Coincidental with the publication of the Queensland government’s panel report on how a high State renewable energy target can be chased is another in London by the British energy regulator (Ofgem) that includes a statement highly relevant to the debate here: “In our view, typically the best way to get the best deal for consumers (and competitiveness for industry) is likely to be to tackle key externalities and let market dynamics drive decisions where possible.”
In the same vein, this time emanating from Oxford, is a new commentary by Dieter Helm, the British Treasury’s favourite energy economist, in which he excoriates the European approach to energy and climate policy as “a marriage of two different and often-conflicting objectives: to promote and enhance competitive energy markets, which are technologically neutral, and to promote the climate agenda in a deliberately technologically biased way, outside and separate from the competitive markets.”
Helm condemns the European Union’s 2030 renewables plan as “a dog’s dinner.”
For those here who think, to quote them, “we are on the cusp of a revolutionary global paradigm shift towards renewable energy,” the EU path represents the yellow brick road and they, including the Victorian, ACT and Queensland governments, are in a rush to push Australia down it.
Queensland Energy Minister Mark Bailey believes the draft report he has just published on pursuit of his government’s target of a 50 per cent renewables target is a “breakthrough” development, asserting (with an eye on the recent flurry of CoAG Energy Council activity after the South Australian blackout and of the Alan Finkel report that he and other ministers have just commissioned) that it shows his State can develop its grand plan “while maintaining electricity security and reliability over the next 14 years.”
In the light of recent events, that is potentially what Sir Humphrey (of “Yes Minister” fame) would describe as a “courageous” stance.
Certainly the Australian Energy Council, representing generators and retailers, is not impressed.
CEO Matthew Warren declares that transforming the Queensland system will requires a multi-billion dollar investment over decades that will have to be paid for by the State’s consumers or taxpayers. “It’s not magic,” he says.
Warren warns that the approach proposed in the draft report to grease the wheels of a forced transition to wind and solar power will “dull price signals” in the Queensland sub-market that are needed to flag to owners and developers of both thermal and renewable generation where and when to build new plant.
The draft report, he adds, expects a high level of renewable generation to be approximately cost-neutral to Queensland consumers if all existing coal and gas power stations operate at reduced margins. Given that the State government owns two-thirds of Queensland generation, this would transfer the true transition cost to its taxpayers.
For the Energy Networks Association, the report just highlights the importance of a national approach to carbon and energy policy.
CEO John Bradley notes that the Palaszczuk government is focusing on just one policy option – variable renewable energy – and he challenges the panel and the politicians to dwell on the right question: which he says is what is the cheapest way to reduce carbon emissions while keeping the lights on?
Bradley points to work recently by the federal Climate Change Authority, using the same consultants as the panel, Jacobs, that found technology-specific targets result in higher-cost carbon abatement. Like AEC, ENA wants a national policy on cleaner energy to be pursued with clear abatement targets. That way, Bradley argues, “consumers will pay less and energy security can be better managed.”
The government panel says in its executive summary that “significant (State) policy action will be required to reach the 50 per cent target,” with between 4,000 and 5,000 megawatts of new large-scale generation capacity needed to be developed in Queensland between 2020 and 2030.
The government intends to launch legislation to give effect to its scheme in 2017. By then, apart from CoAG having received the Finkel review (at least the interim report), Palaszczuk & Co will have had to release the Queensland productivity Commission report on electricity pricing. This was handed to the government at the end of May and must be made public by December.
The draft QPC report was published in February this year and told the government “in order to achieve least-cost carbon abatement, (it) should work with the COAG Energy Council to find opportunities for collaboration on carbon policy, as an alternative to pursuing independent action.”
The QPC observed (seven months before the South Australian twin events) that “one of the challenges for governments at the national and State level is to provide a clear framework for lower emissions generation in a way that supports the market to make the transition to the delivery of reliable and cost efficient electricity supply.”
Modelling done for the commission found that the introduction of a QRET would require 37,250 GWh of renewables generation annually by 2030. The target would need to be primarily met by around 19,000 GWh of additional large scale renewables generation, an increase of about 17,600 GWh over 2015 — and would require a subsidy of some $8.6 billion.
In the interests of transparency, State Treasurer Curtis Pitt should release the QPC final report now that his government is waving around the draft renewables panel document.
Its LNP political opponents argue that the numbers in the new document are “a fudge.”
Meanwhile, in Parliament House, Canberra, this week, Prime Minister Turnbull (in Question Time) accused Labor of treating renewable energy as an ideological issue rather than a technological one. “We must stop putting ideology in to something that is essentially an engineering issue,” he said.
All of which underscores that what we have here – and not just in Queensland – is a “dog’s dinner,” as Dieter Helm asserts.
How exactly the Finkel report and further CoAG discussion can deliver a path to the approach advocated by Ofgem (and others) is one of the biggest national questions.
In the context of the past fortnight’s hubbub over wind-struck South Australia and its ensuing electricity woes, it’s more than a little interesting to read a report in the “Wall Street Journal” about how Hurricane Matthew is “stress-testing a costly effort by utilities and the US government to make the electric grid more storm-resistant.”
According to the paper, the bill for smart grid and storm-hardening technology in America from 2008 to 2017 will amount to $US32 billion ($US7 billion of which has been spent in Florida and the Carolinas, which have borne the brunt of Matthew’s force). The purpose of this exercise is to make the grid more resistant to wind, flying debris and floods as well as to enable power providers to identify damage and restore service more quickly.
The Obama administration has contributed $US4.5 billion to the cost through a bill passed by Congress in 2009, part of the post-GFC stimulus package. (One may recall en passant that Kevin Rudd’s regime chose to spend money inefficiently on pink batt insulation.)
The overall US outlay has included provision of 65 million smart (digital) meters, almost a third of the American total, as well as equipment that automatically isolates problems and re-routes electricity flow around trouble spots.
As it happens, 2009 was roughly when the Australian federal and east coast governments were looking at network resilience and facilitating the regulator allowing $35 billion to be spent on the east coast grid. Did the policymakers and their advisers also look at what the Americans were up to and consider a similar approach here? Manifestly not.
As I have pointed out previously, it’s pretty hard to hold off Nature when it comes to weather-proofing the system. More than two million households and businesses lost supply in Florida and the Carolinas per kind favor of Matthew – although 901,000 of 957,000 Florida Power & Light customers had service restored within 24 hours. (Let’s not forget that the same was done for some 750,000 South Australian customers.)
The focus in these situations inevitably falls not on fast recovery but on the thousands stranded without supply for days. Here the situation is similar in SA and Florida.
