Archive for May, 2016

Be careful what you wish

My Irish grandmother dinned this dictum in to me when I was the same age as my youngest grandson is now: be careful what you wish for; you may get it.

Reading an article about British electricity in “The Economist” this month (“Power hungry,” 14 May), I thought how apt this is for the Brits’ prolonged lunge at green stardom and how readily the point could be applied to Australia’s east coast as the prospect of shutting down coal-fired generation goes from sloganeering to looming reality in the southern States (South Australia and Victoria).

With the Northern power station closed in SA, leaving the State importing some 16 per cent of its power from Victoria (so not “coal free,” as the ideologists and their media fellow travellers keep saying), and Engie (previously GDF Suez) opining to a French parliamentary committee that it may close Hazelwood, we are a step closer to making what the Australian Energy Council describes as “an accidental experiment at scale” in to something potentially harshly real for consumers.

The issue here is not whether old, emissions-intense power plants should be taken out of service but how best to do so in an orderly fashion to meet the International Energy Agency definition of energy security: “the uninterrupted availability of energy sources at an affordable price” (bearing in mind that affordability must apply for business users as well as householders).

The AEC comment relates specifically to South Australia and its now relatively large intermittent power capacity, the association adding “integrating renewables safely and reliably into the grid is an important technical challenge that we must solve if we are to decarbonize our energy systems, but it is not without risks or costs.”

It goes on to comment: “South Australia has become a global test case for what happens when around 41 per cent of electricity generation comes from intermittent sources like wind and solar, displacing older, 24/7, high emissions power stations. Although (this) renewables penetration is the product of both State and federal government decisions, policymakers did not plan to have such a high level of integration concentrated in one region of the grid so quickly. Technologies like wind and solar do not work in the same way as conventional power stations. It is not a like-for-like replacement. Modern electricity grids still need to have enough energy to meet highly fluctuating demand throughout each day and each year, and to be able to manage a stable and safe power quality as all of these fluctuations occur.”

Just so. But mass market consumers (householders and millions of small businesses) are not concerned about the minutiae of electricity supply chain management – they want power when they want it and they don’t want bill shocks.

In Britain, as “The Economist” points out, the end product of years of political grandstanding and market intervention is edging towards supply insecurity and has already delivered power costs consumers find burdensome.

There, here and in countries like Germany the technical challenges, to quote the AEC again, need to be solved in real time – and this relates in particular to meeting the community requirement for reliable and affordable, as well as sustainable, supply when the wind isn’t blowing enough and the sun isn’t shining.

“The Economist” says it has found a sign put up by developers EdF on the gates of the Somerset site proposed for the troubled and massively expensive Hinkley Point nuclear power station that reads “Know how far we’ve come, how far we’ve got to go and how we’re going to get there.”

Yes, quite – and can anyone suggest that either the Brits or the Australians truly have a handle on this in the much-hyped electricity supply transformation?

In the case of Britain, “The Economist,” hardly a stronghold of Tory conservatism even if a committed booster of market forces, declares: “Britain, once a model of energy deregulation, is now able to get the power it needs only when the government meddles in the market with subsidies and inducements.”

It points a finger at a policy fiasco driven by “over-zealous greenery” for “putting Britain at a risk of blackouts, pushing up energy bills and making energy-intensive industries uncompetitive.”

Amber Rudd, the British energy minister, is simultaneously setting 2025 as a deadline for closing British coal generation (now providing a quarter of the country’s electricity), promising less government involvement in the market and saying it is “imperative” to build new gas-fired power stations.

Reverting to the local scene and taking Victoria as a case, how do you build new gas generation if you refuse to support new development in your State and your counterparts in the Northern Territory (the Labor opposition expecting to win government in the near future) are promising a ban on fracking that, inevitably, will damn the prospects of opening a large new natural gas province for the use of east coast consumers?

The official British solution to its energy dilemma is to introduce a subsidy scheme in the form of “capacity auctions,” where investors are to be paid to have fossil-fuelled plant available for the winters of 2018-19 and 2019-20.

Already this month the British grid operator has paid providers of 1,500 megawatts of urgently needed power 30 times the normal price to plug a gap caused by plant breakdowns, lack of wind generation and other factors.

Behind all this, and apparent too in South Australia, is the fact that large amounts of wind energy plus solar power cause fossil fuel plants to struggle to compete when renewables are available and, by undermining coal and gas generation commercial viability, place the back-up role in jeopardy when renewables are unavailable or inadequate for the task at hand.

It’s noteworthy that, despite all the hype about energy storage being the magic solution, we see governments here (South Australia and Tasmania most recently) calling for large new high voltage interconnection to be constructed – a step the Turnbull government is seemingly willing to countenance even when investors find such development unviable.

