Archive for March, 2016

Tangled web

It’s relatively easy right now to throw one’s hands in the air and say that the energy network regulatory set-up is a complete mess and, in the case of New South Wales, is leaving customers and taxpayers like the proverbial cormorant on a rock.

Following the latest manoeuvre by the Australian Energy Regulator, it will be sometime in the second half of 2016 before the Federal Court can impose a view on the wrangling between the watchdog and the State distributors – and it is anyone’s guess when the users will actually get told what they’re paying.

Meanwhile, as the media keep pointing out, this imbroglio has implications for the privatization of two of the DBs, AusGrid and Endeavour Energy, and it also impacts on the ongoing stoush between the rural network, Essential Energy, and parts of the trade union movement over employment cuts to reduce operating costs – with the business challenging whether proposed industrial action is legal.

A tangled web, indeed.

The state of play is as follows:

The AER is seeking a review by the Federal Court of the Australian Competition Tribunal’s recent decision that its revenue determinations for the NSW trio had flaws.

Networks nationally, meanwhile, through the Energy Networks Association, have welcomed the tribunal decision as an “important clarification” of how the national energy laws and rules should be applied.

Consumer organizations have attacked the tribunal decision because they believe the AER didn’t go in hard enough.

Customers who read newspapers are being told (repeatedly) that the tribunal decision may cost them $566 a year in extra charges when, actually, for the majority of them (in the AusGrid franchise area), the AER decision represented a cut in bills of $165.

Lost to broader view is the fact that, in aggregate, the AER decision would reduce NSW consumer costs by some $7 billion over five years.

The AER says it will continue to consult stakeholders over how its original decision should be implemented while awaiting the Federal Court decision – and it is continuing with its tasks of making judgments on network revenue raising beyond NSW.

(Here it must be noted that the Queensland government jumped in five months ago and ordered its DBs, Energex and Ergon Energy, not to challenge the AER determinations (which were more than 20 per cent below what the networks had sought in revenue for five years). So we have a situation where one State government owning networks (NSW) has allowed its businesses to attack the AER’s decisions and methodology while another (Queensland) has accepted them.)

Finally, and perhaps critically, sight should not be lost of the tribunal view that elements of the national electricity objective are “potentially in conflict.” Where, the tribunal asked, is the line to be drawn between prices on the one hand and quality service, reliability and security of supply on the other?  This, it added, is not an easy question!

In a commentary on the situation (before the AER’s decision to call on the Federal Court), the Grattan Institute’s Tony Wood pointed out that the latest round of determinations has introduced a new level of complexity to the regulatory process.

We now have, he said, a set-up where decisions on prices can be delayed by as much as two years, are dependent on complex arguments between legal and financial experts and “deliver highly questionable outcomes.”

Wood suggested it is time for the CoAG Energy Council to examine whether the regulatory approach (which it oversaw and amended barely five years ago) is workable.

My own thought here is that the Energy Council might re-engage Michael Vertigan and his panel (who produced a really worthwhile review of energy market governance issues last year) to specifically examine the determinations approach – and not least the issue of benchmarking; the AER’s efforts in this respect can at best be described politely as “controversial” and were somewhat called in to question by the tribunal.

The Energy Networks Association, reacting to the tribunal findings, commented that its members “strongly support” the use of economic benchmarking – providing the models used by the regulator are “transparent (and) based on robust data and rigorous analysis” when being used to determine “business-critical” operating expenses.

The association’s underlying message was clear.

Bottom line? This is perhaps not much a tangled web as a Gordian knot, an apparently intractable problem requiring an Alexandrian solution (he whacked the original with his sword).

Is the Energy Council capable of playing a collective Alexander?

Reflection on Earth Hour

On a weekend marking an apogee of gesture politics, Earth Hour (heralded as “people coming together for climate action”), I have been reading an International Energy Agency paper on coal technology innovation.

The IEA paper (which has been around for a while) points out that between 1990 and 2010 generation (ie output, not capacity) from non-hydro renewables rose by 454 terawatt hours, by much more (1,334 TWh) from hydro, by 492 TWh from nuclear power – and by 4,271 TWh from coal-burning production.