The broader American effort is directed not just on here-and-now utility resilience but also on the future.
The Obama administration announced in March that it is making $US220 million available over three years to research laboratories for innovation to make power grids “cleaner, more productive and more secure.”
Australia’s NEM is the world’s longest electricity system, but of course by no means the biggest; America, in effect, has three NEMs (interconnected state systems with much larger customer numbers) plus stand-alone Texas, delivering electricity from thousands of power plants to 150 million accountholders (our NEM has 9.4 million) via 3,300 utility businesses (less than 50 here).
One of the things we have in common is that a substantial part of these grids is made up of infrastructure and technology dating back to the 1970s and inevitably straining to meet growing service demand let alone the challenges of a transition involving increasing levels of variable renewable energy.
Whether one believes that climate change is the cause or not, it’s a fact that significant weather events are more frequent at this time and an important factor in grid management today. In the case of the US, there are now 70 to 130 major outages a year related to weather, reportedly a lot more than in the 1980s and 1990s.
The full cost of making grids much more resilient is eye-watering (and wallet weakening, a significant political issue in Australia these days, as we all know).
The Electric Power Research Institute in Palo Alto, California, puts the cost for the US alone at somewhere between $US338 billion and $US476 billion. It also estimates the American economic benefits of pursuing these outlays at up to $US2 trillion.
The US Secretary for Energy, Ernest Moniz, says Florida P&L is on the cutting edge of “addressing a grid for the 21st century, particularly in the area of resilience.”
Which, for me, resonates with a point I made in my previous post, in which I asked what the CoAG Energy Council is really asking Alan Finkel to do in his review after the SA blackout political (and media) shenanigans?
Reading various local commentaries over the past few days, I have the impression that the Chief Scientist is being tasked as a modern Moses, expected to return from Mount Hyperbole with tablets to solve all our energy transition ills.
It might, from where I am sitting, be bold of him to instead come back and say “I got this gig because the body politic (and the media) had kittens about SA being blacked out; here is what is needed to address this issue for Australian grids.”
In this respect, a trip to Florida might be a good starting point, with a stop-over in Washington DC for a chat with the estimable Moniz, former MIT professor of physics and Obama’s Energy Secretary since 2013, in which role he has been a stand-out among the world’s current crop of energy portfolio holders.
“Modernizing the electrical grid is essential to reducing carbon emissions, creating safeguards against attacks on our infrastructure and keeping the lights on,” Moniz said recently.
Perhaps, in a nutshell, this is the key message Finkel (and his yet-to-be-announced pair of review colleagues) need to deliver to Frydenberg and the Energy Council (and beyond them to Turnbull and other leaders) even if it leaves numerous of the local energy chattering class in an ongoing froth.
What exactly is the Australian Chief Scientist, Alan Finkel, being asked to do?
It is an important question in the immediate wake of the CoAG Energy Council decision on Friday to enlist him and two as-yet unnamed co-investigators to produce, says “The Guardian” newspaper, “an energy security review determining whether the national electricity market can deliver reliable base load power while meeting Australia’s climate change commitments.”
According to the “Australian Financial Review,” the Finkel panel is “charged with devising a plan to ensure future energy security, affordability and sustainability as more renewable energy comes into the electricity system and more coal-fired power stations close.”
What the CoAG communiqué says is that, “given the critical importance of energy security, reliability and system resilience,” Finkel’s panel will undertake a “wider independent review to take stock of the current state of the security and reliability of the national electricity market and provide advice to governments on a coordinated, national reform blueprint.”
The terms of reference set out for Finkel require his panel to deliver a “blueprint (that) will outline national policy, legislative and rule changes required to maintain the security, reliability and affordability of the NEM in light of the transition taking place.”
The review, the ministers say, will draw together and build on the analysis and findings of the following “recent and ongoing work streams:”
• Reviews into the South Australian ‘system black’ event by AEMO, AER and the AEMC
• Detailed analysis and reports by AEMO and the AEMC into future power system security and market frameworks
• Analysis by AEMO and the AEMC into the impact of carbon mitigation policies at both the Federal and State level on energy markets
• A review of governance arrangements (Vertigan review)
• National Gas market reforms which relate to NEM security, reliability and affordability; and
• A review of the appropriateness of existing regulatory arrangements for interconnector investment.
And, if this is not enough, the Energy Council also requires that, “consistent with the national electricity objective, the review will examine the costs and benefits, including to consumers and industry, of the options to address any current or future vulnerabilities identified in the NEM.”
All of this is to be done, in draft, to be available when Malcolm Turnbull convenes the next CoAG leaders’ meeting in December and to be completed early in the new year.
That’s right, this report is going, via the Energy Council, to the top of our nine governments.
To quote the Grattan Institute’s Tony Wood, writing in “The Conversation,” Finkel & Co are “challenged with steering Australia’s energy system around some big potholes while keeping an eye on the horizon — and all in about six months.”
Lost in the fog of jaw following the Energy Council gathering on Friday is another ministerial requirement – this one for the Australian Energy Market Operator to provide two reports a year on “the implications on security and reliability of current and proposed investment in the national electricity market.”
Looking at all this from the political angle, Phil Coorey, the chief political reporter of the “Australian Financial Review,” takes the view that the Energy Council outcome is an advance “if only because it promises a co-ordinated approach and reduces the danger that, among the hue and cry fuelled by vested interests on both sides, short-sighted and regrettable decisions could again be made.”
Of course, by the time the Finkel report is completed and the federal government has carried out its pledged review of Australia’s climate change goals in 2017, we will be nearing this time next year – and I bet you a dollar to a doughnut that talk of the next federal election by then will have reached a new high.
Moreover, the next South Australian election will be held on 17 March 2017 and electricity is a very likely hot topic in that campaign. (The Victorian election, by the way, is scheduled for 24 November 2018.)
All of which once again underlines that energy conflated with carbon abatement is a very political issue.
In which context I was struck this week by these comments in the Adelaide Web newspaper “InDaily” by its editor, David Washington, commenting on the broad issues of the blackout: “Politics has become so ideologically-hidebound, so combative,” he wrote, “that our political leadership seems to have lost the capacity to think clearly, to formulate practical solutions, gain public support and implement them. “It’s difficult to ignore a conclusion that members of our political class no longer pay heed to facts – rather, they prefer to cherrypick fact-like pieces of information to suit their particular ideology or political purpose.”
There-in lies the worm in the apple: the Australian Chief Scientist is widely respected and clearly regarded by the energy ministers (and their leaders) as a safe pair of hands. Opting for the Finkel panel approach gives the whole political crew a breathing space – an equally gives the energy agitators months more to play their games – but eventually it all comes back to governments and, in the eyes of leading commentators, the federal government in particular.