Who pays for the new links (built at a cost of up to a billion dollars a pop) when the cheap as chips battery storage we keep getting promised eventually strands them?

“The Economist” tells its readers that, for Britain, “in the long run there may be no option but to muddle through until renewables work without subsidies and back-up technologies or nuclear power becomes cheaper and more efficient.” Meanwhile, it adds, demand for power is fortunately still well below what it was before the Global Financial Crisis…………

Translated to Australia, should we therefore be pleased to see a substantial decline in manufacturing energy needs while we await the arrival of a green energy nirvana, frustrate new gas supply, shun higher efficiency coal options, continue to fend off recourse to nuclear power and take a lukewarm attitude to driving end-use energy efficiency?

Should we resort to a capacity market on the east coast to keep the lights on?

Like the Brits, should we settle for a “muddle through” approach?

As my granny also used to tell me, there are consequences for everything we do and all the things we don’t do, too.

RIP ‘death spiral’

Is it possible that this month’s “Energy Networks 2016” conference in Adelaide has marked the knell of the “death of the grid” carry-on that has been inflicted on us locally for the past three years?

A conga line of speakers at the conference has talked up in one form or another the strong future for the power grid in the transition to a low-carbon, affordable and reliable energy economy.

Which isn’t to say that they were spruiking the status quo or even a diluted version of it; the implicit message being the need to blend “disruptive” technology in to the regulated, currently monopoly system – and, at least to me, this raises the question of whether (and when) we could reach a stage where the distribution business is actually open to competition?

Ben Potter has an epitaph for the doom-laden “spiral” concept in “The Australian Financial Review” that is well worth reading, even if the assertion it quotes from Accenture’s managing director resources for Australasia, Anna Burns, requires us non-maths people to go searching for an interpretation. “This is not a transition,” Burns told the conference. “It’s a point of inflection.”

Look it up. There’s lots of fun stuff about it on the Web, not least about the American presidential election. I like the one about being challenged to turn the Queen Mary around in New York Harbor (or Sydney Harbor, right?).

Burns’s thrust relates to the rubbing together of network operators and energy retailers as “smart technology” changes both their environments – and AGL’s Andy Vesey has added the thought that who competes where is the wrong argument; the right one is how grid businesses and retailers can work together, not something that has been hugely evident in recent years in Australia.

To which one could add the thought contributed by Nigel Barbour, CEO of New Zealand’s PowerCo, who sees the grid becoming “an open-access platform” enabling competition and the trade of services — “some we haven’t even thought of yet” —  between existing and new players.

One of the interesting thoughts thrown to the “Energy Networks 2016” 800 attendees came from Energex CEO Terry Effeney and from Lena Hansen of the US Rocky Mountain’s Institute – they think it should be possible to unlock greater use of hot water storage.

Effeney said the opportunity to increase the benefits of household rooftop solar arrays by using hot water as storage – a “solar soak” – hasn’t received sufficient focus. Hansen agreed there is a need to think differently about resources such as this already on the grid.

Privatized TransGrid’s new boss, Paul Italiano, then put his finger on one of the big issues: “There are economically viable solutions out there, but what’s making them difficult is getting them through the framework we have in place.”

Contrast all this with the torrent of guff inflicted on us in recent years as the green ideologues have ridden the “networks are the enemy” horse for all it is worth (quite a lot in terms of propaganda value, thanks to many gullible journalists) — e.g. Christine Milne, who used a parliamentary inquiry last year to assure us that “the era of centralized power being carried hundreds of kilometres to its customer is coming to a close.”

The “Energy Networks 2016” discussion raises (for me) critical questions about policy and regulatory change in the networks arena. How bold (as opposed to crazy brave) should it be and how fast can it be implemented?  We have had plenty of examples of timidity at jurisdictional levels in recent times and not a few of politicians haring off on “picking winners” paths with their energy illiteracy on display for anyone who really wants to look hard at the offerings.

Josh Frydenberg took a message to Adelaide that he supports a “fuel neutrality” approach but I wonder to what extent this is where his own government as a whole is at (read Greg Hunt’s various comments, for example) – and it certainly isn’t the line being pursued by a number of members of the CoAG Energy Council that he chairs.

Basil Scarsella, formerly an industry leader in Adelaide and now CEO of UK Power Networks (which has the distribution franchise for London among other areas), reinforced my broad point at the conference by underscoring the value of British regulatory reform, including the requirement to lose or gain revenue depending on customer service as well as steps to promote innovation in grid services via government support.