This made me wonder what more recent information would throw up and, after some fossicking around the IEA site, I found data for the period from 2000 to 2013 (currently the latest year available for firm energy numbers):

  • Hydro-electric output rose 1,169 terawatt hours
  • Nuclear production fell back marginally – by 113 TWh – after Fukushima and Energiewende
  • Non-hydro renewables output rose 1,061 TWh
  • Gas-burning plant production rose 2,327 TWh (yes, double that of solar, wind etc)
  • Coal-fired production went up 3,611 TWh
  • And, the one so often forgotten in such discussions, oil-burning power production fell only slightly (156 TWh) and still accounted for four per cent of output (versus six per cent in 2013 for non-hydro renewables).

The merest glance tells you that the growth in fossil-fuelled power production from the turn of the century has far exceeded that of non-fossil fuel sources – by more than double, in fact.

Also available from the IEA is a snapshot of what the situation will be in 2040 under the policies the world’s governments took to the Paris climate change talks last December.

This shows that, compared with 2000, power production over four decades will deliver:

  • A 11,443 TWh rise in fossil-fuelled output, led by a 6,256 TWh increase in gas-based generation and a 5,867 TWh rise in coal generation
  • A 3,560 TWh rise in hydro-electric production
  • A 2,015 TWh rise in nuclear output
  • And a 6,994 TWh increase in non-hydro renewable energy.

When you cut through all the (considerable) noise about what could be done or what should be done or, as with Earth Hour, your burning desire to see something done, these latter numbers show what governments actually plan to do – which is why the IEA and many others declare that the promised effort is substantially inadequate as a means of pursuing the official global goals in mitigating climate change.

There is another statistic that should be mentioned here: if we pursued “business as usual” in terms of electricity use, globally demand would exceed 43,000 TWh by 2040 – it was 15,431 TWh at the turn of the century – but the intentions of governments are to use energy efficiency to reduce this to 39,400 TWh.

The IEA is arguing that far more strenuous efforts have to be made than were promised in Paris, proposing that, having reached demand between 27,000 and 28,000 TWh by 2020, the world should limit it to not quite 34,000 TWh in 2040.

When you consider the supply increases needed to lift more than a billion rural people out of energy poverty and those needed to deal with a further mass migration to cities in the developing countries, this is a massive ask.

Meanwhile, what Earth Hour signals to the global poor who have no (or little) power access is an interesting question.

The change in the generation output mix (again stressing the difference between capacity and production) that the IEA suggests is needed to chase the global warming goal is no less large.

In a 2040 world when energy efficiency has delivered a huge demand reduction mooted by the agency, it says we could see:

  • Fossil-fuelled generation at the same level as in 2000 – just under 10,000 TWh
  • Nuclear generation 3,650 TWh higher than in 2000
  • Hydro generation 4,200 TWh higher (that’s a very large amount of dam-building)
  • Non-hydro generation 10,725 TWh higher than at the turn of the century and about 9,500 TWh higher than it is today (a bigger than huge investment in wind turbines and solar arrays).

We need to get our heads around this, I suggest, not just on Earth Hour weekend but at a time when our local media are running amok over recent, unusually-prolonged warm weather (“terrifying” is a favored word in headlines, I see) and explicitly or implicitly calling for “urgent” action.

In my latest “Point of View” editorial on “On Power” website (www.onpower.com.au), in the context of the CoAG Energy Council promise to do more to co-ordinate energy and carbon policies, I quote Thomas Edison, the father of electricity supply: “Vision without execution is just hallucination.”

The data I have set out above heavily underscore Edison’s point so far as power supply management in a transition to a global low-carbon economy is concerned – and we still seem to have a problem in Australia understanding that the emphasis has to be on “global” with respect to both economic health (about which the media emote even more than about climate change) and carbon emissions.

A paper (focused on innovation in the wake of the Paris talks) just published by the Energy Policy Institute and co-written by EPIA executive director Robert Pritchard and the University of Queensland’s professor Chris Greig makes some interesting points in this context.

For a start, Pritchard and Greig note that the decarbonization debate of the past decade “has tended to swirl around issues that could be described as banal.”  These include such topics as claimed market failure, the use of carbon taxes and emission trading schemes, the polluting effects of fossil fuels and the idea of completely replacing them with renewable energy.

