Archive for September, 2016

The perils of conflation

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?

When sorrows come

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.

Let’s look at that again

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.

Tangled web

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.

A loonie power lesson

There is so much complexity in the transformation of electricity supply to a lower-carbon but still secure and affordable system that one cannot blame the energy illiterate (more than a few of the population) for having little idea of the ramifications of changes opinion polls represent them as holding dear.

The problem for governments is that meeting what opinion polls identify as popular desires – doing more about climate change and pursuing greater use of renewable energy, for example – almost inevitably delivers clashes with other strong community wants (eg lowering power prices).

News out of Toronto, Ontario, this week exemplifies the dilemma. The incumbent Liberal (ie Labor in our terms) government is confronted by substantial antipathy in the provincial electorate to rising power bills – up 80 per cent since 2006. The backlash has included loss of a supposedly safe Toronto seat in a by-election this month. The political (ie kneejerk) solution has been to announce an eight per cent rebate on charges for five million residential and small business customers.

The spin is that this will save households $130 (Canadian money) a year. Now that works out to little more than two loonies a week – “loonie” being the nickname for the country’s $1 coin (which has a waterbird, the loon, on one side) – but what the move will cost taxpayers is being carefully skirted: about $C650 million annually or $6.5 billion over the next decade.

This, in fact, is not much more than the $C4.6 billion the province’s auditor-general says will be the burden on customers over the next 10 years from Ontario’s subsidies for wind and solar power – spun by the government as the cost of removing coal-fired generation from Ontario’s power system.

What has actually happened since 2006 is that Ontario has shut down 7,546 megawatts of coal generation and added 13,595 MW of renewables, 5,674 MW of gas plant and 1,341 MW of nuclear power. The current intention is to have a 2032 generation mix that consists of 9,850 MW of nuclear plant plus 9,300 MW of hydro-power, 9,900 MW of gas, 6,450 MW of wind farms and 3,350 MW of solar power.

At present wind and solar contribute 9.6 terawatt hours of annual Ontarian power production versus 37.9 TWh for hydro, 94.9 TWh for nuclear and 14 TWh for gas, with as much as 19 TWh being exported in to the United States (because the province has a large generation surplus).

Now here’s the kicker: the auditor-general declares that Ontario’s power planning process has “essentially broken down” and the province has not had a technical plan in place for 10 years. The result is “significant cost” for customers (and now for taxpayers, as the new rebate take effect).

Without going in to all the tangled web of arrangements Ontario politicians have imposed to cope with the raft of energy problems the province has (including financing debt incurred by the nuclear sector and not least paying new generators over market price to build plants there), let’s just note that, according to the auditor-general, the total bill for consumers above and beyond actual supply costs will amount to $C133 billion between now and 2032 – on top of $C37 billion incurred over the past eight years.

This is not a banana republic we have in view but a sophisticated economy a bit bigger than that of New South Wales – and the lesson for us here to draw from all this is that modern governments can tie themselves and their communities in costly knots if they allow populism and politics to run roughshod over good planning.

As it happens, I have been following developments in Ontario for a quarter century (initially because of my work as MD of the Electricity Supply Association) and I can see all sorts of resonance for our east coast power market, even though the technology set-up is quite different and the weather, too.

What’s not much different is the politics and here, as there, politicking with power is a slippery dip.

To quote, the auditor-general of Ontario again, “an enormous amount” of technical planning for the province is now needed to determine how to meet future electricity needs efficiently. Same here.

Apart from the well-canvassed (if not always properly understood) issues in South Australia, the big ticket focus here is on Victoria, New South Wales and Queensland, focus of most demand and supply, where State governments are all engaged in thinking about future power supply (or, in the case of Victoria and Queensland, pushing populist expansion of renewables).

The “Re-powering NSW” conference I am co-chairing in late October in Sydney (see http://www.questevents.com.au/re-powering-nsw-2016) provides an opportunity for stakeholders to canvass this State’s electricity future and the Baird government has launched an energy strategy review, but there is little in the public debate so far to suggest that the east coast’s official power planning processes are in much better shape than Ontario’s.

The central criticism of the Ontario situation certainly resonates here: how is the community interest represented when governments ignore the long-term impact on consumers for their own short-term political gain?

Threading the needle

A bane of efforts to have a commonsense discussion in this country about energy and carbon abatement is the endless bludgeoning of Australia with the per capita emissions stick.

Grant King, whose distinguished role as CEO of Origin Energy is about to end, did the best job of rubbishing the concept last year when he spoke at a Committee for the Economic Development of Australia forum. The per capita yardstick, declared King, is “mathematically true and completely misrepresents, in fact ignores, the balance we should seek between economic development and environmental outcomes.”