This stuff keeps raising the thought on my part that, with respect to power delivery, we need a 2016 version of the early 1990s Hilmer Report, so seminal in creating the east coast market we have today – but I am also ever-mindful that Hilmer’s ideas would not have worked out without political leaders like Paul Keating, Nick Greiner, Wayne Goss and (subsequently) Jeff Kennett.

Yes, we have a whole mosaic of reviews and the like being created, but the crying need is to pull everything together as quickly as possible in a workable “roadmap” – the catchphrase du jour as you will have noticed – to deliver an approach that can be implemented relatively fast and won’t be changed with electoral cycles or even by a series of opinion polls (which is what drove Julia Gillard’s rather wild intervention in network affairs in 2012-13).

Having this properly in place by even 2020 is a pretty large task when you look at what has taken place since the last big network reforms at the start of the decade and the broader carbon policy “dog’s breakfast” that has been visited on us.

Interring the “death spiral” is at least a step in the right direction, provided the body politic has actually got the message.

Egg and spoon race

Comments by federal Energy Minister Josh Frydenberg at the past week’s Energy Networks 2016 conference in Adelaide deserve far greater exposure than they have got, I think.

Apart from “The Australian Financial Review” with its restricted audience, they have been ignored by the popular media

The one seized on by the power industry is his commitment, if the Coalition is re-elected on 2 July, to develop a “low emissions technology roadmap” in a project led by CSIRO and intended for delivery by the end of 2016.

This, says the Australian Energy Council, is “a step in the right direction” at a time when its members are “increasingly concerned about the risks arising when firm, high emissions generation is simply replaced with intermittent, low-emissions technology like wind and solar power.”

It is not a “like-for-like” change, says the AEC’s Matthew Warren. “To retain confidence in the decarbonization of the Australian grid, we must retain high levels of reliability at the lowest possible cost.”

Needless to say, none of this sits well with the ideological advocates of renewable energy, who expect nothing more or less of governments (and politicians generally) than that everything they say or do should be boosting the technologies of their dreams.

Frydenberg told the networks conference that his government “supports renewables as a growing part of the energy mix” while understanding that “it is our role to ensure there is a responsible transition,” going on to bucket Labor for “inappropriately transplanting” from overseas policies (like a 50 per cent RET) “that don’t account for Australia’s position” – a point also taken up by the AEC: “We cannot look to the rest of the world for answers.”

In this context, it has been interesting to see well-regarded US consultants, the Brattle Group, publish a new report this week about how cleaner energy may be delivered for Texas. In short, the review for the Texas Clean Energy Coalition argues that natural gas and renewables can provide all of the new electric power for the Lone Star State over the next 20 years.

Texas expects to see 12,000 megawatts of relatively old coal-fired generation retired between now and 2035 and Brattle predict 85 percent of the state’s system energy – Texas famously is not inter-connected with any other part of the US – will come from natural gas, wind and solar at the end of the review period, thanks to relatively cheap gas and falling utility-scale solar costs. By 2035, it claims Texas will have 9,000 megawatts of wind farms and 13,000 MW of solar farms.

Now Texas is not the east coast of Australia; it doesn’t have our coal resources (and the coal industry continues to argue hard for HELE generation and CCS here) and we may be on the cusp of embracing nuclear power (Texas has 5,000 MW of reactor stations). But we both have gas, wind and solar potential that can be further utilized and the real issue there and here is the one Frydenberg articulates – “maintaining an affordable and reliable energy system while successfully making the transition to a lower-energy mix.”

This will take differing forms from country to country and region to region and, as the Energy Minister argues, “simplistic comparisons with other countries are typically ill-informed and risk the adoption of misguided policies.”

(A current case in point is the international media fuss about Portugal “running for four days straight on renewable energy.” Portugal (a) has a solid hydro-electric baseload system – meeting a third of its needs as well as some coal and gas plant, (b) good interconnection with Spain to cope when its own resources lag and (c) as a result of building more than 5,000 MW of wind farms, has some of the highest retail power bills in the EU.)

In the general context of the local debate, I thought ENA chief executive John Bradley came up with a neat analogy at the networks conference.

The industry is in “an egg and spoon race” on behalf of consumers, he said. “We must execute a rapid transformation in the energy system without compromising the delicate balance of affordability, sustainability and reliability.”

(For the energy illiterate, “rapid” is 15 to 20 years, not the end of this decade.)

The community, Bradley pointed out, doesn’t appreciate that the energy grid, an investment of scores of billions of dollars, was built for a passive, one-way flow of electricity and will need to be turned in to a “dynamic, actively managed smart grid” to support the transformation now under way.