Pritchard and Greig assert that, in reality, the “path of least resistance” for transforming the energy economy lies in a scenario where low-emissions systems are at least as cheap as the traditional ones.

They add that, while much of socio-political attention is directed towards the residential and commercial consumption areas, especially for power supply, energy has to be recognized as the “critical enabler” of defence, agriculture, aviation, road and rail transport, ports and shipping, secondary materials production, automotive and other manufacturing industries plus resources development and production for export markets.

All of the above have to be taken in to account when looking at the IEA’s prescription for much-reduced growth in power demand (while ending energy poverty) and a shift in the generation mix over a quarter century to deliver a much lower-emitting global economy.

“Banal,” in my view, is rather too polite a description of the current energy/climate change debate in a country like Australia.

As Pritchard and Greig say, “the scale of the challenge of supplying the world with reliable and affordable energy is enormous and generally under-estimated – (while) the scale of investment required for low-emissions energy innovation is correspondingly enormous and under-estimated.”

Their paper – it will be published at www.energypolicyinstitute.com.au and is being sent to every parliamentarian in the country – asserts that technology diversity and neutrality “should be the paramount and fundamental principle” of energy policy with no exceptions.

With a federal election looming, and the near-certainty that the Coalition, Labor and the Greens will be running at least in part on climate change action plans, all of above is important and generation technology neutrality is ultra-important – but none of it is going to get proper attention because “banal” is what our media, politicians and so many activists do best.

As witness Earth Hour.

ESON 2016

One of my favorite conferences is the annual “Energy State of the Nation” one-day event staged in Sydney by the Energy Policy Institute of Australia. The latest (the tenth) will be held this Friday under the banner “After Paris: Integrating energy and climate change.”

The program is on the EPIA website (www.energypolicyinstitute.com.au) and, to quote the institute director, Robert Pritchard, is focused on “a long-term vision as the foundation of Australia’s energy policy and also debating how to accelerate all forms of low-emissions innovation.”

Last December, of course, Australia was one 20 countries (out of 195 nations) to sign up in Paris for the “Mission Innovation” initiative, agreeing to accelerate spending on clean energy innovation.

Pritchard has recently made a good point about this commitment: “There is little point in throwing money at the problem. The ‘valley of death’ – where innovators often falter owing to lack of money – has a legitimate purpose: it sorts out the technologies that work at commercial scale from those that don’t. Some may not deserve to make it to the valley in the first place. Failures provide valuable lesson to be shared so that history does not repeat itself.”

This aspect needs much better public appreciation. There is a tendency in the mainstream media, with its rat-a-tat focus on “victims” and “villains,” to greet every energy idea that runs in to financing strife as another example of established vested interests stifling opposition – or of governments being stingy with handouts.

Tony Wood of the Grattan Institute, who will be part of an ESON panel on Friday looking at integration of energy and climate policy (which our nine governments via the CoAG Energy Council are pledged to pursue), contributed an EPIA paper in January that made another cogent observation. (His paper is also on the EPIA website.) When you look at the approach of the main political parties to pursuit of a 2030 abatement target, he wrote, and you add political viability and public acceptability to the criteria of credibility, flexibility, adaptability and low cost, none of what’s on offer at present touches every base. “The task for government is to address the limitations of individual policies or find a combination that works.”

A combination, I’d add, that must be durable beyond the political cycle and provides investors with the means of getting banks to lend them money.

The “valley of death” is the popular idiom here but I often think a better one is the age-old “between Scylla and Charybdis” of Greek mythology (cf the Argonauts). Today our energy travellers are threatened by the whirlpools of politics on one side and the hard rocks of financiers’ risk aversion on the other.  (I must look to see whether this thought can make a cartoon for my On Power website – see www.onpower.com.au/first-word/all-in-the-mind.html for the latest of a series.)

Wood’s observation bears repeating: “For industries characterized by multi-decade investment decisions, the absence of bipartisan consensus on even the central elements of policy adds uncertainty and risk that will only increase as the need for new investment emerges in coming years. Companies will not make long-term investments unless they are confident policies are stable. To date, they have been anything but.”

