A model future

I’ve lost count of how many times over the past four decades I’ve tried to persuade people that models are not scrying glasses, enabling specially-skilled people to divine our future. Scenarios are not forecasts.

Energy professional don’t need persuading, of course, but our world is jam-packed these days with the naïve as well as the meretricious players, not a few of them engaged in politics.

The fuss that’s going on at present over modeling undertaken for the Energy Security Board as it strives to sell its “national energy guarantee” to the body politic is just another reminder that any such exercise will be seized on by all sorts for their own purposes.

What various people take from looking at the spreadsheet the ESB has made available will depend on the mindset they have.

In my own case, the work serves to underscore several things I have thought noteworthy in recent times.

The folly of the “death of coal” notion is one.

The model (produced by ACIL Allen and factoring in many current trends and policies) sketches a substantial ongoing role for both black and brown coal, the former the mainstay today of power supply in New South Wales and Queensland, the latter important to Victoria.

It suggests that, starting with output of 54.5 terawatt hours in the financial year just ended, NSW coal-based generation will rise to 56.3 TWh in 2019, decline to just over 45 TWh when Liddell shuts and end the ‘Twenties at just over 47 TWh.

Next door, Queensland generation is shown at 49.4 TWh in 2018 and sliding down to under 41 TWh in 2030.

If this occurs, the technology’s 88 per cent hold on generation output in the two States will be 80 per cent at the next of the next decade.

In Victoria, the model sees brown coal generation, which it estimates at 33 TWh this year,pushing up to just over 34 TWh in 2030 even as wind energy production quadruples to 10.7 TWh and solar farms deliver 2 TWh a year from 2020 onwards. (Their 2018 contribution is set at 2.6 TWh.)

But what about South Australia, that bellwether of the green revolution, I hear you ask? Well, the model sees local electricity sent to the grid sinking to 8.3 TWh at the end of the next decade from 11.5 TWh currently while rooftop solar use doubles – and it expects 5.4 TWh will be met by wind farms, about a fifth of the whole NEM’s wind supply. No wonder, there is a sense of urgency over there to pushing for substantial new interconnection.

Looking at the NEM as a whole, the model sees overall power sent out (which excludes rooftop solar PVs) will barely shift from just under 180 TWh a year (178.4 TWh in 2030 versus 179.3 TWh in 2018). It allocates a market share of 49.1 per cent for black coal plant, 19 per cent for brown coal, 15 per cent for wind power, 8.1 per cent for hydro power, 5.6 per cent for utility-scale solar and a rather dismal 2.6 per cent for gas generation.

Neither at present nor down the track is this what an ABC News reporter has labeled “the delicate mix of coal and renewables.”

For the crowd who are concerned about a sad fate for variable renewables to be brought about by the NEG, this model in fact suggests the NEM output from wind farms will almost treble – from 9.4 TWh in 2018 to 26.9 TWh in 2030 – while solar farms’ output will shoot up from 0.7 TWh in 2018 to 10.1 TWh in 2030. (The green activists want much more than this, of course, and Labor keeps flirting with risk by promising to deliver it to them — a brazen pursuit of marginal parliamentary seats where the main competition is the Greens.)

Rooftop PVs’ contribution is perceived in the ESB model to jump from 7.4 TWh this calendar year to 20 TWh in 2030, underlining the need set out by the Australian Competition & Consumer Commission for the NEM as a whole to embrace cost-reflective network charges.

What all this boils down to is a NEM supply from fossil fuels in the past financial year of 155 TWh sinking back to not quite 127 TWh in 2030.

And what strikes me, looking at the spreadsheet, is the large investment in capacity required to deliver this mooted outcome: an extra 5,200 megawatts of wind units plus 3,500 MW of new large-scale solar plus 2,300 MW of battery and pumped hydro storage – not to mention rooftop solar PV jumping from 5,900 MW in 2018 to 16,000 MW in 2030.

(A big part of this generation investment would be in three States, NSW, Queensland and Victoria: 1,700 MW of wind and big solar capacity in NSW, 2,900 MW in Queensland and 3,100 MW in Victoria.)

What’s not revealed is the total system cost – think of the network augmentation this scenario will require – and I am ever-mindful of the wise advice of royal commissioner Kevin Scarce three years ago: “For those planning a future electricity system (and the market in which it will operate), the relevant issue is the total systems cost, accounting for the cost of generation, connection, inter- and intra-regional expansion of transmission and distribution networks and grid support costs.”

There is still no analysis to hand of a future NEM that examines total system costs on a credible basis – and that is what will dictate the trajectory of power prices.

In particular, it seems to me, if the move to much increase renewable energy in NSW and Queensland (beyond what the ESB modeling encompasses) is to be pursued, in States with more than half the market and a large dependence on coal power, then total system costs — from the power plant to the wall socket — need to be in sharp focus.

Onward (and hopefully upwards)

The speed with which two key business associations put out statements on the CoAG Energy Council deliberation of the “national energy guarantee” today is testament to both relief that the encounter didn’t end in a car crash and concerns that the destination be reached as soon as possible.

In part, I suspect, this is influenced by industry’s fears that the Energy Security Board’s Kerry Schott is right when she points out that foot-dragging on this issue could see decisions ending up being pushed out beyond next year’s federal election (which must be held by May).

As is widely publicized in the media today, next steps after this morning’s discussion are the Coalition party room review and then a telephone hook-up of energy ministers next Tuesday.

It is worth noting from the CoAG communiqué published this afternoon that, at the request of South Australia, the Energy Council has collectively acknowledged “a reliability gap could emerge at any time” over the next 10 years – and has asked the ESB to suggest “legislative options” for addressing this.

While on the subject of the communiqué, it should not be overlooked that the other important business on a crowded agenda was consideration of the Australian Competition & Consumer Commission report on retail electricity pricing. Ministers “agreed to act quickly” by progressing an initial set of 16 cross-jurisdictional recommendations from the ACCC, including reducing the time it takes for consumers to switch retailers, ensuring they get the information they need before their contracts end and fast-tracking consideration of how to increase penalties for unacceptable retailer behavior as well as strengthening the commission’s investigative powers. The Energy Council also agreed to a program of work to consider another 23 recommendations from the ACCC.

As well, the Energy Council has agreed to devote part of its December meeting to further consideration of the Australian Energy Market Operator’s integrated system planning report and has given Kerry Schott and the ESB a lead role in progressing “an actionable strategic plan” on transmission planning and interconnection augmentation.

This is all important stuff but the immediate focus of industry – suppliers and large users – is on next steps for the NEG. The Energy Users of Australia Association has shot out a reaction to the meeting that, in effect, says “so far so good but do get on with the job.”

EUAA chief executive Andrew Richards says “this policy has been circling the airport for too long – it’s time to land the NEG” in the interests of maintaining grid reliability, delivering lower end-user costs and progressively pursuing emissions abatement.