This is why the roadmap proposed by Frydenberg is prospectively a far greater step on the road than the “pick-a-box” Labor promise of 50 per cent renewables by 2030. Allied with the mooted roadmap is work already initiated by the CoAG Energy Council for an Australian Energy Market Commission review of system security needs in the transition.

None of this appeals to the “I want it now” brigade and the million or so post-materialists in metropolitan Australia whose votes are crucial to Labor in holding off the Greens on one hand and regaining seats from the Liberals on the other. (Their attention is also important to the metropolitan papers in their struggle to avoid an early death and the TV stations in the capital cities.)

That these are the same people who will (and have previously) displayed “white-hot anger” over energy bills and power blackouts is beside the point in the crucible of an election campaign to those desperate for the other sort of power.

Nonetheless, the likelihood of broken eggs in the electricity transition race is not to be discounted – and the cost is potentially significant for the economy and energy consumers.

Conveying this message in the fevered weeks of a poll campaign is a challenge – perhaps the Coalition should ponder on how much more they should have done in the past three years in this regard.

You can find Frydenberg’s speech on his personal website (www.joshfrydenberg.com.au).

In “caretaker” mode during an election, the official government websites don’t publish this stuff.

It’s worth reading – and the media generally obviously have other things to do than impart even the basic thrust of it to the community.

Investment killer

No surprises here: Labor has opted to run in the federal election with the unions-driven gas reservation policy adopted at its national convention and is getting an all-round kicking for its pains.

The Labor announcement was always going to happen despite the policy being decried by our most respected consumer watchdog, the Australian Competition & Consumer Commission, between it being railroaded through the ALP convention and this week.

Perhaps most tellingly for Labor, its energy spokesman until a few days ago, Gary Gray (who is retiring from Parliament), condemned the concept out of hand in 2015 when he spoke at the Australian Domestic Gas Outlook conference I co-chaired in Sydney.

Gray said then: “Experience around the world shows that domestic gas obligations – that is, reservations – discourage investment and exploration, ultimately reducing the amount of gas that is brought to market.”

He added: “Reservation may also increase reliance on subsidized gas and discourage efficiency and technological innovation.”

And he pointed to the International Energy Agency statement that “reservation policies are effectively subsidies that exacerbate demand and inevitably lead to shortages a decade later.”

In his ADGO speech, Gray warned that the gas industry is at a crossroads in Australia. “On the one hand, there are pressures to subsidize our gas prices and on the other we want to resist the technological opportunity to produce it. Neither approach makes economic sense and both effectively will keep gas in the ground.”

Gray is part of a trio of politicians who have oversighted federal energy policy for most of this century – the other two are Ian Macfarlane and Martin Ferguson – and all of them have firm opponents of reservation.

Ferguson, who these days chairs the Australian Petroleum Production & Exploration Association advisory board, has been cutting in his response this week: “Raising the spectre of sovereign risk for short-term political horizons is not what the Labor Party I grew up in was about.”

And he added: “(This) is a policy of a union movement desperate for survival (and) cruelling Labor’s economic credentials.”

Josh Frydenberg, successor to Macfarlane, Ferguson and Gray as federal Energy Minister, has leapt on another Ferguson comment (also at ADGO) – in which he labeled reservation as an “investment killer.”

And Frydenberg points out that the CoAG Energy Council (which he now chairs and includes Labor governments in its membership) rejected the need for government intervention of this kind when it met last December.

APPEA’s chief executive, Malcolm Roberts, has chimed in by commenting that it is “disappointing” federal Labor has “bowed to union demands to introduce a policy that could penalize one of the nation’s most successful export industries.”

One can expect to hear a great deal more on this topic at the APPEA annual conference that opens in Brisbane on 6 June.

Meanwhile, the Grattan Institute’s Tony Wood is talking of “the spectre of old-fashioned protectionism hovering in the air.”

Labor, he says, proposes in effect to tax gas producers to subsidize domestic users. “The result would be to increase the costs of producing gas for export and thus reduce the development of exports and the incentive to develop further supplies.”

Wood argues that a more constructive approach would be to address “the current muddle across jurisdictions,” creating a clear and consistent national regime for unconventional gas development.

It’s worth at this point coming back to the key ACCC finding – its recent inquiry could not identify any market failure on the east coast that could justify a gas reservation policy.

The commission  believes the east coast problems relate to a structural lack of competition in the region and this, it says, can’t be addressed via reservation policy.

In fact, the ACCC makes it clear going down this path would threaten a worsening of the situation by depressing prices in the short term and discouraging investment.