Pritchard and professor Chris Greig of the University of Queensland – also a participant in ESON 2016 – have just published another EPIA paper in which they rightly declare that “motherhood statements about innovation are not enough” and assert that, for more than a decade, the decarbonization debate has “tended to swirl around issues that could be described as banal.”

The “path of least resistance” in transforming the energy economy, they add, really lies in a scenario where “low-emissions systems are at least as cheap as traditional systems.”

This needs to be read with the important admonition from the South Australian nuclear royal commissioner that this country requires an independent assessment of total power system costs based on a range of credible low-carbon generation options. As the commissioner said: “Future electricity supply must be designed to be both low-carbon and reliable at the lowest possible cost.”

Cost is the aspect that politicians on the make tend to dodge. As an example, the Queensland Productivity Commission is currently pointing out that the Palaszczuk government’s “50 per cent renewable energy by 2030” political ploy at the last State election is likely to require a subsidy of almost $11 billion over 13 years – made up of $8.6 billion for mostly wind farms and $2.2 billion for small-scale solar PVs.  The QPC’s analysis sees renewable generators receiving production subsidy equivalent of around $765,000 per megawatt of capacity – and this for established technologies.

If a government is going to throw around fistfuls of taxpayers’ and consumers’ dollars in this fashion, surely the community interest is better spent by supporting innovation in pursuit of the outcome outlined by the SA royal commissioner?

As Wood said in his EPIA paper, “the challenge is to find a pathway to environmentally effective and economically efficient emissions reductions that are also politically deliverable over the longer term.”  Part of the problem, as he notes, is that stakeholders will go on putting forward solutions that mix sound analysis and vested interest. (Was it Keating who coined the phrase that “if you want to know who is really trying, look to self-interest every time”?)

The value of the ESON forums is that they provide neutral ground for serious people to dispassionately discuss the carbon/energy challenge – which is why I am looking forward to Friday’s event.

Can the caravan move on?

The Queensland government’s new Productivity Commission first upset solar power vested interests and the green lobby last month by announcing modeling done for its electricity pricing report showed that small-scale photovoltaic installations in the State can reach 3,000 megawatts capacity by 2022 without any further subsidies.

Any acceleration of this timeframe – the Palaszczuk government wants to reach this level in 2020 – will “require significant incentives for a modest improvements in outcomes,” the commission added.

It went on to declare that the total cost of the “solar bonus scheme” — introduced by the previous State Labor government and cut back hard under Campbell Newman — was now estimated to reach $4.4 billion by 2028, with more than $3 billion of this cross-subsidy to be landed on non-PV customers from next financial year to 2027-28 despite most of the scheme’s participants recovering their capital costs by mid-2020.

This is not a minor point, although the mainstream media seems to be treating it thus. Just reverse it to suggest that networks will land an extra $3 billion on consumers (regardless of reason) and watch the commentariat flare up. What is it about solar power that makes laying high (collective) costs on consumers acceptable?

The government, declared the commission, should consider whether there is merit in bringing the scheme to an early close.

Letting it roll on, it pointed out, involved giving PV persons a “significant” windfall between 2020 and 2028 at the expense of the rest of consumers – about $1.9 billion in fact.

There is a “strong case” for dealing with this issue, it said.

Of course, the solar boosters reacted as if stung by a wasp — but lost to view in the “debate” (really, a one-sided rant)  is something else the commission said: on present trends Queensland’s solar PV uptake is likely to increase by more than 4,300 MW by 2034-35 with another 806,000 customers taking up the technology, representing a 290 per cent growth over 2014-15.

In other words, far from cruelling the prospects of solar power, the commission is talking up its future – but also suggesting that politicians stop playing games to attract votes and think of the rest of the community’s budgets.

Now comes the second QPC draft report – this one specifically responding to a government request for the commission to consider a “fair price” for rooftop solar power exported to the State grid.

The new report runs to 230 pages. Paraphrased it knocks over arguments for paying premium feed-in tariffs to PV households to curb greenhouse gas emissions, induce industry development, impact on wholesale markets or reduce network infrastructure outlays.

The QPC makes the blindingly obvious point that the larger the subsidy to PV owners, the larger the aggregate transfer of wealth away from other consumers, including those renting properties and living on low incomes.