The EUAA points out that AEMO actions to ensure adequate supply last summer have come home to roost for its members (who pay billions in energy charges annually) in the shape of “substantial bills” to pay the costs involved. Failure to land the NEG, the association warns, will leave the maintenance of system reliability being managed by AEMO and State governments via further costly market interventions.

This morning’s CoAG meeting, of course, is being followed this afternoon with a deluge of media coverage seeking to highlight the ongoing political biff – and the weekend will see plenty more, encapsulated by Channel Nine’s assertion that the policy “must still stagger through a minefield that could blow it apart.”

While claiming a “victory” today (as he has) might be going a bit far, Josh Frydenberg is entitled to feel he and the federal government have passed in fair shape through this NEG gate; what some of his own backbench colleagues may do next week before Malcolm Turnbull can massage a party room decision fit for purpose is the next challenge.

The Liberals are themselves not above playing political hardball whiles simultaneously trying to hold the high ground – Frydenberg is out and about this afternoon charging that the Greens are “wagging the tail of the Labor Party” in Victoria ahead of the November State election, declaring the Andrews government is “no longer in charge” and warning that, if it trips up the NEG, “the people of Victoria (are) guaranteed higher power prices and an increased risk of blackouts.”

It was interesting to read an op-ed by the Grattan Institute’s Tony Wood in the Australian Financial Review ahead of today’s meeting – in which he decried accusations that the NEG is “enormously complex.”  It is, he asserted, in fact “alarmingly simple.”

Wood argues that the measure, in essence, requires retailers to deliver “increasingly clean” energy to consumers and to ensure they have enough contracted capacity to meet demand. Design limitations, such as the potential impact on NEM competition, he claims, can be addressed during the implementation phase.

He supports pressure being applied to the Turnbull government to increase the abatement target, but declares, the guarantee should be green-lighted because it can deliver lower end-user prices through higher energy investor confidence, including development of new coal-fired plants if they are commercially viable.

“There are those from the extremes of both sides of this debate who have concluded that the guarantee would be worse than doing nothing. They are wrong,” he adds. “The danger is that our political warriors will beat each other to a standstill with no clear victor and no clear policy. If that happens, the big losers will be Australian energy consumers and the environment.”

Of course, there are a multitude of devils in the NEG detail, but, broadly speaking, I think Wood hits the nail on the head – as he also does when counselling the politicians to leave the debate on enhanced carbon abatement to the upcoming federal election.

The last word at the close of an interesting day belongs with EnergyAustralia CEO Catherine Tanna (in an op-ed just published on the Financial Review website).

The NEG, she writes, is a mechanism designed to give east coast society more reliable and cleaner energy. The process it proposes can be endorsed now – and the ambition left to another day. She’s disappointed the NEG was “kicked down the road” today.

And she asserts that the NEM does not have a power capacity problem. “There’s more than enough installed, nameplate generation – it’s just not where it needs to be or not always available when it’s needed. Everybody deserves affordable, reliable and cleaner power. That’s what the NEG will deliver.”

If I was Frydenberg, I’d be making sure that the Coalition party room members read Wood and Tanna over the weekend – rather than continuing to be distracted by (or contributing to) the Punch & Judy show on offer in the popular media.

On the brink

It’s extra-ordinary, really. Not quite two years ago we set out, at the instigation of the Prime Minister via the Finkel report, to have a well-informed debate about the current challenges and future opportunities of electricity supply – and now we are stuck on a political battlefield, to quote Paul Kelly in The Weekend Australian, where the price, reliability and make-up of power supply has become “the test of our time.”

How next Friday’s CoAG Energy Council discussion of the “national energy guarantee” – to be followed by a Coalition partyroom discussion and then another CoAG meeting via a conference call, rolling the official debate on in to at least September – will pan out is open to a range of opinions, all of them presented in hyper-drive in the media.

Tony Wood of the Grattan Institute has summed up the current environment pretty well in a conference talk: “Australia has drifted in to a place of high prices, questionable reliability and uncertainty on emissions; the primary cause is poor governance behind a toxic political battle (on carbon emissions abatement).”

At the same conference, Paul Simshauser (of Griffith University and Infigen) made the point that, for a market-based power system like the NEM to function properly, investor knowledge, expectation and conviction must match policy settings and intent – and vice versa. “This,” he said, “is the NEG’s main contribution to current market conditions – and this alone is where it is worth pursuing.” The market, he asserted, can be trusted to manage power prices back down if clarity prevails about the investment climate. “Security of supply is a serious issue, but the NEG can’t, and should not, deal with it.”

Also at this forum, Anne Pearson, CEO of the Australian Energy Market Commission, provided a salient thought on the context of the “debate” that will reach some form of denouement at the CoAG meetings. “The concept of social licence is more relevant than ever,” she said. “It’s also about energy consumers generally having confidence that the challenges of the (supply) transition are being addressed. Consumers want to know that while our generation is becoming cleaner through this technological transformation, it will still be secure, reliable and safe, and affordable.”

Pearson added: “It’s no good offering the latest, greatest technology if the power system is not resilient enough to deliver it to consumers. It’s no good having the perfect niche product if the market is not competitive or customers are not empowered to choose it. We need to be careful about how we manage change so least cost solutions can be put in place so consumers don’t pay more than necessary for certainty of their power supply.”

As she told her audience, “the appeal of simplistic solutions over pragmatic actions based on rigorous analysis can be strong when things are changing quickly.”

All of which throws an odd light over this recent tweet from the activist Labor Environment Action Network: “The truest thing said at clean energy conference: High prices are not a market failure. They are proof of the market working well.” (LEAN was the successful proponent of a 50 per cent renewable energy target as ALP policy at the party’s last national conference.)

In this context, the claim that adding more renewables to the NEM indisputably will lead to lower wholesale electricity prices is a tad ingenuous – the critical test is the total system cost, which needs to take in to account all the infrastructure and supply support needed in a market with a much higher level of variable generation.

Digressing only slightly, I am watching with a raised eyebrow the waffling in the media about the latest NEG modelling showing that the measure will result in 2030 in 24 per cent of market energy coming from variable sources plus up to 12 per cent from hydro power (which LEAN and the rest of the activist gang see as much too little). One can have a debate about how much energy will need to be provided to the grid then (for example how much manufacturing will Australia have at that point, remembering this sector is responsible for a third of demand), but, assuming that the level is still around 190 terawatt hours a year, the modeling suggests fossil fuels in the 2030 NEM will account for about 122 TWh versus about 167 TWh now. Just what will be needed in the way of support infrastructure and services to deliver an additional 45 TWh of variable energy to the grid? What costs will be incurred – and how will this feed through to consumers large and small?

Bear in mind these numbers do not include rooftop solar power. The large increase in this form of technology anticipated by all and sundry will come with its own impacts on the grid – and therefore on consumer bills – as well as impacts on the profitability of conventional supply.