Waiting for a Boy’s Own comic moment – with one bound Jack was free – in which a complex and currently seemingly impossible situation can be resolved by the simplest possible means relies too much on hope rather than our experiences.
However, industry is clearly ready to live in hope, as evidenced by comments from Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association.
“Let’s hope Finkel’s review will drag debate away from polarized positions,” he says, “to a fact-based discussion of how Australia can cut emissions from the energy sector without jeopardizing reliable, affordable electricity for consumers. As far as some governments are concerned, this might not be the beginning of a beautiful friendship, but it could be the beginning of a long overdue realism in debate about renewable energy.”
Talking up the need for a mix of technologies to meet national power needs, Roberts adds: “As a starting point we need to see more co-ordinated action from governments and fewer ad hoc announcements designed to capture headlines.”
If, to quote Jennifer Hewett of the “Australian Financial Review,” we are caught up in an energy revolution looking for answers, then the really important hunting ground is not South Australia or Tasmania, much in the headlines this year for crises, but the trio of Victoria, New South Wales and Queensland — home in 2015 to 174,580 gigawatts hours of power production (out of an east total of 195,346 GWh, ie 89 per cent) and to 8.3 million residential and 1.07 million business accountholders (88 per cent of the Australia-wide, grid-connected market).
Both Victoria and Queensland are getting their share of current headlines, per kind favor of the federal government badmouthing them over go-it-alone renewable energy targets, but the sleeper (at least in the public debate) is NSW, home to 3.5 million of the aforesaid residential and business accountholders, more than Victoria and South Australia put together, and to 62,000 GWh of electricity production, again almost as much as Victoria and SA combined.
The Baird government has initiated an “advanced energy strategy” project, which has flown below the public radar since its announcement at the beginning of August with its promise to develop yet another “roadmap” for a journey to a “clean, affordable and reliable” energy future for the State. Energy Minister Anthony Roberts has initiated discussions behind closed doors with “energy experts across the east coast of Australia” in pursuit of this roadmap and promises that the outcome will “ultimately” be made available for “broader comment and input.”
Quest Events and I are getting ahead of this game this month by staging a two-day public conference on “Re-powering NSW” in Sydney. (You can find the program here: http://www.questevents.com.au/re-powering-nsw-2016.) Speakers will include:
# Paul Italiano, chief executive of TransGrid
# Professor Ross Garnaut (on the opportunities and challenges for an energy transformation by 2035)
# Innes Willox, CEO of Australian Industry Group
# Professor Frank Jotzo of the Australian National University (on developing a market mechanism to facilitate the exit of high emissions generation)
# Tania Constable, chief executive of CO2CRC, on a role for CCS
# Paul Broad, CEO of Snowy Hydro (on building new infrastructure for secure and affordable energy supply)
# John Bradley, CEO of Energy Networks Association
# Miles George, CEO of Infigen Energy
# Iain MacGill, Director, Centre for Energy & Environmental Markets (on electricity storage)
# Kieran Donaghue, GM Policy of the Australian Energy Council (on the challenge of integrating renewables in the market)
# Greg Evans, Executive Director Coal of the Minerals Council of Australia (on developing a high efficiency, low-emissions roadmap for NSW).
One of the most popular, and from my perspective most useful, aspects of the “energy outlook” conferences on which Quest Events and I have worked for the past five years, is the “Q&A” sessions they feature, involving not just some of the speakers but also other players in the energy game and by no means least the audiences themselves.
The “Re-powering NSW” conference will include five such panel discussions, including one featuring Andrew Stock from the Climate Council, Innes Willox of Ai Group, Tony Maher of the CFMEU and Ivor Frischknecht of the Australian Renewable Energy Agency debating “Can we re-power NSW reliably at low cost?” — and another featuring Tim Nelson of AGL Energy, Lisa Gooding of EnergyAustralia and Anthony Englund of TransGrid on what NSW can learn from the SA developments in trying to phase out higher-emitting generation in the “premier State.”
There are also going to be panel discussions on the potential use of carbon capture in NSW (featuring Tania Constable of the CO2CRC, Alex Zapantis of the Global CCS Institute and Rick Fowler from the NSW Government — where he is director of coal innovation) and on achieving affordable supplies of gas for the State (where the panellists will include John Pierce, chairman of the Australian Energy Market Commission).
Another that should be rather interesting has the title “Is the death of the grid dead?”
My co-chair Andy Lloyd (chair of the Energy Policy Institute of Australia) particularly wants a focus on the vexed issue of investment and the conference will feature a presentation by Andrew Pickering, chairman of Infrastructure Capital Group, and then a Q&A involving him, Brett Redman, the chief financial officer of AGL Energy, and Gloria Chan of the Clean Energy Finance Corporation.
The vicissitudes of the federal Renewable Energy Target are a good reflection of that saying that you can lead a horse to water, but getting it to swim is another matter! The issue of whether market mechanisms are adequate to attract investment — and how much our penchant for chopping and changing the rules of the game deter investors — tends to get less attention (and not only for energy) than is sensible in a country like Australia.
For the purposes of this conference, the misfortunes of South Australia, the ensuing shouting match over renewable energy and then the “emergency” CoAG Energy Council meeting on Friday (with its decision to get Chief Scientist Alan Finkel to chair a “quickie” review of energy security — his draft report has to be available by early December) are a commercial blessing, giving real-life emphasis to the event’s premise: an era in which coal generation has served the State well since the 1950s is moving to at very least change substantially, if not close, as the existing fleet, mostly built in the 1970s and 1980s, moves towards the end of its design working life and questions abound for the next 10-15 years, not just about what use can be made of variable renewable energy (and how to integrate it in to the system) but also the extent to which gas and coal-burning plant can continue to play a role.
To which, of course, one must add that ignoring nuclear power in this environment is daft. One of the more interesting parts of the program, I think, is a pair of back-to-back presentations featuring Infigen Energy’s Miles George talking up the opportunities for large-scale wind development in the State and Tony Irwin, technical director of SMR Nuclear Technology, examining what forms of reactor power could be suitable for NSW.
I haven’t nearly covered the whole conference program in this post but I think what is here goes to support my own view that (a) it is highly desirable to have this broad-ranging discussion about the largest regional sub-market for power at this time (a view I formed well before the wheels fell off the SA cart) and (b) there’s a helluva lot more to this situation than political spinning and once-over-lightly media coverage has led the community at large to believe.
It is, I suppose, the reverse of a storm in a teacup.