Fingers are also being pointed to the 2014 study by what was then the Bureau of Resources & Energy Economics: it concluded that a reservation policy, including restrictions on exports, was likely to have an adverse impact in such areas as energy efficiency, foreign investment, new gas supply and future government revenues.

All of this adds up to more grist to the mill of Labor opponents, who accuse the current federal leadership of being glove puppets for militant unions.

Meanwhile I am waiting for Bill Shorten or Chris Bowen to explain how it will help to reserve gas on the east coast when Labor is frustrating its development in Victoria, supporting a moratorium on further development in New South Wales and threatening, if elected next year in the Northern Territory, to impose a ban on fracking in the area that is being held out as the lifeline for NSW manufacturers in particular.

Which brings me back to Ferguson, who told the 2016 ADGO conference that “the biggest risk to gas users is not exports; it’s the combination of poor policy, poor regulation and political opportunism.” Quite.

Basslink & beyond

Is the Basslink saga, now in its fifth month, a NEM sideshow?

It is, of course, a big, fat problem for Tasmania. The failure of the high voltage link to Victoria and the difficulties of finding the break under Bass Strait and then fixing it, have presented a rolling crisis for the State government and Hydro Tasmania as well as a substantial inconvenience for large customers.

In the latest twist, bad weather has simultaneously lifted Hydro Tasmania’s dam storage above 20 per cent and prevented the final stages of the repair operation from being tackled.

Any number of politicians and journalists have made local hay of the situation, including recent claims that the bill, which includes the cost of running more than 200 megawatts of diesel generators, will exceed $400 million (a hit to taxpayers). The solvency of Hydro Tasmania has even been questioned.

The government-owned utility denies the bill is anything like $400 million. It says that diesel plant hire is looking to be a bit over $50 million and monthly operating costs are running at $11 million per hundred megawatts. It dismisses talk of insolvency.

It is also increasingly being argued that Tasmania should build wind power capacity in spades and a second Basslink to carry excess power to the mainland. Beyond this lies a still broader agenda for more NEM high voltage interconnection capacity to underpin wind power development in particular.

The Prime Minister has bought in to this by approving a new feasibility study of Basslink 2 at federal cost. (You may have noticed there is an election on; three of the Tasmanian seats are in play and form part of a list of 36 around the nation that, the political pundits argue, will decide the federal government’s fate on 2 July.)

The Tasmanian Energy Minister, Matthew Groom, recently told State Parliament in Hobart that secure and reliable interconnection between the States in the NEM is “essential” if Australia (really the east coast) is to encourage greater renewable energy penetration.

His State’s hydro system should be seen as a national strategic asset, he argued, not just an essential local one. “There’s no doubting Tasmania’s long-term capacity to contribute further to Australia’s clean energy transition.”

With this in mind, Groom declared, expanding the link across Bass Strait should be recognized as a national objective. It seems Malcolm Turnbull agrees.

Groom’s views are echoed by South Australia’s Ian Hunter, Environment Minister, who used a speech in Sydney last month to call for a “real grid” on the east coast – including a “thicker, stronger” link between SA and NSW and a second link between his State and Victoria – to “deliver world-class renewable resources to all of the NEM.”

Interestingly, this thought reflects something the International Energy Agency executive director, Fatih Birol, said in Tokyo four weeks ago to Prime Minister Abe and a meeting of G7 finance ministers: “What is crucial for renewable deployment in many regions is no longer just subsidies such as feed-in tariffs, but system integration.  In most countries, including Japan, there is a regional disparity between wind and solar potential and large demand centres. A strong transmission system is needed to enable a larger scale integration of often very cost-efficient renewable resources as different weather patterns balance out.”

The obvious point is that such major infrastructure development comes at substantial cost and, in Australia,would require significant change to NEM regulatory rules governing high voltage network expansion.

Some, including the Australian Energy Council, are reminding policymakers, in the context of the Tasmanian crisis, of the risks to consumers of over-reaction.

The AEC notes that the New South Wales and Queensland rolling blackouts of 2004 sparked a massive east coast move to give the network system extra capacity – and drove up NEM consumer prices to eye-watering levels with significant consequences for all concerned (including politicians).

“With hindsight, what seemed a good idea at the time ended up being an expensive and unnecessary solution,” says the AEC’s Matthew Warren, who also points to the desalination plants built in South Australia, NSW and Victoria in reaction to the millennium drought. Most have hardly been used since commissioning but their costs figure on consumer bills.

As Warren says, a second Basslink would be a billion dollar venture and it hasn’t been taken up so far because no-one can see how the project can pay for itself.