Just one thing is clear from all the current goings-on: energy remains the plaything of politics, a thought leading a clearly over-it Katharine Murphy, The Guardian’s chief political reporter, to snarl this weekend about “self-interested rent-seekers and politicians prepared to traduce facts, reason and evidence, leaving the Australian people the biggest losers.”

Her message to the governments gathering under the CoAG umbrella (and to the federal politicians who eventually get to vote on emissions abatement as part of this package): “Get over yourselves – we need you to come together in good faith and sort this out.” And she added: “Will it be détente or is there political profit in confecting a state of permanent war where virtue-signalling triumphs and practical progress is nailed to a national monument called failure?”

To which one might append another comment from The Australian’s Kelly: “Success depends on compromise from all sides. But this violates the spirit of the age, riven by ideology, populism and sectional interest.”

The last word, however, should go to Kerry Schott, chair of the Energy Security Board, who said in her covering letter to CoAG submitting the latest iteration of the NEG: “Many stakeholders have stressed that at least some of the existing pipeline of new investment is predicated on the assumption that integrated energy and climate policy is now within reach. Any delay or, worse, a failure to reach agreement will simply prolong the current investment uncertainty and deny customers more affordable energy.”

Generating heat

There has been a lot of interesting stuff on electricity supply in the past 10 days, much of it sparked by the Australian Energy Market Operator’s integrated systems modeling report, as well, of course, as the inevitable guff from the usual suspects.

One of the oddest media contributions came from the Daily Telegraph – not exactly an unusual occurrence from that source – in the shape of getting het up about New South Wales’s imports of power from Queensland (a front page pointer and a prominent inside story headlined “State of anxiety in power shortfall.”)

The cause of this fuss in a teacup was a 50 per cent rise in NSW’s imports of power from Queensland in the past year with federal MP Craig Kelly (from NSW) quoted as saying “it is an appalling state of affairs that we now have to rely on Queensland to make sure we can keep the lights on.”

Well now, here’s the thing: (using data from Graeme Bethune’s excellent EnergyQuarterly), for the 12 months to March this year, the interconnector flow west in to NSW did indeed almost double (up from 2,889 gigawatt hours in the previous period to 5,332 GWh) – but that was because the long-standing reliance of the State on Victoria for back-up power fell away (dropping from 5,347 GWh to just 239 GWh in the wake of the closure of Hazelwood).

And, if you went back to comparing the year-to-March 2017 data with the same period 2016, you would find that NSW dropped imports from Queensland from 3,489 GWh to 2,889 GWh while increasing the flow east from Victoria from 3,954 GWh to 5,347 GWh.

Appalling? Nope. Cause for “state of anxiety”? Nope. Actually, situation pretty well normal in meeting NSW needs for most of the past decade.

While those who know a thing or three about the NEM would have smiled wryly (at best) at the Telegraph story, it does represent just how much the current situation gets beaten up by various elements of the media (including social media) and how far down the garden path the broad community (aka voters) gets led.

Black coal generation is indeed the backbone of NSW electricity supply and in three years (all 12 months to March) it has bobbled about from 55,883 GWh (2016) to 54,782 GWh (2017) and 58,096 GWh (2018). And, as part of compensation for the loss of Hazelwood, the State’s black coal plants have pushed up production by some 3,300 GWh over three years even as consumers got fed more electrons from across the Tweed River (most of them from Queensland coal plants). In the year to March 2018, by the way, NSW in-State coal power represented 88.7 per cent of domestic production with the balance coming from gas plant (2,488 GWh), hydro (2,344 GWh), wind (2,020 GWh) and solar farms (541 GWh).

How many of the hundreds of thousands of NSW households who get to read the Telegraph would have any idea of these numbers, even broadly speaking, do you suppose?

Now, shifting away from the strident and the silly, as the Grattan Institute’s Tony Wood and Lucy Percival opined on The Conversation, the beholders of the AEMO report seem to divide in to those seeing different futures for coal generation (which is all in Victoria, NSW and Queensland in the NEM – in other words where the vast bulk of power requirements are sited). “It’s either on the way out,” Wood and Percival wrote, “or its going to be needed for decades or perhaps even new coal plants should be built.”

You can read the institute’s perceptions on The Conversation under the heading “AEMO’s new electricity plan is neither a death knell nor a shot in the arm for coal.”

The pair’s central point is that “The (AEMO report) provides a hard-nosed engineering and cost assessment of what our energy system needs. It applies neither an accelerator nor a brake to the closure of existing coal-fired power stations. We need more of this approach and less ideology if we really want to see a lowest-cost, reliable and low emissions (electricity) future for Australia.”

Meanwhile, the Australian Energy Council, representing the gentailers, has reacted that the report is “a rebadged version of an earlier model.”  The plan, says new CEO Sarah McNamara, is “simply the first step in a process to align the transmission system with a rapidly changing generation mix.”  AEMO’s work, she adds, reinforces two main points “everyone in the energy industry already knows” – first that the sector is in the midst of “transformative and unprecedented” change and second that “coal-fired power stations will remain the cheapest provider of energy for several decades.”

Most of the debate heat we are witnessing results from the report, and that of the Australian Competition & Consumer Commission in to electricity costs, feeding in to the ongoing verbal jousting between members of the federal Coalition government over power generation, between the Turnbull regime and federal Labor over an emissions target, and between Josh Frydenberg and some of the rest of the CoAG Energy Council over the “national energy guarantee” ahead of their important meeting next month. All of this is eagerly pursued by the media, not least by opinionated commentators eager to push their own (mostly green) perceptions.

Depending on how much credence you place in opinion polls, it may be interesting to note here that Essential Report in the past week has recorded respondents as lifting their support for the notion that “governments should prioritize support for the coal industry over renewables” from six per cent in mid-2015 to 16 per cent now – and have reduced support for the reverse from 50 per cent in mid-2015 to 38 per cent now – with 34 per cent thinking they should be “treated equally” (up from 28 per cent).

The same poll sees 80 per cent wanting an inquiry held in to power prices and anti-competitive conduct by supply companies – presumably the ACCC activity, despite many headlines, has not had much impact Out There – while 40 per cent think “the government” should spend up to $5 billion on building new coal plants or extending the lives of existing ones.

I’m afraid that the noise off-stage can only become more strident in the run-up to the CoAG meeting – and then, depending on the outcome, we will have to wait and see what further steps are needed to actually produce a workable plan for “NEM 2.0”.

Looking at the AEMO report and the operator’s ensuing comments, I rather think a basic take-away is that it supports a continuing relatively large contribution by coal generation (some 100 terawatt hours annually in 2030 versus 150 TWh at present), wants to see most of it (producing roughly 70 TWh) gone by 2040 and replaced by about 33,500 megawatts of weather-driven renewables plus 17,000 MW of storage and just 500 MW of new gas plant and to see “significant and unavoidable” investment in transmission between some three dozen “renewable energy zones” and the (mainly urban) load centres to help this to happen.