King, who has argued for us to come to terms between the benefits of increased energy use here and elsewhere and the consequences that come with this, with the punchline that our society “will not give up economic gains solely for the purpose of environmental outcomes,” told the CEDA audience that a more useful measure of Australia’s performance would be to assess how it is achieving the trifecta of simultaneous economic growth, reduction in absolute carbon emissions and a reduction of carbon intensity. He claimed that only Australia, the US and Canada have recorded this achievement and that we are leaders in doing so.

While I wrote about his comments at the time, the media essentially ignored them and little effort has been made by business to run with the trifecta concept over the past year.

King’s point came to mind this weekend both in reflecting on his retirement from Origin – he is lauded by the Australia Energy Council for not only building a leading integrated energy business but also for his role as “a strong advocate of energy policy reform” – and on the ongoing, although relatively low-key, rumbling about the Climate Change Authority’s latest report for the federal government.

The trifecta point also resonates with a submission I have been reading from the Minerals Council of Australia to the Victorian government, underscoring the administration’s own declaration last year that the State’s key objectives in energy policy are an efficient and secure system to provide for social and economic wellbeing as cost-effectively as possible and the safe and reliable delivery of energy supplies.

The CCA, for its part, has put out a tart statement rejecting the much-publicized criticism by two of its members (former Greens election candidate Clive Hamilton and fellow academic David Karoly) that its report is motivated by political considerations and re-asserting the need for this country to “chart a sustainable, durable and scalable (national) climate change response in the years and decades ahead.”

It’s interesting to see even The Australia Institute’s Richard Denniss canvassing the view (which he attributes to the CCA majority) that “giving the Coalition (government) a way out of the climate change cul-de-sac it is in is worth the effort.” The important question, says Denniss, is whether or not a majority in Parliament agree that “climate progress is more important than protest.”

To which the Fairfax Media’s Ross Gittins has added that he has “never believed that, if you can’t have it all, you’re better off having nothing.”

Gittins argues that the Turnbull government “must know its present arrangements are insufficient to meet its international commitments without hugely increased cost.” What the CCA has done, he suggests, is show the government how to build on existing policies to strengthen its efforts.

Some members of the left-leaning commentariat are eager to use the CCA document as another means of adding fuel to the perceived feud between Turnbull and his supporters and the “old guard” among the Liberals but others in the media are suggesting that it could grease the wheels for another meeting in the middle between the Coalition and Labor. (The first, of course, was the compromise on the RET.)

Is this perhaps what is exercising the criticisms of the CCA approach from both the green left and hard right of our political spectrum?

I thought it interesting to hear Hamilton on ABC Radio responding to the compere’s question “Isn’t this about doing what is politically possible?” by contending it is not the Authority’s role “to try to thread the political needle.”

At least some of us think that facilitating a pragmatic outcome is much to be desired. Some others, obviously, fit the Gittins’ description of “if you can’t have it all” and some no doubt have radical political games to play.

When all this is said and done, this political ball now is where it belongs – at the feet of the Prime Minister, his cabinet and especially Environment and Energy Minister Josh Frydenberg. The latter gives me the impression of treading water until the cabinet (and perhaps the party room) have had an opportunity to think their way through the opportunity the CCA has handed them.

Politics being what it is, however, one should not lose sight of a message running through the CCA’s material: there’s no escaping electricity price rises in tackling stronger abatement action. Given the poisonous use of power costs in the public debate of recent years, this represents a challenge to a pragmatic outcome not to be under-estimated.

A case of “watch this space,” methinks.

The pragmatism test

The problem with getting any sort of pragmatic tone to the climate change debate (now 20 years old) is that so many protagonists hate pragmatism; for them, this is either about imminent doom or a giant hoax.

Salt this situation with a desire to attack capitalism or socialism, depending on bent, and you have the perfect whirlpool, with the rest of us, hopefully the majority in what I see Prime Minister Turnbull calling the “sensible centre,” at rising risk of being sucked down the policy plughole.

Thus the new Climate Change Authority report is being assailed from both ends of the commentariat spectrum: it’s a “cop out” and/or “inadequate,” a “gamble” with our future and more “garbage” (that’s from the far right). Titillating the media is the fact that two CCA members, one a former Greens election candidate, have now come out with their own report lambasting the main one.

Emblematic of the times, federal Environment & Energy Minister Josh Frydenberg has responded to the formal report’s release by declaring that the government has no plans to revisit its abatement measures and that his job requires him to “get affordable energy.” His Labor opposite number, Mark Butler, offered no comment at all.