In barely a week since a substantial storm lashed South Australia we have seen debate about electricity policy swing from relatively ho-hum engagement between the usual suspects to the headlines of the media nationwide, culminating in an “emergency meeting” of the CoAG Energy Council in Melbourne tomorrow.
What will flow from this gathering remains to be seen, but the flavor of events is well represented by “The Australian” this morning leading its front page with a headline that says “Malcolm Turnbull to put the wind up States over power blackouts”
Central to the CoAG Melbourne discussion is a hastily-prepared report on the South Australian blackout by the Australian Energy Market Operator, which has got more media attention than all the other output from the agency in its nine-year history. And, naturally, it is being interpreted by the many interested parties to suit their own perspectives.
The Australian Energy Council, rightly I think, is striving to get understanding that the AEMO report is only a start, more detailed analysis is needed to understand what occurred in SA last week and steps to improve power system security should wait on this work.
AEC’s Matthew Warren makes the salient point that we need to think differently about the potential effect of extreme weather events on electricity supply now that Australia is increasingly shifting to a more weather-dependent supply system; for the radical corner of this shouting match, of course, this sentiment, expressed by some others, too, in various forms, is seen as a wicked assault on the great goodness of wind energy.
Warren argues the report from AEMO – itself a preliminary effort rushed out to meet the politicians’ needs – indicates that a different mindset is required to properly run a decarbonizing electricity system “reflecting the significant differences between using conventional thermal generation and a mix with higher levels of intermittent renewables.”
It says something about the quality of strategic thinking about energy in this country that it takes the rough beast of a State-wide blackout to shatter the smug shuffle down the road to higher and higher levels of wind and solar power without due attention to the fact that safe, reliable, affordable power supply requires superior levels of engineering skills.
John Bradley of the Energy Networks Association sums things up well in declaring that we now have “political risk too great for the energy system.”
Speaking at an energy conference this week, Bradley commented that “patchwork targets and policies across Australia are not leading to a stable, secure energy system,” pointing out that Friday’s Melbourne gathering is the second “emergency meeting” of energy ministers in seven weeks.
I rather like his metaphor: we are “running with scissors” towards a lower-emissions energy system.
To all of this, Malcolm Roberts of the Australian Petroleum Production & Exploration Association adds a reminder of the importance of maintaining a diverse energy mix in ensuring power system stability and security.
He is alluding, of course, to the fact that shoving gas to the sidelines of electricity supply isn’t smart at all – and who can blame him for also seizing the opportunity to remind us that (a) gas generation played a key role along with the SA/Victoria main interconnector in restoring power quickly last week and (b) when the lights went out, “tens of thousands of SA families were still able to cook their dinners, heat their homes and enjoy warm showers thanks to natural gas.”
The Minerals Council of Australia takes this point still further, as its CEO, Brendan Pearson, writes today in an op-ed in “The Australian.” MCA argues for “a simple, merit-based approach” to decarbonizing the national power supply. “No option should be off the table. No solution should be favored over others. We must ditch the canard that only renewable energy can deliver low-emissions solutions.”
Pearson accuses “some States” of wanting to phase out coal and gas, continuing to ban nuclear energy and pushing towards 50 per cent of their power mix from variable renewables “without any assessment of the cost or viability.”
This is my cue for harping yet again on the wisdom of paying proper attention to the advice of the SA royal commissioner Kevin Scarce, the more so when I see the Prime Minister saying this sort of thing: ““Let’s take this storm in South Australia as a real wake-up call. Let’s end the ideology and focus on clear renewable targets.”
This is my paraphrase of the royal commission’s comments on the general issue of our electricity transition:
# In developing Australia’s future electricity system there is a need to analyze the elements and operation of that system as a whole, and not any single element in isolation. It should be an objective of policymakers to ensure that those outcomes are delivered at lowest possible cost.
# There is a substantial challenge in meeting the three requirements of low carbon, high reliability and low cost. This transformation needs to be guided by stable medium- to long-term government policies to encourage investment. Given the complexity of the issues and cost of transformation, planning must be based on evidence not opinion or emotion. That evidence should focus on a combination of cost, reliability and carbon intensity. A future national electricity supply system must be designed to be low carbon and highly reliable at the lowest possible system cost. Resolving this ‘trilemma’ will be difficult and will require carefully considered government policies. A low-carbon electricity system would also need to maintain current levels of reliability.
# No single option for electricity generation currently commercially available in Australia meets all three criteria because of the intermittency of renewables, the emissions intensity of fossil fuel generation and the high capital costs of developing nuclear power.
# At present, there is no analysis of a future NEM that examines total system costs based on a range of credible low-carbon energy generation options. Such an analysis would be required before it could be asserted that any option would deliver reliable, low-carbon electricity at the lowest overall cost.
# The Commission recommends that the South Australian Government promote and collaborate on the development of a comprehensive national energy policy that enables all technologies, including nuclear, to contribute to a reliable, low-carbon electricity network at the lowest possible system cost.
If the ministers meeting tomorrow, and the PM and first ministers of the States and Territories beyond them, could just focus their attention on this good advice, some real progress could be made. At the very least, if they don’t, they owe the rest of us an explanation of why not.
So where are we in the wordy aftermath of the South Australian power blackout?
Most importantly, the majority of the high voltage network in the State has been restored, allowing all mass market customers to be supplied although some large industrial customers remain without full power. The efforts of lines crews and engineers in achieving this should be recognized.
Next, the inevitable ministerial-level post-mortem will be kicked off on Friday by an “emergency” meeting of the CoAG Energy Council – which at least will have the merit of allowing nine governments to be briefed by officials and agencies on what actually happened when the blockbuster storm struck South Australia.
Politically, the event has already morphed in to round umpteen of the long-running slanging match between the Coalition, Labor, the Greens and various fringe-dwellers. In what I see being described overseas as the environment of “post-truth politics,” the chances of a coming together in the national interest would not appear to be high.
Looking for a bright side, is it possible that a broader approach to low and zero emissions generation could come in to focus at the higher levels of government?
Can one hope that the need to react politically to the SA blackout is a catalyst for this better approach? In this regard, the Prime Minister’s commitment to also engage first ministers on energy security through CoAG should not be overlooked
Here, it should be pointed out that a federal administration serious about tackling the long-term issue could start re-examining the case for nuclear power as well as both how to resurrect gas-fired generation in the southern States and how to pursue carbon capture and storage meaningfully. This is the so-called “fuel neutral” approach, strongly advocated by a number of industry associations but anathema to green activists. All of the above goes hand-in-hand with the need to develop a plan to cut over-capacity out of the east coast market and to facilitate a changed supply chain that delivers efficiency as well as environmental outcomes.