On equity grounds, it adds, a policy to raise FiTs in “demonstrably unfair.”

The commission report includes dismissal of arguments that there are widespread or major barriers in Queensland to investment in solar PVs and that the two State distribution businesses are using their market power to systematically prevent embedded generation connecting to networks.

It also says: “Better and fairer policy options are available to achieve carbon abatement at a lower cost than can be achieved by subsidizing electricity exports from small-scale solar PV generation.”

Needless to say, this is simultaneously upsetting the solar boosters and encouraging the generation and retail lobby.

The Australian Energy Council (which has replaced ESAA) says the big point from the new QPC report is that it “confirms solar is now mainstream.”

The council’s Matthew Warren adds that PV systems can be bought from energy retailers at prices that don’t require subsidies. “This is no longer an emerging technology that requires assistance to make it to market.”

Queensland, Warren points out, now has one of the highest penetrations of household solar PV in the world. “The transition to market-based FiTs in south-east Queensland (under the Newman government) has not impeded continued PV deployment.”

The council says SEQ installations are running at 3,000 units a month.

I can’t be bothered here to get all pejorative about the ideologists and their entirely predictable reaction to these reports or industry assertions.

What did Churchill say? “The dogs bark and the caravan moves on.”

The real issue is the one of governance – can a government like Palaszczuk’s rise above its base political instincts to address broad community and economic interests?

The same question can be posed in other jurisdictions about Labor and conservative governments with respect to broader energy issues.

The pessimistic/cynical answer is “No” because we have so many examples from across the political spectrum of how hard politicians find it to take a good, if thorny, path and how easy it is for them to give in to a base desire to chase votes in marginal seats.

Thanks to the QPC – which is to deliver final reports on electricity pricing and solar FiTs towards the end of May – there is now a test case in Queensland for a government to spurn the rent-seekers and the ideologically blinkered in favor of sound policy benefitting its community as a whole even as it wrestles with the prospect that the state of the parliament may send it to the polls earlier than scheduled.

The national power industry, however, should be doing a lot more to make sure Queenslanders understand that what the QPC is saying does not imply a winding back of solar development.

In this post’s context, I listened from the domestic gas outlook conference chair with interest on Thursday as Energy Networks Association CEO John Bradley outlined analysis undertaken for it by consultants Jacobs demonstrating how policymakers can save hundreds of millions in power bills nationally between now and 2030 by embracing a “technology neutral” carbon policy rather than focusing on renewables only to meet current national abatement goals. This, he said, would involve changing the RET to a low emissions target along with other steps. Bradley’s media statement and the Jacobs material can be accessed on the ENA website (www.ena.asn.au).

Who knows where this will end?

I wish I could report back that the Australian Domestic Gas Outlook conference, which I have been co-chairing this week for the fourth year running, has found grounds for even a little less frustration with the east coast supply situation, but it hasn’t.

If anything, what Rod Sims, the Australian Competition & Consumer Commission chairman, called “a triple whammy” is making stakeholders still more fretful.

The triple strikes, of course, are the flow-on effects on domestic supply of the development of the Gladstone LNG projects, the continuing uncertainty created by political kneejerking (manifested in the southern States’ moratoriums on the gas search) and the investment issues created by the global oil price imbroglio.

Sims promises that the ACCC’s report on the east coast gas market – to be handed to the federal government on 13 April – will be “a riveting read.” Just when Small Business Minister and Assistant Treasurer Kelly O’Dwyer will release the review is as yet unknown but end-April seems likely.

While he was close-mouthed at ADGO about the content, one aspect obviously in the report, as indicated in his conference comments, is the “urgent need for more gas supply and suppliers.”

At least part of the problem in realizing this goal is the sharp reduction in exploration wells, a product of the moratoriums, the signals from other politicians hoping to be in government and the impacts of the global price problems. The 2015 tally of onshore exploration wells was the lowest for 20 years (an issue a bit disguised when official government record-keeping focuses on the search expenditure because industry costs have shot up).

Central Petroleum CEO Richard Cottee, one of the ADGO speakers, nailed this in commenting “Without capital, capitalism doesn’t work. In the present circumstances, capital isn’t there. The fix for delivering more gas is not to cut the search.”