For the record, as well represented by the South Australian royal commission report, the collective job of our governments is to pursue, in the case of electricity, reliable, secure supply at the lowest possible cost while transitioning us to a lower-emissions economy. All of this, not the parts that suit an agenda at a particular time (subject to change to fit an altered political wind or set of opinion polls or an election outcome).

The CCA chair, Wendy Craik, in releasing the report, made a point that seems sensible to me in this context: “The Authority found that one size cannot fit all of the many opportunities that exist to reduce emissions across our economy.” Australia, she said, “needs a policy toolkit calibrated to capture reductions in different sectors.”

What we most need, she added, is a “durable solution” for decarbonizing the economy. To the CCA, this can be tackled in particular by (a) an emissions intensity scheme for electricity generation, (b) establishing or strengthening energy efficiency standards for buildings, including houses, and vehicles, and (c) a better, voluntary approach for the land sector.

Tucked away in my files, waiting for this report to be released, are copies of submissions made to the Authority earlier this year.

In one, EnergyAustralia observed that “even an astutely-designed emissions reduction policy” will struggle to draw the substantial re-allocation of private investment required to achieve just the current 2030 abatement target unless it seen by investors to be “politically secure and robust at the outset.”

Our national track record over the past decade decade, EA added, “unfortunately has fostered a perception of instability and unreliability” while the emissions performance of electricity generation “is being inhibited by the substantial over-supply of capacity in the market” with new investment in low and renewable generation plant “crowded out.”

In another, Origin Energy supported the “toolkit” approach and urged appreciation that it is “crucial” the transformation of the electricity sector be sustained over time to keep the impact on investors and consumers to a minimum.

The company pointed out that, if the 2030 target is quantified as cutting back national emissions by 100 million tonnes annually, the power generation share is 33 Mt – which is the equivalent of closing two of the most carbon-intensive Victorian brown coal plants plus one or two more on the east coast and replacing them completely with renewable energy.

Going for a much higher 2030 abatement target, as proposed by Labor and others, needless (but necessary) to say, requires much more (including a great deal more money).

Given the recent experience in South Australia, what either step implies for quality, security and cost of supply needs forensic scrutiny – and this is still the missing link in the ongoing public melee.

In addition to its 219-page main paper, the Authority has also published a “special review electricity research report” running to 109 pages and drawing from input by 65 individuals and organizations as well as modeling by consultants Jacobs.

Brought down to a core view after this work, CCA believes that “the most prospective type of market mechanism for the electricity sector is an emissions intensity scheme.”  This, it asserts, will increase electricity prices less than a cap and trade scheme, while delivering significant emissions reductions that can be scaled up over time.  “Smaller increases in prices,” it adds,” may result in greater community acceptance, making it more stable. Further, the smaller price impacts on low-income households and other groups of particular concern can achieve a balance between cost effectiveness and equity.”

The political poison here, of course, is that the proposal acknowledges power bills need to rise to pursue even the relatively modest current national target. This hardly news to those of us who follow the abatement issue closely, but the public has been conditioned by the media and some politicians to howl at any mention of price rises.

In other news, although the casual media reader wouldn’t know it, the CCA has recommended that the renewable energy target carry through unchanged to 2030 – which is a rejection of the policy for a big increase Labor took to the recent federal election – and it adds this comment: “Given the importance of investor confidence to making the transition to a low-emissions electricity sector and the uncertainty that has characterized policy in the past decade or so, the Authority considered whether additional electricity sector policies (beyond the RET) might be warranted to support the emissions intensity scheme. The Authority reached the view that investor confidence is best met by introducing a scalable, cost-effective policy which remains stable and adding further policies in the electricity generation sector risks policy interactions that could undermine this key objective of policy stability.”

(The minority report wants a major boost to the RET, pushing it up to 65 per cent of power consumption by 2030.)

Looking at the past 7-10 days’ coverage, it strikes me that media denizens are incapable of just telling their readers (listeners, viewers) the facts without the embroidery provided by all the meretricious players, as I called them the other day – players that include opinionated “reporters” for whom it is more important to convey their own interpretations than an unadorned view of an independent entity that has spent months both consulting and cogitating. By all means allow the various noisy players room to express themselves, but get facts about the report in clear public view.

Perhaps one should be most concerned that the relevant minister, Frydenberg, sprang in to the media to belt the report in to the long grass within hours of it becoming public. Pragmatic? Not so much. But very typical of the current environment.