It should be noted that the major value of Basslink 1 has not been in getting hydro power to the mainland market (although Hydro Tasmania made a pretty penny in doing so when the carbon tax was in operation, laying it open to accusations with hindsight of not husbanding sufficient resources for the inevitable next drought) but in bringing brown coal-fired electricity production to Tasmania, staving off the impact of drought – a boon busted when the cable failed on 20 December.

In passing, also, although there was a flurry of green boosterism (and media fellow travelling) when the closure of the SA Northern brown coal power station was immediately followed by an especially windy day and resulting high wind farm output for a relatively short period, the real news is that imports of brown coal-fuelled power from Victoria reached as high as 600 MW in the aftermath of the shutdown and are now accounting, on average, for about 15 per cent of the State’s supply.

So much for the “SA is now coal-free” line that is being pushed quite vigorously. The almost-completed augmentation of the Heywood interconnector (raising capacity 190 MW) will no doubt reinforce the ability of Latrobe Valley coal plants to send power west.

As for Basslink, the immediate fate of the island’s power future depends on a fix-it ship currently tied to a wharf in Victoria’s Geelong, with its mission temporarily thwarted by Bass Strait bad weather. Two windows, each of six days, of relatively fine weather are needed to complete rejoining of the cable ends.

Scarce & the big picture

As we contemplate 50-plus days of politicking before the federal poll and the way the politicians are seeking to talk up their carbon credentials, it pays to take a moment to read the South Australian nuclear royal commission report – which was published in its final form yesterday.

Not surprisingly, Kevin Scarce’s 344-page report is receiving most media and political attention for its recommendation that the SA government pursue development of a nuclear waste facility, but this is not all it contains and there are aspects of it relating to electricity that really need to be communicated widely in the long-term public interest.

On our national energy future, Scarce writes: “ There can be no doubt that the energy sector in Australia and elsewhere is changing dramatically. Although the major trends of this transformation are increasingly apparent, the extent and pace of change are not. It remains unclear which energy options Australia will embrace. Any of a range of possible scenarios for Australia’s future electricity system remains plausible. Any claim that there is certainty about future outcomes should be treated with caution.”  (The italics are mine.)

And Scarce says: “In developing Australia’s future electricity system there is a need to analyze the elements and operation of the system as a whole and not any single element in isolation.”

This further observation should also not be lost to view: “The present considerable optimism about the future cost of renewable generation and storage does not ensure certainty about these outcomes.”

Scarce recommends that “the SA government promote and collaborate on the development of a comprehensive national energy policy that enables all technologies to contribute to reliable, low-cost, low-carbon (supply) at the lowest possible system cost.”

He adds: “Given the complexity of the issues and cost of transformation, planning must be based on evidence (and it) should focus on a combination of cost, reliability and carbon intensity. It is critically important that long-term decision-making should not rely on what is presently popular.” (My italics again.)

This point also shouldn’t be lost: “Modelling suggests that it is unlikely that Australia could fully decarbonize its electricity sector by 2050 by relying on renewables alone. Combined cycle gas turbines will be required for system stability in the absence of other dispatchable generation.”

Scarce, while making it clear that he thinks electricity market economics plays against the early introduction of nuclear power on the east coast, says that, in the event rapid action is needed on decarbonization here after 2030, “nuclear power might play a useful role.” This can’t happen, he points out, if steps aren’t taken now to plan for that role.

Scarce recommends that the SA government “pursue removal at the federal level of existing prohibitions on nuclear power generation to allow it to contribute to a low-carbon electricity system if required.”

He suggests that, in the case of nuclear power, as new systems are developed around the world, particularly small modular reactors, the costs of this technology may reach the point where it is able to be part of a low-cost, low-carbon energy system in Australia.

He also makes this somewhat tart comment: “The Australian government will formally review its current and future carbon abatement commitments in 2017. This would be an ideal time for scientific rather than politically-led discussions about future options.”

Even so, Scarce acknowledges, “the pace of change will depend on government policy and will not be driven by technology and cost alone” – and it will also be affected, he notes, by consumer behavior and “new pricing models to equitably fund networks among their users.”

And, in words that will be music to the ears of a number of business lobby groups who have been pressing this point, he says “it would be wise to facilitate a technologically-neutral policy for Australia’s future electricity generation.”

All of this is seriously sensible stuff that should be imparted to the wider community at a time when politicians’ rhetoric on energy issues is inevitably more about their self-interest than long-term community interests no matter how they dress it up, the more so because it comes from a respected figure – Scarce is a retired admiral and former SA Governor – with no axe to grind in the carbon wars.

But, if you scan the mainstream media reports, hardly any of the above is being passed on and none of it in a form that would educate public opinion.

This, I think, requires concerted action by the national business lobby groups to ensure that Scarce’s very sensible advice on the big picture in electricity supply is not lost to view.