Martin Ferguson, wearing his hats as group head of natural resources, Seven Group Holdings, and chairman of the Australian Petroleum Production & Exploration Association advisory board, was just as blunt in taking aim at serving politicians: “Political opportunism, along with poor policy and poor regulation, is stifling exploration and production.”

My own contribution was to push the point that, despite the good advice last year from the Vertigan panel reviewing energy policy governance, the current crop of CoAG Energy Council members has ignored (or dodged) the opportunity to work towards a CSG regulatory regime applicable across the jurisdictions that has been presented by last year’s excellent report on hydraulic fracturing for the Northern Territory government from Allen Hawke.

Such a step is an essential ingredient in corralling the galloping herd of activists and giving farming communities confidence that their concerns are being addressed.

What Ferguson describes as the “New South Wales disease” is now “infecting politicians” in other jurisdictions, he told ADGO. “In a rational political environment, things would be very different.”

As he noted, the irony is that, “having all but killed off the gas industry in its own State,” the NSW government is now banking on piping gas from the Northern Territory – where the Labor opposition proposes to go to the August election under a fracking moratorium banner.

The NT lifeline for NSW, he opined, “might now be a long shot,” not something the manufacturers in the ADGO audience wanted to hear.

Hawke’s efforts, Ferguson pointed out, involved reading 260 submissions and listening to hundreds of people at public forums in the NT.

“He grilled regulators, scientists and gas companies. He personally inspected fracking operations and spoke with people who lived with gas operations. He analyzed hundreds of pages of evidence from eight previous inquiries – and concluded there was no justification for a moratorium (and) that the environmental risks could be managed effectively (provided) regulatory changes (he recommended) were pursued.”

Ignoring such reports, Ferguson told a mostly receptive ADGO audience, may be politically expedient but it’s not good policy.

And he added this ominous note for those with NSW interests: resolution of the issue (in the sense of supplying gas where it is needed) could be years away.

The wider problem, he added, is that the example set by NSW has emboldened radical anti-gas activists – controversially dismissed by the irrepressible Cottee in his contribution as “frack-wits” – and frightened politicians in other parts of the country.

Those in politics making decision based on short-term expedience, Ferguson said, needed to understand that “cunning is no substitute for wisdom and bad policy eventually creates bad political outcomes.”

(Moratoriums now have bipartisan support in Tasmania and Victoria and the West Australian Labor opposition has also come up with an anti-fracking policy.)

In this environment, the former federal minister averred, gas reservation and market transparency “are second-order issues” because the most transparent market won’t work well if gas supply is dwindling.`

And he has this advice for gas users: “You have spent too much time, energy and political capital pushing for market intervention.”

They will be better occupied, he said, explaining to politicians why current policies will backfire and helping to raise public awareness about the core issues.

The issue is development of new gasfields, Ferguson argued, and reversing the momentum towards a gas shortage requires understanding what is needed to “bring on more gas as quickly as possible.”

Suppliers, consumers and unions, he said, should be focusing on getting governments to address “the regulatory fixes we know are needed.”

I thought it was good, hard commonsense stuff but I’m very unclear how far Ferguson will be heard outside the Sydney hotel room that was the ADGO venue.

As he said to the forum: “Who knows where this will end?”

What you see…………

The eagerness of local proponents of the green electricity revolution to trot out Germany’s Energiewende (its eco-energy transition borne more by a post-Fukushima panic about nuclear safety than carbon abatement ambitions) as the example par excellence of how to transform our own power grid waxes and wanes, depending on what statistics come to hand from Europe and how they can be bent to the Australian debate.

The general thrust, you will glean from recent media reports, is that 2015 was a banner year for renewables in Germany, not least, it is said, because they became the largest form of electricity production, a claim that merits closer examination, something our own media seem too often incapable of undertaking.

Here are some facts about the 2015 German power mix that are thrown up by only a little digging:

Yes, renewables accounted for 30 per cent of German power last year, of which three per cent was hydro power, 7.7 per cent biomass, 5.9 per cent photovoltaics and 13.3 per cent wind.