At a practical, SA-specific level, it now emerges that the State’s network operator, ElectraNet, has been in the throes of preparing a case for substantial outlays on the transmission system for its next bout on revenue determination with the Australian Energy Regulator. This bid will address investment from 2019 to 2023 and it is not hard to see the local body politic wanting such refurbishment to happen earlier than this.
The other augmentation issue given added impetus by the blackout is the call initiated by the Weatherill government after the July SA “energy crisis” for construction of a new interconnector between the State and New South Wales. (The SA Premier is probably not best pleased to have media pointing out that his Labor predecessor Mike Rann promised to pursue this link as long ago as 2002.)
Not surprisingly, the Australian Energy Council has weighed in today to argue that increased interconnection should be part of a considered national (or at least east coast) energy strategy “not a political response to a major blackout.”
While the South Australian situation is very high profile at present, the main political battlegrounds over pursuit of greater levels of renewable energy are Victoria and Queensland, each with Labor governments elected on a promise of going well beyond the RET. Malcolm Turnbull is accusing Victoria’s Premier, Daniel Andrews, of being “evasive” about how his State target will be met while maintaining energy security and is, in return, is accused of “peddling ignorant rubbish.”
Turnbull (“I have a roof full of solar panels at home in Sydney”) declares he is “very keen” on renewable energy but “we have to maintain security and reliability and we have to maintain affordability” while reducing carbon emissions.
On cue, a Queensland minister has described the PM as “almost a climate denier.” Bizarre business as usual, then.
Personally, I’m struck by an outbreak of emoting in some parts of the media and elsewhere about “how can this (the blackout) happen in a first world country?”
We have a writer in the “Australian Financial Review” this past weekend declaring that the real political fall-out flows from “the basic expectation of most people that in a first world country like Australia their fridge isn’t rendered useless for an extended period of time.”
Given that the “Fin,” Fairfax Media generally, tabloid newspapers, radio shock jocks and television news broadcasts have tub-thumped some 500 times about network “gold-plating” since 2013 (see Google News), this is quite a statement.
Does the writer, and others who have gone down this path in the past few days, have any concept about the tens of billions of dollars that would be needed to materially reduce network exposure to weather – or that even undergrounding is not insurance against system failure (cf the Auckland blackout of 1998 when a grid-based blackout lasted 10 weeks)?
My files on Auckland include a crisis management business commentary making this point: “Despite the best of all possible intentions, it is simply impossible to avert all crises. This was well stated by Aristotle, who said it is very likely that something very unlikely will occur. Large technological failures and catastrophes often occur in areas outside the realm of well-established and tested knowledge.” To put it another way, in life generally we are pretty well always dealing with the certainty of the unexpected; politicians at least should understand this.
Having a storm tear down sections of three different high voltage power lines comes under the heading of “unlikely” and how it is possible to protect a grid against such an eventuality at a cost consumers are willing to bear seems a point lost on the ranters.
Rather more material is the emerging line in the media asking whether, if the coal-burning plant at Port Augusta had not been forced to shut by market conditions, the impact of the blackout could have been lessened or avoided for Adelaide, home of most of the 1.7 million people shocked and inconvenienced by the sudden loss of power? Will the immediate survey of the disaster by the Australian Energy Market Operator look at this aspect?
Who ends up conducting a wider forensic examination of the lessons to be learned from South Australia’s twin woes remains to be seen – Xenephon for one wants it to be the Australian Energy Market Commission – but Labor (the governments of SA, Victoria and Queensland and the federal opposition) will be nervous about having a “driving without due care” sticker attached to the bumper of their green electric vote-catching vehicle.
The federal Coalition is already hard at work trying to make this happen. Industry Minister Greg Hunt, in an op-ed in the “Australian Financial Review,” comments: “In Paris last December the SA Premier declared ‘We are running a big international experiment right now.’ Hmmm.”
He asserts that “the demonstrated inability of the SA electricity system to cope with major storms will now be a factor in whether businesses choose to invest there.”
Hunt argues that there are “three fundamental pillars” of electricity management: (1) ‘the country must continue to have reliable base load,” (2) each of SA, Victoria and Queensland must engage in integrated planning of their renewables expansion, and (3) “there must be a more integrated system of providing consumer and investment security,” which he claims means that the NEM States will have to consider new or upgraded interconnectors.
Energy security, he declares, has to be a key consideration in attracting investment for today and tomorrow. I wonder how many times this sentiment was expressed in his speeches and media interviews from 2013 until recently when he was serving as Environment Minister?
The howling wilderness that is Australia’s public discourse on energy supply has never been better exposed than in the past few days in the wake of the South Australian power blackout.
Political blowhards, the impact of savage winds on infrastructure, ideology and the ongoing issues of integrating variable power in to a supply system are all at play here, no doubt to the complete confusion of ordinary Australians.
The salient facts about this week’s event are straightforward: the weather collapsed 22 high voltage power pylons in the north of SA, bringing down three of the State’s four major grid lines, the supply chain reacted as it is designed to do by shutting down, a State-wide blackout ensued and system engineers brought supply back for most South Australians (especially in Adelaide) in little more than than a day.
Then, of course, as is the fashion in our Trump-esque western world, the media and the politicians went in to overdrive, much of the color and movement based on energy illiteracy.
Just how out-of-whack this debate can get is illustrated by the Adelaide mass market newspaper launching an all-out assault on SA Premier Jay Weatherill for daring to assert that the blackout is the result of a cataclysmic weather event nothing could have prevented and that the swift shutdown of the system demonstrated it worked well. Both of which are true, but the accusation hurled at Weatherill and his government is that they are “better at generating excuses than power.”
Without downplaying the community and business problems caused by the blackout, as EnergyQuest’s Graeme Bethune says, South Australia was not without energy during this event: gas supply to 400,000 South Australians continued to be available and also played a critical role in enabling (through gas generation) a fairly fast (under the circumstances) restart of power supply to Adelaide and its environs.
Amid the hollering in some quarters about “unprecedented” power failure, can one point out that North Queensland has twice suffered similar events from cyclones in the past decade and at the end of January 2009 a sub-station explosion in a heatwave took out two 500 kilovolt Victorian power lines and left 500,000 Melburnians without electricity – as well, back in 1994, a combination of damp and dust caused the south-west Western Australian power system to shut down leaving 600,000 people in the dark.
In other words, these events do not happen often (thankfully) but they do happen because supply infrastructure is exposed to the elements.