To which, the central question must surely be “at what total system cost?” in the context of supply reliability and the expectation of consumers (including those who use 60 per cent of our production of power in commerce and industry) that their bills will be “affordable.” The price expectation, of course, is centrally about the here and now as, naturally, is the focus of government.

Equally in context is this observation from Robert Barr, president of the Electric Energy Society of Australia: “It is impossible to see what the capabilities will be (of electricity generation and storage technologies) in 10 or 20 years’ time; the best approach is a technologically-neutral (one) in combination with a capacity market with a low dollar cap energy market where environmental incentives are built in to the pool.”

Is this where we are heading, do you think?

And, in passing, it would be worthwhile for multiple stakeholders to read the Engineers Australia submission to the Energy Security Board’s latest NEG design consultation paper.  In particular, the bit sounding a warning about what the board considers to be dispatchable supply. Without a clear definition, EA says, “ambiguity may arise” and this could be the case in particular “if new technologies develop and have the ability to increase or decrease output in a predictable manner.” This is what my economist friends have the habit of calling a “non-trivial” issue.

Needed: change across broad front

If, like Bill Shorten (according to media reports), you can’t be asked to read the 398 page report on electricity costs by the Australian Competition & Consumer Commission or even the 23-page executive summary, then you can surely have recourse to a single page the watchdog has published – with three columns (headed “poor decisions” and “big problems” and “proposed solutions”) summing up why, in the organisation’s view, the NEM is “broken” and what can be done about it.

The “poor decisions” the commission highlights are (1) loosening the rules regulating monopoly networks and imposing excessive reliability standards leading to over-investment, (2) offering excessively generous solar feed-in tariffs, (3) collapsing Queensland generation from three to two players and selling New South Wales generation assets without sufficient eye to competition, (4) stopping or impeding gas exploration and development, (5) meeting sustainability objectives by subsidizing renewable energy without regard to market needs for energy, and (6) retailers deliberately using opaque discounts in their marketing, imposing excessive penalties for bill payments not on time and exploiting customer stickiness.

The ACCC identifies the “big problems” caused by all this as (1) customers paying more than they should due to excessive network asset bases, (2) those without solar panels subsidizing excessive benefits for those who have them, (3) considerable market power in generation contributing to higher prices, (4) power costs increasing as gas is more often the NEM marginal generator, (5) subsidies for generation assets that may not be capable of providing energy when the market needs it, and (6) customers using the highest retail discounts often not getting the lowest price, consumers disengaging from the market and undermining competition – and customers who don’t pursue switching paying too much.

The commission’s proposals to address these issues are (1) write downs or equivalent action to reduce excessive network bases in Queensland, NSW and Tasmania plus the removal of the Victorian network tax, (2) governments taking the cost of premium feed-in tariffs on to their budgets, (3) Queensland dividing its two generation business in to three, new rules to prevent future generation acquisitions from allowing any NEM entity to exceed 20 per cent market share, a new approach to over-the-counter trading, including much greater transparency,  governments providing back-end price support for new/small generation players and allowing large consumers to bid demand response in to the market, (4) making more gas available, (5) introducing a well-designed “national energy guarantee,” and (6) having the Australian Energy Regulator set default tariffs to replace the retailers’ current “standard offers,” limiting penalties on consumers for late bill payment and funding groups to facilitate greater household and small business switching between retailers.

There.  Even political blatherskites should be able to get their heads around this much of the plan – and they can read the ACCC’s executive summary for further and better particulars without straining their poor brains. All able to be done in less than 30 minutes.

(Not included in this shorthand version but a further proposal with decided bite for gentailers is a suggestion that the national electricity law be amended to give the Australian Energy Regulator powers to address behavior “manipulating the proper functioning of the wholesale market.” There be dragons……….)

The Prime Minister, who has a penchant for circumlocution that cruel critics lampoon as waffling, managed to sum up what should be the highest goal of the body politic in one sentence when he addressed the Queensland Media Club this week: “My single, clear-eyed focus is to reduce the cost of energy for Australians.” That’s a one-liner aimed squarely at those going to the by-election polls later this month.

Malcolm Turnbull added: “The measure of any (market) solution should be will it cut prices?”

He excoriated his opponents for continuing to focus on technology rather than lower prices and declared that “only a technology neutral approach will get prices down.” Here, I would have been inclined to rather say that “a technology neutral approach to generation is important among a set of steps needed to get prices down” – as one can see from the ACCC synopsis I have cited above.

As the Australian Industry Group, representing a large part of the commercial and industrial users who account for 60 per cent of the market by power demand, said in a largely supportive statement on the ACCC proposals, a lot of work will be needed to understand and flesh them out.

One of (few) worthwhile media commentaries on the commission’s report has come from a doyen of business journalism, Stephen Batholomeusz, in an op-ed in Fairfax Media’s The Age and Sydney Morning Herald. You can find it under the (rather smart-arse) heading – some editors just can’t help themselves – of “Light bulb moment: how many recommendations does it take to unplug our energy mess.”  Don’t be put off by that.  Bartholomeusz has done an insightful job in a relatively few words of conveying the context of the report for laymen.

As he says: “It is a measure of the complexity of the issues, the scale and number of the deficiencies and the difficulty of responding to them that the ACCC inquiry in to energy affordability has come up with 56 recommendations.” He adds: “It is also a pointer to the convoluted nature of our energy policies that, while most of the recommendations appear to be reasonably sensible, even the more obviously beneficial recommendations for consumers will have their critics and the potential to produce unintended consequences and uncomfortable trade-offs.” Quite.

The broad context was also concisely canvassed by Rod Sims, the commission chairman, in a media statement (which, again, certain people could at least have taken the time to read and digest) saying that “the NEM is largely broken and needs to be reset – previous approaches to policy, regulatory design and competition over at least the past decade have resulted in serious electricity affordability problem.”

(Shorten and his federal leadership team would rather be hanged, drawn and quartered than acknowledge that Labor, including present and past State governments, shares culpability for this situation. It is, they egregiously declare, “the Prime Minister’s energy crisis.”)

Sims claims that adoption of the ACCC’s recommendations will deliver savings to the average NEM household of 20 to 25 per cent and a saving for 2.2 million small to medium businesses of an average of 24 per cent. That prospect should require the political Punch & Judy show to take a sabbatical until the many moving parts of this attempt at a solution are shuffled and arranged by governments across the jurisdictions in to a workable form.

Again, Sims makes a point that needs to be well-appreciated by both politicians and the community at large: “First, our recommendations require some difficult decisions as sound economic reform usually does. Second, despite the poor past (record), it now falls to the Commonwealth and State government to make (these) decisions. Third, we must move away from narrowly-focused debates; addressing affordability requires change across a broad front.”