(Biomass, by the way, in German generation means burning trees and the residue of forestry – 40 per cent of the country’s timber production is a source of energy and it is the provider of 62 per cent of the total use of renewable energy there, including heat and transport fuel. It makes up nearly a quarter of the much-touted renewables revolution in Germany, but I’d like to see how the greens reacted to any such proposal here.)

The balance of Germany’s electricity generation in 2015 came from coal (42.2 per cent) – the boosters get to call renewables the biggest source by dividing the coal contribution in to lignite (24 per cent) and black coal (18.2 per cent, sourced from imports from Russia, Colombia and the US) – plus 8.8 per cent gas, 4.4 per cent oil and 14.1 per cent nuclear power.

To put this another way, last year wind and solar power together were way behind black and brown coal combined in German power production notwithstanding a massive outlay on the former pair under Angela Merkel’s regime.

In short, Germany sourced 55.4 per cent of its electricity in 2015 from fossil fuels and 72.5 per cent from conventional sources (coal, gas, oil, hydro, nuclear).

I defy you to find a reference to the fossil fuels number anywhere in the popular media in recent months in a way that makes their role in German power supply clear.

As well, yes, Germany’s renewables power production (including hydro) reached 194 terawatt hours in 2015, more than three times what it was in 2005 and close to double its 2010 level – but the contribution of the two coals was 273 TWh. It was 330 TWh for fossil fuels overall.

For the record, the contribution of the two coals in 2005 was 288 TWh.

It’s zero-emissions nuclear that has taken a dive – down from 163 TWh annually a decade ago to 91.5 TWh last year.

Also, 2015 was an especially windy year and onshore wind power was up 22 TWh over 2014 (offshore wind turbines began making a real contribution last year: 8 TWh of the 86 TWh total). What will this output be in calendar 2016? Depends on the weather.

Another piece of info is also interesting: last year German generators sold almost 98 TWh of their output to other European countries and imported almost 37 TWh. Most of this power is exported to Austria and the Netherlands. Half of it is coal-fuelled.

Putting this another way, the Germans are wearing the coal generation emissions and selling heaps of fossil energy to their neighbors while wind and solar power are used at home. If they didn’t, the major generation businesses would be in even more financial strife than they are at present and less able to back up the variable heroes.

The German electricity emissions level in 2015 was pretty well what it was in 2014. All heil the green revolution.

Our media carry on a bit about low wholesale power prices in Germany (as must-run wind and solar eats the market lunch of high volume/high reliability generators), grounds put forward to boost the “going green” argument here, but the bottom line is that country’s householders are now paying almost 50 per cent more in their final power bills than in 2007.

Despite this, what regularly gets reported is that 90 per cent of Germans tell opinion polls Energiewende is “important” or “very important” – and only five per cent support the use of coal to make power (versus 85 per cent for solar and 77 per cent for wind). It would be interesting to separate out the views of German household account-holders (ie people who pay the bills) from the rest of the population.

Truth is that the environmental movement boosting and local media reporting of German prices amounts to a masterclass in how to accentuate the positives and hide the negatives.

However, apart from the real household outcome (which, you will note, is similar to the eastern Australian rise from 2007 – fuelled by our network charges and by government intervention to promote renewable energy and something that still has the local media and politicians screaming about the impact on our “families” and those “in hardship”), there is also another important fact. According to the NUS Consulting group’s annual survey of factory power bills in a basket of 18 countries, Germany ranks with the Italians as the most expensive and Australia lies 14th, behind Canada, Finland and Sweden, who all have massive hydro resources.

German industrial power bills are actually double those of America, which, on average, are higher than in Australia.

As well, something that does not get coupled with trumpet-blowing here about Energiewende is that energy-intensive industries are steadily moving out of Germany and its neighbor Austria, countries with some of the world’s highest energy and labor costs.

The EU has a goal to increase the region’s share of value creation from manufacturing to 20 per cent (it’s now 15) by the end of the decade, something business analysts suggest doesn’t have a prayer of happening, not least because of the German situation.

The real point of all this is that any effort to pursue Australian transformation of electricity generation – and especially in New South Wales, Queensland and Victoria, home to 79 per cent of Australia’s grid-connected power output and heavily reliant on coal as plant feedstock – needs to take in to account all the opportunities, benefits and impacts and not rely on Pollyanna notions drawing on vested interest interpretations of overseas developments.