The University of Melbourne’s Roger Dargaville has offered this succinct summation: “The NEM experiences a range of extreme weather on a regular occurrence and a vast majority of the time copes well. The system contains multiple levels of redundancy and safety mechanisms – however it is impractical if not impossible to build any complex system that is completely 100 per cent reliable.”
Providing additional redundancy to insure against such events would not only be extremely costly, but it would still not completely guarantee against further extreme events, he rightly adds, a point that should surely resonate with the politicians, pundits and media types who have spent the past several years fulminating against network “gold-plating.”
Federal Energy Minister Josh Frydenberg should bear this latter point in mind when he talks (as he does in an op-ed in “The Australian” today) about “what measures should now be implemented to enhance resilience of the system.”
Lost to public sight is the fact that considerable planning goes in to system engineers being able to bring electricity supply back as quickly as possible after things go pear-shaped.
The Australian Energy Market Operator has a “black start system procedure” for this very purpose. AEMO is required to investigate all such system failures and the grid operators’ never-ending learning process also extends to extensive collaboration with each other, not least in benefiting from similar overseas experiences – of which there have been 49 since 2010, including a hurricane knocking out power in a large part of Florida this month.
The two-page fact sheet on power system security published on Thursday (in reaction to what happened in SA) by the Australian Energy Market Commission should be required reading for politicians and journalists – and a current commentary on The Conversation (and especially the segment by the ANU’s Hugh Saddler) is another worthwhile contribution to understanding.
What is ratcheting up this week’s South Australian event in to another dimension is the ongoing political debate over plans to promote variable renewable energy (or to baulk its growth), fuelled by a continuing argument over the causes of the late July SA market problems – and set off this week by egregious contributions by Deputy Prime Minister Barnaby Joyce and senator Nick (‘head’s must roll”) Xenephon.
As Laura Tingle of the “Australian Financial Review” says, the context is everything is politics these days and she adds that maybe a benefit of this latest spasm is that it is “a rude wake-up call” about energy security, which most Australians take for granted.
Malcolm Turnbull has now seized the opportunity of the blackout to take aim at the “extremely aggressive, unrealistic” renewables targets being pursued by some States without regard, he says, to energy security – hello Victoria and Queensland!
He is tasking Frydenburg with talking anew to State energy ministers about the issue, promising to go on to take it up with State premiers thereafter. (I’ll refrain, almost, from caustic reflection on what it takes to get the nation’s leader to talk to other first ministers about a key energy supply issue………)
Frydenberg’s opening gambit (in “The Australian” op-ed) is to say “it is quite irresponsible for the Queensland government, with 4.4 per cent of the State’s power presently generated by renewable energy, to commit to a 50 per cent RET for 2030 or for the Victorian government, with 12 per cent renewable energy today, to commit to a 40 per cent target by 2025 without a clear and practical roadmap for getting there with energy security guaranteed.”
Which is my cue for reminding him that the SA royal commission dictum should prevail: the task is to integrate energy and carbon abatement policies so as to provide secure, reliable supplies at the lowest possible cost to consumers.
Frydenberg says (in the op-ed) “we cannot trade away the reliability of the system as we transition to a low-carbon future because to do so would be far costlier in the long run.”
This, he adds, is why he and other policymakers need to understand exactly what took place in South Australia and the reasons behind it. Well, yes and no: it’s a good idea to properly grasp what has happened this week but the event is not itself a metaphor for what Frydenberg & Co (and then Turnbull & Co) have to understand and manage.
As explained above, weather impacts on power grids are unavoidable; the major issue at hand for our political leaders is the efficiency and cost/benefit equation of the carbon transition. If it takes a big storm in one region to get them to come to grips with their challenge, so be it, but it’s a damned funny way to steer the ship of state.
The risk of the blackout influencing the big issue is well captured by the Grattan Institute’s Tony Wood in yet another op-ed in “The Australian” today: “The two events (SA’s rise in use of renewables and the blackout) are not connected and a response based on an incorrect connection could lead to the wrong solution for the wrong problems.” Wood adds: “South Australia has seen a power price shock in July and now a massive power failure. Other States are not immune from the same problems. Conflating the events that caused them may be attractive to various interests but the issues must be addressed separately. To do otherwise risks failing to resolve any of them.”
Just so – but are those who matter in energy policymaking actually listening?
This seems to be quite a good time to remind populist policymakers in the energy space of that saying “Be careful what you wish for, you might just get it.”
The closure of Hazelwood power station has been high on the green wish list for a long time – six years ago students on one Victorian campus devoured a plant-shaped cake to symbolise this desire – but, now it appears to be on the cusp of happening (although the French owners are putting on a show of Gallic enigmatism), the media is full of hand-wringing and the ever-so-green State government is doing a flea-on-a-hot-griddle dance.
Twittering State Energy Minister Lily D’Ambrosio, having publicly rushed to phone Engie executives in Paris after a newspaper report claimed a closure decision is nigh (and getting a Gallic shrug in response) and having rushed to the Latrobe Valley to make a show of concern for the community, has launched this weak attempt attempt at deflection: “We will stand by the people of the Valley. Josh Frydenberg must join us & provide the support the community desperately needs.”
Plus dark green boosters are emoting: “This is fantastic news in most respects (my italics) BUT (their capitals) the process is occurring in such an unstructured way it’s likely to result in significant rises in electricity prices for consumers.”
Trading in the NEM forward price for electricity is spiking upwards on the Hazelwood closure claims, including as much as $62 per megawatt hour for Victoria by mid-2017, leading one trader to reflect that this is as bad as the impact of the 2008-09 drought.
But don’t worry, D’Ambrosio, whose government in June promised to “lead the nation on climate change,” is telling Victorians through the media, “we have the lowest prices in Australia and an over-supply of electricity.”
This is a pledge the State’s lights won’t go out, not one that bills won’t increase.
On the former topic, it is worth at least a mention that the State government’s trade union allies are locked in combat with AGL Energy over a new remuneration deal at neighboring Loy Yang A power station. This has reached a stage where the company is warning a strike or a worker lock-out could put State energy supplies at risk.
As well, the State government is considering whether or not to continue a subsidy for a Portland smelter which notionally almost halves Alcoa’s cost of purchasing brown coal power for the aluminium plant. The impact of this on Victorian manufacturing and Latrobe Valley generation is a topic of much speculation.
To quote Shakespeare, “when sorrows come, they come not single spies but in battalions!”
As far as Hazelwood is concerned, Mary Aldred, CEO for the Committee for Gippsland, writing in the “Herald Sun” newspaper last weekend, deplores “megaphone activism (that has chased) only as far as the trophy of a (coal) power station closure and (has bothered) to look no further.”