So much of what the industry lobbyists’ offer is instantly attacked by green ideologists and vested renewable sector interests on the basis of “well, they would say that, wouldn’t they?”

Here is an opportunity, through an impeccable independent source, for the business bodies to highlight the big picture for the community at large. Not to take it would be a sin of omission of no small order in my book.

RET-go-round 23

It’s eight months since I last wrote a commentary in my RET-go-round series but the renewables carousel has been whirling all that time and it is speeding up now with the federal election almost upon us.

Just in the past few weeks we have had:

• The Energy Networks Association arguing the case for technology-neutral policy to allow all low-emission technologies to play a role in meeting national abatement targets.

• The ALP launching its climate change prospectus for the federal election, promising a 50 per cent RET by 2030.

• The Clean Energy Council releasing its “Power Shift” paper arguing for “strong and long-term” RETs that “ensure the steady and continued” deployment of wind and solar power.

• BIS Shrapnel reported in the media as being “highly doubtful” that the current RET can be met by 2020 – with $10 billion of investment (others say $12 billion) needed in an environment where lenders are wary because the policy keeps changing.

• The Greens wanting to see $2.9 billion spent in subsidies over five years to drive take-up of electricity battery storage. The Greens’ target, of course, is 90 per cent renewables by 2030

• The Grattan Institute publishing a “roadmap” for climate change policy and arguing in it that, while existing RET-led investment should be protected, the scheme should not be extended if a “robust intensity baseline scheme” for power generation is put in place.

• The Australian Forest Products Association calling for the RET to be amended to allow wood waste to help “plug the gap” in investment.

David Blowers of Grattan Institute has an interesting commentary, published in mid-April on “The Conversation,” explaining the “roadmap” with a headline that states “One day we won’t need a RET because we’ll have good climate policy.”

Meanwhile the South Australian Labor government, wrestling with the market impacts that the large amount of wind and solar power policy has delivered in the State, is kicking a can down the road for much more investment on the east coast in high voltage transmission – and the Coalition federally, in what is an obvious poll ploy, has agreed to subsidize a feasibility study for a second Basslink in an environment where the failure of the existing link has Tasmanians more than a little unhappy.

The study will be overseen by a former federal minister, Warwick Smith, MHR for Bass for a time, and the Clean Energy Finance Corporation, with a preliminary report to be delivered next month and a final one at the year’s end.

Malcolm Turnbull told a media scrum in Hobart that “there is potential for enormous additional investment in renewable energy in Tasmania.” He asserted that the new link would be commercially viable with private sector support because of the opportunity to sell hydro and wind power to the mainland.

It is less than two years since Hydro Tasmania killed off a project to build a 600 MW wind farm on King Island and link it to Victoria with a new connection because the concept was not commercially viable.

In March this year consultants Pitt & Sherry told media that it would be difficult to demonstrate net market benefit (required by NEM regulations) for Basslink 2 and suggested that the estimated $1 billion price tag would be better spent building more wind farms to complement the State’s hydro-power system.

With respect to the grander scheme of things, Grattan Institute’s Tony Wood told “The Australian” a few days ago that Labor’s plan for half Australia’s electricity to be based on renewable energy by 2030 would require more than 25,000 megawatts of capacity and about $48 billion of capital. If the whole task was dependent on wind power, he added, between 7,000 and 10,000 turbines would need to be installed.

The RET debate revolves endlessly around cost – capital outlays, the wide-ranging non-generation expenses of a major transition (like the cost for land acquisition) and impacts on consumer bills for the mass market and large and small business, a matter of constant controversy – but this is not the only issue.

As the Australian Energy Council puts it: “The integration of high levels of renewable energy into the power grid is a major technical challenge that is still to be solved.”

And, as the Energy Networks Association says, we need a policy framework that doesn’t change every election and can deliver carbon abatement at least cost for consumers while managing energy safety, security and reliability.

ENA rightly adds that renewable energy will play a key role in electricity supply’s transformation “but it’s just one tool in the toolbox (which should also include) demand management, carbon capture and storage and low emission fuels such as gas and carbon capture and storage.”

(As well, the coal industry keeps pointing out that a country with our resources shouldn’t ignore the potential of high efficiency, low emissions plants capable of delivering baseload power with 50 per cent less emissions than the conventional units dominating supply today – and the nuclear advocates keep reminding us of the potential of small modular systems.)

The impending delivery of reports by the South Australian nuclear royal commission and the Queensland Productivity Commission (two reports – one on solar power and the other on electricity pricing) will provide more grist to this mill.