One aspect of the publication of the report that should not be overlooked is that it may have put to rest an outcry for a royal commission that seemed only days ago to be taking on populist momentum. There is no need to spend another year (or more) traversing the ground the ACCC has covered over the past 15 months; the need now is to press forward with solutions, including pursuit of the NEG, which gets a critical outing at the next CoAG Energy Council meeting on 10 August.

Josh Frydenberg, who has been in North America this week and who is plainly chuffed by the support for the NEG from the ACCC (“which has no partisan axe to grind”), has slapped down the royal commission push in an interview with ABC Radio: “There is no point in calling another inquiry before you have read the report of the last one.”

It is hard to pick one aspect of the ACCC recommendations as the most contentious – as evidenced by the instantaneous yodeling from the green corner about rooftop solar power and an early pushback again the default retail price on the grounds it will deliver re-regulation – but the trickiest is probably the new concept of the federal government underwriting off-take agreements for “appropriate” new power stations able to provide dispatchable energy. Already this is being interpreted as support for coal-fired or gas-fired generation and the usual suspects have been quick to vent their displeasure. (It could also encompass variable renewable energy combined with storage or peaking gas. Or, sotto voce, nuclear.)

The Australian Industry Group has reacted by commenting that such long-term agreements could “expose taxpayers to significant financial risks and cut across other elements of energy market design and policy.” It argues that “care and consultation are needed to ensure the proposal delivers value.”

It’s possible that the NEG may address the same issue of reliable, affordable supply without direct government intervention in the market and the distortions affecting investors that could create.

For the moment, as the aftermath of the ACCC delivery of its report has made clear, energy is still very much a football in the political game – immediately the imminent federal by-elections. Once they are out of the way and the upcoming CoAG debate has taken place, it is possible progress can begin to be made towards mending the NEM before Turnbull calls a federal election (which he repeatedly says will be next year). However, I can’t commit to holding my breath.

 

Wake in fright

I wrote in the “Last word” segment of my latest monthly Coolibah energy newsletter that a very large issue for the CEOs in electricity retail – essentially the gentailers – is what they can do in a relatively short time to change the “vibe” only too clear in reports piling up on political leaders’ desks about consumer sentiment on energy services.

Now this weekend brings Barnaby Joyce and others urging the Prime Minister to call a royal commission in to the sector, following a claim in the Herald Sun newspaper that the retailers are worried federal Labor will propose this as part of Bill Shorten’s populist pitch to battlers in the community.

Craig Kelly, chairman of the Coalition’s backbench energy committee, is asserting that the pending report on electricity prices by the Australian Consumer & Competition Commission could be the trigger for such an inquiry – which he adds should also look at the networks. Other MPs are making similar noises and The Australian reports this morning that Environment & Energy Minister Josh Frydenberg is declining to comment.

As far as I am concerned, the surprise in this situation is why the leaders of electricity supply are only now waking in fright to the prospect of a royal commission, the more so after the events leading up to the current banking inquiry, which is trashing and burning the reputation of that industry.

The issue for Malcolm Turnbull, Frydenberg and Treasurer Scott Morrison, it seems to me, is “why not” rather than “why,” given that the federal government itself was burned in the political marketplace by perceptions that it was dilatory about throwing the bankers to the wolves. The political pressures of the current by-elections campaign – where the government could pick up as many as three seats and seriously wound Shorten – may not be a minor factor in the government’s thinking.

As with everything in politics, there are multiple layers to this game. Once a royal commission is called – by the Governor-General on the advice of the government – it can’t be stopped so the terms of reference need very careful crafting. Its hearings are fully in the public domain with very little leeway for evasion under oath by witnesses, as the bankers are discovering, but eventually such reports weigh on politicians to take action to give effect to their recommendations.

The community appeal of taking this route is that royal commissions are perceived as a means to ensure fearless and comprehensive reviews of significant problems.

We have been rolling up to this point for years – in fact, I’d suggest, since Prime Minister Julia Gillard told an Energy Policy Institute forum in Sydney “the bad news is, today, Australians are paying more than they should for electricity; the good news is that we can do something about it.” That was on 7 August 2012 and who could claim things have improved since then? It’s a salutary thought that Turnbull is the fourth prime minister to wrestle with the issue (Gillard, Rudd and Abbott being the others).

Some of the writing on the wall for the current crop of energy executives was provided back in February this year by Rosemary Sinclair, CEO of Energy Consumers Australia, when she pointed out in a newspaper op-ed that a report her organization had commissioned found only 21 per cent of people polled declared confidence the electricity market was working for them – and a majority thought they were getting less value for money than from the banking and insurance sectors. This, wrote Sinclair, “should send a shudder down the spine of the leaders of all energy companies – if you are making an industry that is the subject of a royal commission look good, you know you have a problem.”

And she added: “The curtain must close on a decade in which price increases have been the norm.”

Since then, of course, we have the Grattan Institute telling us that federal and State politicians must be honest and admit that high wholesale power prices are now “the new normal.”

The institute’s Tony Wood wrote in a recent newspaper op-ed: “Our report exposes a nasty reality: new supply, whether coal, gas, or renewables with back-up to cover intermittency, is more expensive.” He added: “even if more subsidized renewables do lower prices, this will be transitory because more closures (of coal plants) will follow and the full cost of the intermittency of wind and solar electricity will emerge.”

In their mental writhing over how to deal with situations like this, politicians tend to look to the messages they are getting from their constituencies and I am interested to see the Queensland Farmers Federation declaring that, the banking royal commission having “laid bare the finance sector’s misdeeds, it is only a matter of time before the calls for greater transparency and accountability in the energy sector are acted upon.”

The next step is publication of the ACCC’s final report on electricity supply and prices – which presumably was delivered to Treasurer Morrison on 30 June as scheduled. One of the key matters Morrison required to be considered in setting up the review was “the existence of, or potential for, anti-competitive behaviour by market participants and the impact of such behaviour on electricity consumers.”

As the ACCC chairman, Rod Sims, said in a speech in May, the commission is legally bound to keep the report under wraps until the Treasurer releases it, but he gave a strong clue to its direction when he concluded in that talk: “The energy market is working extremely well for energy companies but is working badly for  users.”

What this report will trigger when published can only be speculation at this stage but it’s highly likely that those calling for a royal commission will find fresh ammunition in its pages.

Edging towards a precipice

As 2017-18 financial year slides in to 2018-19, there’s an awful lot energy-wise up in the air, waiting on reports and responses to them as well as on political decisions that tend, too often, to be rather reactionary (eg the goings on over Liddell in particular and the broader issue of whether, where and when to build another coal-burning power plant).

One of the frequent distractions in this environment is the tendency of some to push their barrows without being too fussed about what the data really shows.