Gippsland’s community, she writes, demands “no less than full engagement from government; it deserves much more than the cheap platitudes shouted by activists with no skin in the game.”
This point strikes far wider than Aldred’s geographic area of focus and wider even than Victoria, given the role of brown coal generation in feeding power to South Australia and Tasmania in particular.
Victorian coal generators currently export up to 8,500 gigawatt hours of electricity a year. How much of this can be supplanted by black coal generation in New South Wales (where currently large capacity is idle)?
One of the key issues that the broader community (which may be inclined to cheer Hazelwood’s closure) does not appreciate is that swapping variable renewables for baseload coal plant is not a like-for-like exercise.
As Paul McArdle of WattClarity is pointing out this week, you can’t replace Hazelwood (1,760 megawatts) with eight wind farms like Ararat (270 MW, the newest wind generator in Victoria). It would require, he suggests, two to three times the current fleet of 10 wind farms in the State and, even then, other issues start to impact on cost-effective supply (cf recent events in South Australia).
Tony Wood and David Blowers of the Grattan Institute have just published a good oversight of the SA “crisis” and the issues that flow from it.
One point they make is: “South Australia’s power shock (has) exposed a looming problem in Australia’s electricity system – not high prices or the threat of blackouts, but an emerging conflict between Australia’s climate change policies and the demands of our energy market.”
They add that, despite the well known and significant Australian greenhouse gas abatement target, the national debate on climate change has been so toxic and so destructive that almost no policy remains to reduce emissions from the power sector in line with that target.
“The events (in South Australia) of July do not expose an immediate crisis, but they have exposed the potential consequences of a disconnection between climate change policy and energy markets. If it is not addressed, the goals of reliable, affordable and sustainable energy may not be achieved.”
And they point out: “The rapid introduction of a very large proportion of new intermittent electricity supply creates problems that were not foreseen when traditional generation from coal and gas supplied the bulk of Australia’s power needs. All of the wind farms in one State could be offline at the same time – a far less likely event with traditional generation. The problem can be solved by investment in storage and in flexible responses such as gas and other fast-start generators. Commercial deals with consumers paid to reduce demand could also contribute.”
Whatever Engie’s board in far-away Paris decides to do about Hazelwood (a decision that requires consultation with partners Mitsui in Japan), it is clear that the Victorian government specifically, and the membership of the CoAG Energy Council as a whole, should be focusing far more closely than they have been on the implications of less dispatchable power, more variable generation and the wider supply chain issues – and sharing this learning with the community.
Governments generally, but Victoria in particular right now, can start by acknowledging that the transition to a lower-emissions electricity future, which is underway and needs to go much further, is going to deliver higher bills for consumers (including business customers who use 75 per cent of power) not least because of the need to ensure quality and security of supply.
In this respect, the Victorian government, with its State poised to be a far bigger “canary down the (NEM) coalmine” than South Australia, has been delinquent for base political reasons since returning to office and now needs to get its act together in something of a hurry.
Here’s a question: which global power generation technologies had the largest capacity expansion between 2004 and 2014?
A casual reader of energy news in the media is likely, I think, influenced by the huge amount of propaganda generated by the green industry and its fellow travellers, to say “Well, wind and solar power, of course.”
To pick on an example outside our shores for a change, this is America’s CNBC headlining coverage of a new report from the World Energy Council: “Wind and solar power enjoy a decade of massive growth.” Plenty in similar vein can be presented from other sources.
But here’s the thing: In the 10 years chosen by WEC for its review, installed capacity around the world increased by 2,380 gigawatts, rising by an annual average of five per cent from 3,800 GW in 2004. Of this increase, coal, gas, oil and nuclear contributed 1,480 GW.
The WEC chooses to label these “conventional” generation, but for my money there is nothing more conventional than hydro-electric power and, when you lump it in with the others so labeled, the increase is 1,820 GW.
With hydro excluded, the growth of other renewables amounted to 898 GW. Of this, the wind and solar increase accounted for 500 GW (wind 322 GW, solar 178 GW).
Now this is not to discount the substantial percentage rise of wind and solar over this period (from a low base) – by 23 per cent for the former and 51 per cent for the latter compared with four per cent for coal, gas, oil and nuclear combined – nor the prospect, indeed the certainty, that this trajectory will accelerate later this present decade.
But it’s the imagery that impacts on the unlettered (in energy literacy terms) and the way this stuff is reported creates at the very least a misleading picture for the Averages, who then convey messages to politicians via opinion polls about pushing harder down this path — leading to the sort of policy malarkey we are currently witnessing in Victoria, for example.
I would bet heavily that, when asked which technology had grown more globally in the 2004-2014 period, a local Average would say wind and/or solar – but, on the WEC numbers, hydro rose 340 GW between 2004 and 2014 versus 322 GW for wind and 178 GW for solar.
The other thing the Averages (and not a few journalists reporting in this space) don’t comprehend is the contribution these technology forms make to actual power production, which in terms of both consumer needs and carbon emissions is what matters.
According to the WEC, coal, gas, oil and nuclear provided 18,127 terawatt hours in 2014 or 77.2 per cent of the total. Add, as I argue one should, hydro power to this, and “conventional” generation delivered 22,025 TWh – or 88.8 per cent of the total.
You’ll notice that nuclear is tossed in with fossil fuels in this WEC reporting – but, if hydro, which emits no carbon dioxide, is on the other side of the ledger, so surely should nuclear be. The latter accounts for some 2,480 TWh annually at present and, when taken with hydro, non-carbon emitting conventional generation in 2014 delivered almost 6,380 TWh versus 1,455 TWh for all the other renewables.
The other aspect of this debate relates to the issue of a technology’s ability to respond when system dispatchers want energy versus variable renewables delivering production when nature permits. (Which is why there is so much fuss in green quarters about energy storage and about great expectations that it will soon be a less costly option.)
Rather buried in the WEC report, and not dug up by the truffle hounds of the media (whose noses are trained to a different scent), are these comments: “Renewable energy sources (RES) offer many benefits, including CO2 emissions mitigation, fossil fuels import requirement reduction and job creation.
“At the same time, the findings of this study indicate that the total cost and the overall impact of RES (by which, I interpolate, they actually mean VREs) on national electricity systems is often underestimated by consumers and policy makers.
“In general, (our knowledge network drawn from industry in 32 countries has) found that the rapid growth of (wind and solar) renewables together with their priority of dispatch status has led to price reductions but also price increases for some electricity consumers.