The one certainty is that the RET-go-round is nowhere near running its course – which I suppose is good for commentators like me but hardly much fun for investors and, in the long run, for all of us as consumers.

Tuned for the times

One of the biggest annual conferences in Australia is now only a few weeks away – and events are conspiring to make it highly important in the energy debate.

The forum is the APPEA conference, now in its 56th year and which I oversaw for 11 years last century as executive director of what is now the Australian Petroleum Production & Exploration Association. I will be attending it next month for the 31st time.

The current turbulent state of the petroleum industry and the stringent budget management of stakeholders poses a marketing challenge for the conference managers this year, but the focus the event brings to key issues is still, as it has been over five decades, central to the Australian energy debate.

APPEA chairman Bruce Lake makes an interesting point in the 2016 conference brochure (which you can find at www.appeaconference.com.au), noting that the meeting in Brisbane comes 110 years since the Australia gas industry kicked off with a field discovered at Roma. Today, as he says, Queensland leads the world in coal seam gas production and hosts three substantial LNG projects, the first ever to use CSG as a feedstock.

What this and the resource sector as a whole means for the State is highlighted in the brochure by Premier Annastacia Palaszczuk, who says minerals and energy has contributed $32.9 billion to the Queensland economy last year.

The government, she adds, is keen to work with the resources sector to attract still more investment – a perspective that runs directly counter to the campaigns by activists bedeviling gas activities in neighboring New South Wales and in Victoria.

APPEA chief executive Malcolm Roberts asserts the conference is “tuned for the times.”

As an example of what he means, one of the big ticket plenary segments will see a focus on the future of energy featuring Peter Hartley, who holds chairs in economics at Rice University in Texas and the University of Western Australia, Regina Mayor, the KPMG energy leader in the Americas, John Lyden, managing partner in Australasia for McKinsey & Co, and Peter Coleman, CEO of Woodside Energy.

In the wake of the Paris climate change agreement, this segment alone is worth attendance in my book — although 100 speeches and presentations on the program provide a pretty wide choice.

Coleman made a challenging point at a recent forum in New York when he argued both that renewable energy and gas should be seen as complementary fuel sources and that our federal government should be taking on a greater role in encouraging a sensible policy debate internationally, given this country’s status as a major exporter of energy.

As APPEA observes laconically in the program brochure, “not all see an ongoing role for natural gas in a clean energy future” and a fair bit of this year’s conference is devoted to tackling the ongoing communications challenge the upstream petroleum industry faces.

One of the highlights for me of this part of the program will be an address by Cameron Hepburn, who is professor of environmental economics at Oxford’s Smith School of Enterprise and Environment.

In this context, the event winds up with an interesting focus on stakeholder engagement, to be facilitated by journalist Ellen Fanning, and including Peter Botten, whose leadership of Oil Search Ltd in pursuing petroleum development in Papua New Guinea has been one of the success stories of the past three decades, John Cotter, chairman of the GasFields Commission in Queensland (an agency I have argued for ages should be replicated in NSW), and Seiya Ito, the Australian boss of Japan’s INPEX, which has developed an LNG project on the doorstep of a capital city (Darwin).

Also, with the federal election looming within a month of the conference, a lot of attention is going to be on the three politicians performing at it – federal Energy Minister Josh Frydenberg, his Labor counterpart, Gary Gray, who is retiring from Parliament, and the Queensland Treasurer, Curtis Pitt, who has declared his (and the State government’s) ambition to deliver a “cleaner, greener energy future” for the State.

No doubt Frydenberg will ride hard on the recent east coast gas market report by the ACCC (which APPEA sees as confirming the industry view that more gas and more suppliers are the answer to consumer needs, not moratoriums and domestic gas reservation) but I wonder whether he will also take the opportunity to speak up for the CoAG Energy Council pledge to do a better job of integrating energy and carbon policies?

His leader, Prime Minister Malcolm Turnbull, ignored this important issue when he spoke at the LNG 18 conference in Perth a month ago.

Gray, of course, in his contribution has to carry federal Labor’s climate change policy for the election in to the fossil fuel lion’s den – including its commitment to drive a far higher national abatement target by 2030, a proposal criticized for being made without full understanding of the cost.

His past pragmatism as energy minister for a relatively short time and as an Opposition energy spokesman who has supported gas development have won him resource sector regard. It will be interesting to see how he handles this gig.

The APPEA conference doesn’t do boring – one of the more entertaining tasks of my quarter century as an energy sector lobbyist was overseeing the 1983 event that started a day after the Fraser government was defeated by Bob Hawke – and I have no doubt this one will live up to that reputation for the 2,000 or so attendees at the Brisbane Convention Centre early in June.