For example, in the past week, there’s a claim in one of the greener websites that the majority of the replacement for Hazelwood has come from renewable energy – leaning on capacity developments when, so far as consumers are concerned, what matters is available energy.

In the 12 months to March this year, using EnergyQuarterly numbers, NEM black coal generation rose by 5,940 gigawatt hours, output from the remaining brown coal plants went up a bit too and gas-fired production increased by 5,192 GWh in a period where wind farm output actually fell slightly, utility-scale solar went up 79 GWh and hydro’s contribution, because of rainfall issues, was 4,141 GWh lower than in the same period 2016-17.

The point of that claim, of course, is to boost perceptions of a growing presence for weather-driven generation as part of the anti-fossil fuels game, but it is all a bit trivial from where I sit. Real life dictates that NEM generation from now to 2030 is going to go on being a mix of all its present ingredients with conventional plants (coal, gas, hydro) remaining the backbone of supply in Victoria, New South Wales and Queensland, home to most of the market’s residential and business demand.

Trebling wind energy production on the east coast and increasing big solar output 10-fold will still only push renewable contributions to around 35,000 GWh a year in a market needing some 200,000 GWh. (And what will this do to total system costs? But that’s a different conversation point.)

One of the thoughts being offered in a paper recently pushed out by Hydro Tasmania to boost its “Battery of the Nation” concept tosses an interesting soundbite in to the debate: “It is forecast that in the 10 years from 2028 to 2037 about 35 per cent of our existing generation capacity will retire simply due to age-related deterioration. This would be the equivalent to Hazelwood retirement every year for a decade. As older NEM plant retires, new plant will need to be built. The late 2020s is forecast to be the precipice of a rapid change.”

Which engenders in me the thought that marching (or meandering) up to this precipice without all due care is truly risky business.

(For example, will some of the ageing plants be refurbished to extend their lives or will a mindset shift open the door to nuclear SMRs, changing the nature of the transition challenge? Will carbon capture and storage emerge as a genuine option for some existing and new coal plants?)

Unfortunately, a lot of the current focus is on precipitate action – and, if, like any number of people with whom I communicate regularly, you are heartily sick and tired of the argy-bargy, the bad news is that it isn’t likely to stop or even diminish any time soon.

The carrying-on in the public debate in June has been par for the course and will very likely intensify as we get closer to the key CoAG Energy Council discussion about the “national energy guarantee” in August.

The heading on a statement put out by the Australian Energy Council in the past week – “Facts, not exaggerated claims, needed in energy debate” – is exactly the point but many of the protagonists in politics, the media and activist bodies are far more focused on rhetorical flourishes and “fake news” than facts, not leaving much room for conservative (lower case C) voices.

In this context, I have been interested to read a commentary by Robert Barr, president of the Electric Energy Society, in a trade magazine that landed in my mailbox a few days ago. In it, he queries just how much power system engineering know-how is going in to the present push on the NEG, opining that, for a very complex engineering system (the NEM), there seems too much faith that all the separate components of the proposed measure can operate independently of each other without adverse outcomes.

He adds: “Confidence for changes like the NEG often comes from modeling. Building models of this type requires both detailed power system engineering and market economic knowledge. The complexity of the NEG makes it almost impossible to model with any degree of confidence. Where the electricity industry will be in 2022 and beyond is very difficult to predict. Unwinding the NEG in 2022 and replacing it with something simpler is too awful and expensive even to contemplate.”

Which jells, it seems to me, with another observation in the Hydro Tasmania paper: “The future NEM is expected to bear little resemblance to the historic operation of the market and work is required to understand future options.”  I’d interpolate “lots more” ahead of “work” in that sentence.

None of this is an argument for abandoning the present endeavors on the NEG – something seemingly equally sought by green activists and the discontented members of the Coalition’s parliamentary backbench – but it is for further careful assessment of the version the Energy Council may agree on 10 August rather than hastening to legislate it in the last third of the year, which obviously is the federal government’s intent.

Actually, I won’t be surprised if the CoAG energy ministers push back and ask for further and better particulars next month. This may not be what politics dictate as desirable for the Turnbull government, but the past decade surely should have taught us the risks inherent in headlong policymaking.

Getting carts and horses in the wrong order in energy policy has been perhaps the biggest problem over these years and the chances of this continuing to be an inherent flaw are not zero.

Happy new year!

Not a sideshow

Settling down to start this post at 7.30pm on a decidedly cold (in Sydney’s Hills district) winter Friday evening, I went to the Open NEM widget to find that power production across the east coast market for the past seven days had been 4,106 gigawatt hours – and 2,986 GWh of it had come from black and brown coal generation versus 259 GWh from wind and 20 GWh from utility-scale solar. The back-up support came from 503 GWh of hydro power and 335 GWh delivered by gas plants.

Switching to the NEM Watch widget, I saw that the current (mid-evening) load in South Australia, the apple of all green eyes, was 2,005 megawatts and just 137 MW of it was being supplied from the State’s wind farms versus 1,794 MW from gas turbines (the balance being sourced over the interconnector).

Meanwhile, the wind contribution in Victoria (load needed 6,722 MW) was 211 MW versus 4,191 MW from brown coal plants, 1,404 MW from hydro and 896 MW from gas.

Tasmania was producing well over its domestic needs thanks to 1,650 MW of hydro power and 259 MW of wind – and a functioning-again Basslink meant it could dispatch power to the mainland.

New South Wales at this point required capacity of 10,635 MW and could provide only 9,039 MW from in-State resources (7,481 MW from black coal generation, 724 MW hydro, 664 MW gas and 169 MW wind) – but succor was at hand from Queensland where 8,643 MW of capacity was operating, well more than was required within State borders. The sources were 7,119 MW of black coal plant, 1,372 MW of gas and 135 MW of hydro.

All these numbers drive home yet again that the backbone of NEM consumption (in Victoria, NSW and Queensland, where most of it by a long way is located) is coal supported by hydro and gas and the interconnection system.

Which really should be underscored in a week where some fuss has been made about a green-boosting Bloomberg New Energy Finance prognostication for Australian generation with a 2050 horizon.

I have made the point here and elsewhere more than a few times that forecasts out to 2050 are just guesswork (try standing in 1986 and conjuring up a scenario for 2018) but my focus on the BNEF material was on 2030 where it believes that (across the whole of Australia) coal, gas and hydro will still be meeting some 160 terawatt hours of a national production to the grids around the 230 TWh mark.

There are so many variables that can affect the level of demand and constituents of supply over even the next 12 years that you can take your pick about what resources will be in play in 2030. Will nuclear take a bow? Will wind and solar fall off the subsidy bandwagon? How will transmission help or hinder things? Etcetera. But, in this time frame, the ongoing roles of conventional generation (coal, gas and hydro) appear obvious – providing you are not in thrall to green enthusiasm.