“Final bills do not usually display itemized costs of the direct incentives and additional measures required to accommodate the increasing share of (variable) RES. The bills would look significantly different if these costs were itemized. The additional measures are necessary to keep the system running and they include backup/reserve capacity, system balancing costs, additional network investments and other similar outlays.
“In addition, in some countries, “state-of-the-art”, high efficiency gas-fired generation units are being used less and less frequently and utilities have to write off these stranded assets (see case studies for Germany and Italy); the introduction of a capacity market is being examined in several EU countries.”
And the WEC sums this up in its report’s executive summary – although I can’t find any popular media reference to it – via the salutary point that “a real challenge for variable renewables integration is to rapidly manage the implications of the variable nature of wind and sun.”
The organisation also points out that “each country’s power is unique depending on its primary energy sources, location and size of power plants, transmission and distribution systems, financial conditions, costs and consumer behaviour.” Yes, quite, and that is the answer to all the guff about why can’t we (Australia) be like “X” (insert your country of choice for pejorative comment designed to portray us baddies or laggards or whatever)?
In this context, the Energy Policy Institute, in publishing a new commentary in the past few days, has emphasized that increasing intermittent renewable generation in a power system has a “pressure cooker” effect and can involve an unaffordably high level of integration costs.
EPIA adds: “(Our) paper underscores the importance of sound and technology-neutral policies to ensure it remains safe to make long-term investments in Australian energy infrastructure.”
To which I’d append the critical importance of both energy literacy and intestinal fortitude over populist impulses among those making decisions – requiring an understanding of information being put out in the public arena well beyond what media outlets may choose to highlight.
Of all the meandering pathways of east coast electricity supply management none is more tangled than the regulation of the NEM’s distribution businesses, none is more likely to lead to emotive (and frequently misleading) media coverage and none (not even the carbon shouting match) is more likely to trip up politicians over time.
We are now embarked on yet another review of the tangled web of network distribution at the behest of the CoAG Energy Council, whose chair, Josh Frydenberg, flagged the politics of it all in a statement that said: “Energy networks who have appealed (current Australian Energy Regulator) determinations stand to earn an extra $7 billion over the next five years if their appeals are upheld.” (Some at this point may wish to quote the Roman satirist Juvenal – Quis custodiet ipsos custodies? or “who will guard the guards?” – but that’s just nitpicking, isn’t it?)
Frydenberg told a Sydney tabloid newspaper “Our goal is to put consumers first and ensure they pay no more for electricity than necessary. The regulator does a good job in holding the networks to account as the primary decisionmaker on pricing and this position should be respected.”
The paper, in a fine example of the tabloid genre, headlined its report: “NSW ratepayers spared price rises as energy company bandits brought to heel.”
The back story here is that NSW, ACT and South Australian network businesses, along with the Public Interest Advocacy Council, challenged the 2015 AER determinations before the Australian Competition Tribunal – one wanting higher allowances, the other urging they be further cut – and the tribunal found against the regulator in some areas (upholding it in others), requiring further watchdog work, still ongoing, while the regulator itself has appealed aspects of the tribunal decision to the Federal Court.
Or, as the Energy Council’s notes for the review of the appeals system put it, legal challenges mean that revenue decisions made by the AER in April last year will “likely remain uncertain until at least early 2017.”
The Energy Network Association, speaking for the “bandits,” who are critically important in maintaining the quality and reliability of power delivery to some nine million households and million business customers on the east coast, has declared that removing the appeals system is the equivalent of “sending an umpire off the field for blowing his whistle” and argues that the tribunal can uphold grid appeals only where outcomes provide a better result for users.
This is a reminder that the grounds for the latest network appeals were that they could not maintain safety and reliability of supply under the proposed determinations. (The flipside of this coin is that the AER used benchmarking, its method also challenged by the networks, to assert significant business inefficiencies.)
Frydenberg’s take on all this is that consumers are being “short-changed” by long-drawn-out legal processes. He says the Energy Council ministers are “firmly of the view” that there is “a case for change” because the system is “not working in the way intended.”
Buried in the consultation paper the Energy Council has now released, canvassing various options for remedial action, is what may well turn out to be the politically-acceptable solution: removal of access to a limited merits review but leaving access to a judicial review. “Judicial review,” says the paper, “is not the rehearing of the merits of a case (but rather reviewing) a decision to make sure the decisionmaker has applied the relevant law correctly and reached a decision not unreasonable in the final result and arrived at by following the correct legal procedures.”
The line of attack, as represented elsewhere in the paper, is that the present set-up allows “cherry-picking” of issues and a focus on correcting individual errors “without sufficient consideration of whether a different decision would lead to a materially preferable decision that is in the long-term interests of consumers.”
To which, not unreasonably I suggest, the network lobby is already firing a warning shot about the need to bear in mind the interests of investors, a large number of whom are domiciled offshore in the case of privatized networks but in NSW (at present), Queensland, Tasmania and, in part, the Capital Territory, are taxpayers represented through government ownership.
If, like me, you have been observing this scene since the early 1990s, it is not hard to discern another loop in a rollercoaster ride that has seen politicians suppress network spending, freak out at ensuing supply blackouts and breakdowns with their inevitable community backlash, encourage major new investment — $35 billion of it, boasted about by government leaders of the day, that helped increase power bills by up to 80 per cent over their 2008 levels – and now seek to stamp on the regulatory brakes because of the latest consumer (and media) outcry.
In passing, the main focus of the legal hoo-ha of recent months has been the ACT and NSW businesses and the initial AER determination of some $16 billion in revenue raising affecting their four million household and business customers over five years from 2016. (That’s about 40 per cent of the east coast customer base.) Tabloid readers in the region may be surprised to know that $16 billion in charges is what they will be copping in their bills even if the political magic wand can make the extra revenue the networks are seeking go away.
As well, that $7 billion number being bandied around applies more widely than NSW and the ACT. In fact, if you bring this down to Greater Western Sydney, a key political “battleground” for State and federal elections where who governs can be materially affected, it’s about a fifth of the headline sum or maybe a couple of hundred dollars annually per household from now to 2019.
Frydenberg, it should be noted, harps on costs in talking to the media but does not address the questions of safety (which include fire hazards) and reliability.
North Americans are more familiar than we are with the expression “shell game” – the old three thimbles or shells and a pea trick – but it can be applied locally, I suggest, to this long-running networks saga and it is awfully hard to follow by ordinary folks. Politically, that’s the intention. A cynic might even suggest that the review of the merits review, politically at least, is a shell game within a shell game.
Consumers, on the other hand, really don’t care about the flim-flam; they want lower bills and ongoing reliability of supply, a dichotomy which today’s political players are not really any better at handling than their predecessors.