Drilling down on gas

Next week’s Australian Domestic Gas Outlook conference in Sydney — from 8 to 10 March — offers a new opportunity for stakeholders (suppliers as well as consumers) to think about both the present state of play, not least for New South Wales, and where the winding path of politics is taking them.

The politics involved here is not just Australian but also the global joust over oil production created by the Saudis and others that seems to have now taken on a life of its own and is impacting across the petroleum patch.

One of the discussion sessions at ADGO — now in its fourth year and regularly attracting more than 200 people annually — raises the question of what is the “new normal” for the gas business here and to what extent Australian upstream companies and joint ventures should be recalibrating their business models and issues management?

The case of network business Jemena is an interesting example.

Last week it officially commissioned the $150 million augmentation of its Eastern Gas Pipeline, which brings about half the NSW gas supply from Victoria and has been expanded by some 20 per cent, and it is looking to spend another $800 million to link Northern Territory gas resources to the east coast through Mt Isa — but already activists and the NT Labor party, targeting the next Territory election, are threatening to block hydraulic fracturing there; should they do so, the present supply proposals will become much more difficult.

The Australian Petroleum Production & Exploration Association points to 40 years 0f industry work in the Territory using “fracking” and says that, without it, further development of NT gas resources is “impossible.”

This sort of stuff plays to a point the Australian Energy Market Commission chairman, John Pierce, made to a forum of the Committee for the Economic Development of Australia last month.

“We should  recognize the sobering reality,” he said, “that we only have a relatively small window of opportunity to adjust our domestic gas market arrangement — a window of opportunity to make lasting change and to develop a resilient market.”

Pierce’s version of a resilient market is one that is efficient, secure and reliable for the long-term interest of consumers — and is transparent, flexible and adaptable.

As he rightly adds, attaining this will require commitment from all stakeholders — the further (and not small) problem, I suggest, is that some are ideologically bent on preventing gas developments and others are politically bent on running with the green and NIMBY hounds.

Federal Energy Minister Josh Frydenberg, welcoming the Jemena EGP development, declared his government is leading work with other jurisdictions to deliver co-operative reform “aimed at easing price pressures for consumers while ensuring a reliable supply.”

One must laud the sentiment but, as with the CoAG Energy Council pledge to integrate carbon and energy policies, one must also look at the performance of individual governments to see just how far the words will have real force. Victoria, for example.

The imminent report from the Australian Competition & Consumer Commission on the east coast market can be expected to deliver an interesting report card for all concerned — producers, policymakers and consumers, especially those in manufacturing where a lot of jobs are likely to be affected by the market going pear-shaped. Some 200,000 in NSW alone.

The gas market roadmap the AEMC has laid out for the Energy Council, Pierce says, is not dependent on Australia  being in some part of the commodity cycle or the economic cycle “or, for that matter, the specific economic challenges of the day.” It means, he adds, getting the market mechanisms right so that there can be an effective response to changes in supply across the east coast, whether LNG exports are high one month or low with supply pushed south.

By progressively winding back barriers to the flow of gas, he says, it can go where it is valued most.

Unfortunately, the mechanism can only work well if there isn’t political interference affecting exploration and development, fuelled by fear of activists or a desire to give them comfort, so that an adequate supply of gas is available to the market.

The upstream petroleum industry is constantly calling for a “balanced and factual” approach to gas development but this is still an uphill struggle despite innumerable inquiries that have delivered a message that, well-regulated, the effort does not represent a “scourge” to communities (to quote one politician seeking to default the industry at present).

APPEA argues that “saying no to natural gas is saying no to thousands of jobs, regional development, a better economy and a meaningful response to climate change.”

The extent to which this message is getting across to the community at large, especially in Victoria, NSW and now, perhaps, the Northern Territory, as well as to elements in federal parliament, is open to question.

Broad public understanding of the economic risks, including risks to large number of jobs, inherent in the negative approach continuing to make ground is also questionable.

The ADGO forum offers a good opportunity to canvass the range of current issues and portents in the gas space, but the need to win wider community support remains a work in progress — as it has been now for a number of years.