A particular interest for me just now (and one of the more prominent news stories at the end of this week) is the Australian Energy Market Operator’s “gas statement of opportunities” – notably in my case the punt it is taking on this fuel’s role in NEM power supply out to the end of the next decade (although the media focus, understandably, is on the reversal of the previous year’s forecast of a dire east coast overall outlook).

In shorthand, AEMO opines that “overall utilization of existing gas-powered generation is projected to decline in the next decade as renewable generation sources supply more energy during the day and most existing coal-fired generation remains in service.”

The operator (and I do wish journalists would stop referring to it as a regulator) also comments that the NEM is most at risk of large swings in gas plant output due to a variety of factors, including reduced wind speeds impacting farm output, delays in the installation of new renewable generation, reduced rainfall impacting hydro generation and extended unavailability of coal-fired generation.

The real risk is that gas generation is going to be treated as a sideshow rather than what it is: an ongoing integral part of an efficient NEM on the mainland.

Some context for all this can be found in the EnergyQuarterly report of electricity production for the past calendar year: 21,375 gigawatt hours of gas-fuelled generation compared with 16,183 GWh in 2016 – and then for the March quarter this year when it was 4,837 GWh compared with 5,450 GWh in the same three months of 2017.

It is also notable, in the context of proposed much greater recourse to variable renewables in the NEM, that the largest use of gas generation at present is not in Queensland but South Australia.

Using Graeme Bethune’s data again, this time for the rolling 12 months to the end of March 2018, gas generation was 7,536 GWh in SA (a big jump over the same period 2016-17), a bit reduced in Queensland (6,180 GWh), up by a lot in Victoria post Hazelwood (3,364 GWh) and steady in NSW (2,488 GWh), not forgetting Tasmania (1,195 GWh), giving a total for this 12-month period of 20,762 GWh, up almost 24 per cent on the same 2016-17 period.

What gas-burning plant may we see built in the next 3-4 years? Where? What will fuel these generators – imported LNG, perhaps? What will the gas price be and how will this impact on NEM wholesale prices? Lots of questions, but not much certainty just now.

And this is a reason for focusing on the bit of a joint statement by Josh Frydenberg and Matt Canavan, reacting to the AEMO report, that warns it is still “clear that new gas reserves and resources need to be explored and developed,” re-iterating the Turnbull government’s call on States and Territories to remove blanket bans and moratoriums on conventional gas exploration.

Apart from talking up the more positive tone of the AEMO report, as did the ministers, the Australian Petroleum Production & Exploration Association not surprisingly jumped on the operator’s observation that “further action by both industry and governments can bring even more gas into the east coast domestic gas market” as well as “meeting demand over the period to 2030 will require ongoing industry investment in commercializing existing reserves and resources and finding new sources of supply.”

Of course, the green boosters have another view. As one put it, “the record breaking (current) roll-out of wind and energy actually means less need for gas generation so less pressure on supplies (as well as) falling prices.”

And so it goes. And time continues to fly.

Not confident

Quote of the week: “Everyone has to emote like shrieking banshees to be noticed these days on our cluttered political stage.”

Thank you Katherine Murphy of The Guardian. That nails the situation and the problem in one, not least for the energy sector, exemplified currently by one commentator feeling the need to label the proposed “national energy guarantee” as a “Frankenstein’s monster” for Fairfax media.

So much is going on in the energy space at the moment that it is hard for even those with a special interest to keep up; for householders and those in small business, it must border on the impossible to gain much more than is available from shrieking headlines and tabloid-style reporting.

It is not surprizing, therefore, to see a new Australian Energy Market Commission report recording that, for these consumers, trust in the energy sector has fallen from 50 per cent last year to 39 per cent – and that confidence consumers’ long-term interests are being served is down to 25 per cent despite 25 actions taken by governments and market bodies in the past year aimed to improve user experience in the retail market.

Worryingly for those who want to see the competitive market sustained, the AEMC’s research indicates that 38 per cent of those polled for this report are not confident that NEM is working in their long-term interests versus 25 per cent who still think it is, leaving 37 per cent “neutral.”

AEMC chairman John Pierce says that: “The conduct of retailers is making it difficult for all consumers to access the benefits of competition even though more retailers are operating in the market and more customers are switching plans and accessing new technology. Competition continues to increase, but retailer inertia and a lack of transparency have emerged as significant barriers preventing consumers gaining the maximum benefits in terms of prices and services.”

(It is not at all clear to me why the Australian Financial Review chose to headline its story on this “Fickle consumers lose confidence in energy market.” Fickle? If you want an “F” word, “frustrated” might be appropriate.)

The core accusation against the energy retailers is that they have been “slow to innovate on tariff, pricing and products” and, damningly, householders now rate them lower in delivering value for money than banking, insurance, water utilities and broadband and mobile providers.

Hence the federal government, in the form of Josh Frydenberg, being in the media soon after the AEMC report appeared doing a Julia Gillard – remember “waving a big stick”?

Unless retailers “pick up their act,” Frydenberg declared, “they will see more government intervention.” The politics of this are clear. The pricing issues are imposing severe pressure on government attempts to achieve a long-term improvement in the supply environment through the NEG.

(In passing, there is an overseas object lesson available this month for our pollies across the jurisdictions about just how snarky Them Outdoors can get over power issues: the Canadian province of Ontario – their New South Wales – has been a poster child over the past decade for how to get power supply policy wrong, accompanied by deeply unpopular costs for consumers and taxpayers, and in the past week the community struck back at the polls. The long-serving Liberal government – their Liberals are our Labor – got just 19 per cent of the vote and lost party status in the provincial parliament after an election campaign in which electricity was a hot-button issue.)

The retailers’ lobby group, the Australian Energy Council, has pushed out a statement in the wake of publicity about the AEMC report arguing that “re-regulation of energy prices is not warranted” and declaring that it is clear its members “need to do more top accelerate innovation and improve energy marketing to customers while supporting all measures to bring down the cost of energy – the market needs to evolve faster.”

The big problem for the retailers is that this horse (let’s call it Light-handed Regulation out of Hilmer by Keating) may have bolted and re-corralling it won’t be helped, on all indications, by the Australian Competition & Consumer Commission report due on the last day of this month. Especially in the gun are the “Big Three” gentailers, who have increased their market share in generation from 15 per cent in 2009 to 48 per cent now while holding the accounts of seven out of 10 NEM electricity end-users.

Frydenberg made a point of telling reporters this past week that the Turnbull government is “open to any recommendations for further regulation” that the ACCC may produce on 30 June – and this was followed by a frank acknowledgement from EnergyAustralia CEO Catherine Tanna, who is reported as saying “it’s pretty hard to argue that the market is working as intended in the best interests of customers when the prices go up as they did last year.”

