to the 50-by-30 target.

Here is what Bill Shorten said to the National Press Club last week: “We have all the sun and wind you could want and with it we can make an endless supply of the energy the whole world is moving towards. No serious energy plan, anywhere in the world, is built on the assumption of a decline in renewables investment. It’s like releasing a roads policy based on the resurgence of the horse and cart…or a national broadband network based upon copper. Labor’s objectives are clear, achievable and responsible: 50 per cent renewables by 2030, a 45 per cent cut in pollution by 2030 and zero net pollution by 2050.”  By “pollution” Shorten means carbon emissions.

Not a syllable, you will note, about the cost of going down this path. Not a word about the headline-hogging debate over the past year about the stability of the NEM and the need to balance pursuit of abatement with system reliability.

Malcolm Turnbull had the opportunity to challenge Shorten on this at Toowoomba when he subsequently delivered an opening speech for the new year’s political debate. What he chose to say was this: “We’ve also taken action to make energy more reliable and affordable. Now, 12 months ago, I said that pumped hydro needed to be a vital part of our energy plan; the storage that makes renewables reliable. The feasibility study for Snowy 2.0 proves the project is technically and financially viable. Work is on track to start later this year. This, again, is nation-building infrastructure that will bring thousands of jobs to regional Australia.

“Now, we’ve already reduced wholesale energy prices. With the help of the competition regulator, those savings will be passed on to customers. Longer term, the national energy guarantee will lock in those gains. Independent analysis commissioned by the Energy Security Board predicts that wholesale electricity costs will fall by 23 per cent over the decade. Those actions, along with Snowy 2.0 and others, will cut the average household energy bill by $400.”

Neither of these energy comments got any coverage at all in the mainstream media.

This is not so much a debate as two leaders talking past each other to what they hope is their corner in voter land. Which is what their predecessors (Howard, Rudd, Gillard, Abbott) spent their time from 2007 doing, too, collectively delivering us in to the “energy crisis” we have today.


In the dark

Sunday’s events in Melbourne as Victorians strove to cope with extreme evening heat and humidity while watching Roger Federer demonstrate his wonderful tennis skills have seen the public energy debate descending in to yet another shouting match with the year barely begun — but whether the right questions will get asked in 2018 is another matter.

It, of course, didn’t take long for clueless politicians to seek to connect 50,000 Victorian households deprived of energy with the State Labor government’s commitment to driving investment in variable renewable power – even though a moment’s thought should have told them that this one was down to distribution network hassles. One of these was no less than the Deputy Prime Minister, Barnaby Joyce, tweeting before engaging his brain cells: “We said Labor’s power policy would cause blackouts over summer and it has.” Similar flatulence was produced by the State leader of the opposition.

The noise, I see, has sparked the ANU’s Hugh Saddler in to pointing out on The Conversation that “the reality is that blackouts, trips and intermittency are three very different issues, which should not be conflated.” He adds: “Unfortunately, for reasons of basic physics, electricity distribution systems do not work well when it is very hot, so the combination of extreme heat and high demand is very challenging. It appears that significant parts of the Victorian electricity distribution system were unable to meet the challenge, leading to uncontrolled blackouts.”

Networks United Energy, CitiPower and Powercor sought to make a similar point to the media but the comment was utterly buried in a long report in The Age as Melburnians blearily tried to cope with Monday morning (and an overnight “low” of 28 degrees after a peak of 38 degrees at 5pm Sunday): “A spokeswoman said substation fuse faults were the main cause of most outages as the mercury climbed past 40 degrees. The prolonged high temperatures and humidity through the weekend significantly increased electricity demand at many locations across the network.”

Upfront in the shouting match, it didn’t take long, meanwhile, for the Victorian Premier, Daniel Andrews, to get out a big stick to wave at the distribution businesses – who, at it happens, charge the lowest network costs of any State and who, in real terms, now bill their customers less than two decades ago even while adding hundreds of thousands of homes to their systems and doubling their operating expenditures (which include maintenance) in nominal terms.

As well, this level of performance hasn’t stopped the Greens’ leader, Richard di Natale, rushing out on Monday to declare that the era of power privatization should be over. (Andrews feels sufficiently pressured by this in seats where Greens are rivals, it seems, that he was soon declaring “most Victorians” would prefer that the State electricity system had not been privatized — two decades ago – “but a State take-over is not possible.”)

The Premier is also rabbiting on about “compelling” the networks to consider compensation for affected households and to improve their systems – while asserting they shouldn’t be “ripping off” consumers by “piling” maintenance costs on to bills.  He apparently is paying no heed to the roles of the Australian Energy Regulator or the process of determining network charges. The AER, after all, is not up for election next November……… and Andrews got the headline he sought: “Daniel Andrews lashes power companies over blackouts.”

Is it worth also noting that 320,000 Victorian homes now have rooftop solar PV (14 per cent of the State total)? One wonders how far this contributes to a “let it rip” approach to air-conditioning when the heat is on even when the sun has gone down?

Energy Networks Australia’s CEO, Andrew Dillon, is pointing out that “because of the period of prolonged, intense heat residential customers are using air-conditioners for longer periods of time, putting significant pressure on electricity networks at a local level.” He adds: “What solar power has done is certainly well and truly clicked the load off at midday and it has helped with these peaks at 3pm or 4pm. But what it’s effectively tended to do is shift them to later in the day, so now we’re starting to see the network peak doesn’t happen until 6pm or 7pm.”

Overall peak demand in the State on Sunday was 9,443 MW around 4pm at which stage rooftop solar was estimated to be contributing about 330 MW – but by 7pm this contribution had effectively disappeared while sweating Victorians still wanting much the same supply.

According to the Australian Energy Market Operator, “Victoria experienced its highest operational demand for a Sunday ever, recording 9,144 MW of demand at 7:30pm.” At this point the Victorian in-State load was being borne by brown coal, gas turbines and hydro power (with fossil fuels representing about two-thirds of the required generation) while some 900 MW was being accessed over interconnection with South Australia, Tasmania and New South Wales (which in turn was sourcing almost 600 MW from Queensland).