As a long and vocal supporter of both privatization and the competitive market for energy supply, I’d have to say that the present situation makes it pretty damned near impossible to argue this.

The critical issue is what steps can be taken to deliver quite rapid improvement for consumers without driving the market in to a ditch? And, equally importantly politically, to achieve outcomes acceptable to voters without populist steps, driven on by all that fore-mentioned shrieking, that inevitably won’t work long term?

None of this is helped by the ongoing noise about promoting renewables as the sine qua non of policy. As an overseas colleague has put it this weekend in an email, “so many start from the premise that renewables electricity generation is all important and we must adapt the energy system to fit around this rather than recognising that what is important is an affordable, secure low-carbon energy system, however achieved.”

PS: Have you focused on the just-released BP Statistical Review of World Energy? Among many things, it reports that, in 2017, the world needed 25,551 terawatt hours of electricity – to which the NEM provided barely 200 TWh – and had a contribution from coal-burning plants of 9,723 TWh and from gas 5,915 TWh. The next highest inputs were 4,026 TWh from hydro systems and 2,635 TWh from nuclear reactors. The total for other forms of renewables was 2,151 TWh. 

 The non-OECD nations had a 14,538 TWh share (almost 57 per cent) of this production – to which fossil fuels (oil, coal, gas) contributed 10,317 TWh (nearly 71 per cent) and hydro 2,668 TWh. Also there was 679 TWh of nuclear generation and 804 TWh of non-hydro renewables. This is where most of the coal Australia mines and the gas we produce is going. And then there is our uranium production.

Negative on energy

Tucked inside my new, warm dressing gown, which enables me to get by with a single bar on the heater in my work space, I spent a fair bit of the wintry long weekend pondering our energy language.

Many examples can be paraded of language that is florid, inadequate and sometimes designed to mislead. Needless to say, the happenings in New South Wales power supply last week, have seen “crisis” hustled back in to the media headlines, along with “coal chaos” in some greener outlets despite, in the words of a Melbourne University academic, “nothing going wrong, the lights staying on and the market doing what it is supposed to do”.

The latest fuss comes barely three weeks since the Australian Energy Market Operator, under the headline “Positive energy,” felt able to publish an upbeat media statement that “despite the 2017-18 summer being the second-warmest on record, the NEM did not experience any electricity customer supply interruptions due to insufficient generation.”

However, go negative on energy is a selling proposition (“clickbait” in the jargon) for the media at large and negatives on coal or, for some conservatives, renewables is another constant of what we get to read, see and hear, especially focused on the east coast power market.

Weigh this against a comment from an Origin Energy executive published yesterday to the effect that “the NEM is coping pretty well through a period of significant transition, with reliability of supply still high even as coal plants age and close and as we significantly boost supply from renewable sources like wind and solar.”

So what happened in NSW in what the WattClarity analyst Paul McArdle has described as a “shaky week” and made AEMO comment that these events are “a sobering reminder that, even outside of the traditional summer peak periods, there is still a need to ensure adequate resources are available to manage the system”?

First, weather conditions across the Sydney basin had the community seeking warmth big time, contributing to State capacity demand pushing towards 11,000 megawatts against a June peak demand average for NSW of 10,550 MW. (It always pays to remember, of course, that 60 per cent of the total demand is from commerce, public services and industry but the residential reaction to weather can impact on peaks.)

Second, last week’s higher peaks coincided with both substantial planned outages by large State (coal and gas) plants and some 1,400 MW of unplanned outages. At the depth of supply wrestling, according to WattClarity, there was 2,000 MW less coal capacity available than at the same time the previous week. Despite these hassles, actual output from the coal-fired sector during the “shaky” week was running between 130,000 megawatt hours and 160,000 MWh against a daily State need that was around 200,000 MWh. (This supply, of course, does not include coal- and gas-fired power flowing west from Queensland in to NSW.)

Third, the weather militated against wind and solar power production. The former, according to WattClarity, had been “subdued” for a fortnight and fell away three times by 1,000 MW in the “crisis” week when wholesale prices spiked strongly, especially on Friday. And the many Sydney basin rooftop PV arrays weren’t much use in heavily overcast conditions.

Fourth, the Tomago smelter in the Hunter Valley had to take a potline offline for 45 minutes one day and two of them for an hour each two days later, demand response leapt on in the media, not least because the owners are vocally unhappy about needing to interrupt their operations.

There is much more detail than this to what made last week “shaky” in the NEM’s largest regional market – but, for my purposes here, one other thing that the situation threw up was that transmission between NEM regions is yet another issue in strong need of attention as the “transition” is pursued.

WattClarity’s McArdle, summing up, made a worthwhile point, I think: “The NEM is a very complex, integrated piece of machinery.  What follows from this (though less often acknowledged) is that when there is a ‘failure’ (or something that was too close to ‘failure’ for comfort last week in NSW), it’s highly likely that there will multiple factors contributing to the predicament. Even a cursory analysis reveals that there were challenges last week with coal, gas, wind, solar, hydro, interconnection capability, demand forecasting and so on.”

All this said, I do take issue with AEMO claiming in a media statement about the situation that “Australia does not have the energy reserves it once had to lean on in times of need.” Western Australia and Queensland, between them accounting for some 3.3 million of about 10.4 million national residential and business customers, might justifiably ask why they are also thrown in to a stew made by South Australia, Victoria and NSW?

One thing more: Thanks to the latest quarterly report, and its immediate predecessor, from Graeme Bethune’s EnergyQuest advisory firm, it’s possible now to look at the NEM generation performance for the six warm (and sometimes really hot) months of 2017-18 – this being the first such period of modern times without Hazelwood. What emerges is a picture of 91,105 gigawatt hours of power production (not including estimates for rooftop solar electricity) led by 73,571 GWh of coal-fired supply (80.7 per cent), of which 17,525 GWh was brown coal output in Victoria, as well as 10,298 GWh from gas, 5,883 GWh from hydro, 6,002 GWh from wind and 331 GWh from solar farms. The additional rooftop PV output is calculated at 4,266 GWh. The grid’s fossil fuel contribution for these six months was 92 per cent. The VRE contribution (wind and solar farms) was 6.9 per cent. I wonder how many casual readers of the media in the community would come even close to these latter two numbers? Of course, the deep green members know and seeth about them, but the community at large……?

The new EnergyQuarterly report also includes rolling 12-month data for the SWIS (WA’s version of the NEM) that shows, when rooftop solar is excluded, a fall in supply for the year to March 2018 over the same period in 2016-17 – down to 16,340 GWh (excluding solar PVs) from 18,312 GWh. The make-up for the latest 12 months was 8,092 GWh black coal, 6,705 GWh gas, 1,429 GWh wind plus 77 GWh oil and 36 GWh from large solar. The use of rooftop PV rose to 1,269 GWh, up from 1,000 GWh in the previous period.