Playing with fire

In thinking about the Victorian government’s controversial moves against the natural gas industry (banning hydraulic fracturing out of hand and extending a moratorium on conventional gas developments onshore to 2020), I’d like to toss a quote in to the debate from Rod Sims, chairman of the Australian Competition & Consumer Commission.

It’s taken from his participation in a forum in Melbourne in May and he was referring to the ACCC’s inquiry in to the competitiveness of wholesale gas in eastern Australia: “I hadn’t really realised how many manufacturing plants we have that use gas. I was very surprised how many there are, how big they are and how many people they employ; they’re making plastics, fertilizers, glass and a whole range of (other) things. So, if you think we don’t have much manufacturing in Australia, we have a hell of a lot of it and gas is pretty important to a lot of it.”

Nowhere is this more true than in Victoria and yet, in throwing a big political wrench in to the future gas market only days after the CoAG Energy Council emoted on how important it is to provide greater east coast supply, the Victorian Premier, Daniel Andrews, could not find one word to say about manufacturing — which contributes almost 11 per cent ($31 billion) of gross State product and is the largest employer of full-time jobs (295,100 people at last count) in his State.

These days politicians take to Twitter to get across their key messages. What Andrews tweeted was “In a national first, the Andrews Labor government today announced a permanent ban on the exploration and development of all onshore unconventional gas.”

He did want to talk about jobs, claiming in his media statement that his move will “protect the clean, green reputation” of State agriculture, employing more than 190,000 people” — who, may I point out, depend on fertilizers in a substantial way and on food processing plants, both significant users of gas.

Agriculture, by the way, contributes $11.6 billion to Victoria’s GSP.

Andrews’ Industry Minister, Wade Noonan, also wasn’t interested in the anti-gas move’s impact on manufacturing. His tweet declared “Victorians have made it clear they don’t support tracking.”

Contrast all this, then, with the reaction to the Victorian step by the South Australian Treasurer and Energy Minister, Tom Koutsantonis, who urged gas companies to come to his State “where the assessment and approval of projects is left to expert regulators, not politicians,” adding that this country has “the best regulatory systems in the world” and they should be trusted to protect the environment, agriculture and communities.

What’s more, Koutsantonis pointed out, the Victorian decision is “bad news for the NEM” because the availability of gas for generation will continue to be constrained and for the environment because gas is “a much cleaner form of generation than coal and an essential component in the transition to a low-carbon future.”

And he’s a senior Labor figure.

The Shell Australia chairman, Andrew Smith, nailed the egregiousness of the Andrews’ announcement pretty well, too. “Today’s move,” he said, “means every Victorian household and business will pay higher energy prices moving forward. In a State that depends most on gas, this means fewer jobs, lower growth, less investment and a higher cost of living.”

It was, he added, a decision made without any scientific basis — noting that bad policy can be rewritten but, “once manufacturing jobs are lost, they rarely come back.”

The Australian Energy Council CEO, Matthew Warren, who told a newspaper the Victorian government had “succumbed to populist sentiment on fracking,” said in a statement that the move was shortsighted for an administration wanting to pursue a large-scale increase in use of renewable energy for power production. “The plan to install more than 5,000 megawatts of wind generation means that Victoria’s electricity system needs to be increasingly reliant on gas as a flexible back-up fuel.”

Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association, pointed out that Victoria has benefited from decades of conventional local gas production and accused Andrews of “playing politics” with the State’s energy future, reminding the government that, apart from the use of gas in 80 per cent of the State households, 27 per cent of the fuel consumed by local industry is used as feedstock for such essential products as glass, bricks and fertilizers.

And, he added, the dairying and food processing industries are heavy users of gas.

Now can one for a moment believe that the Andrews government does not know about all these values? Of course it does, but it has a higher priority — looking after its own political hide at a time when it is not exactly popular with a great chunk of the Victorian community. Kicking the gas sector is applauded by inner-city post-modern materialists and rural activists, the foot soldiers of the Victorian Labor faction on which Andrews & Co depend for support.

A senior political writer on “The Age” newspaper in Melbourne summed it all up as “easy politics,” going on to prate the conventional anti-fossil fuel lines of the Fairfax mass media and to claim that this was a decision with no “big, near-term economic implications.” Even he, however, could not fathom why the fracking ban had been twinned with the conventional gas moratorium, settling for it to have been pursued to deliver a simple “clean, green” message.  And, he declared, “the constituency in favour of gas development is small.”

If this is representative of the mindset in Spring Street, Melbourne, then Andrews is playing with fire in more senses than one.

Even the Australian Workers’ Union, a stalwart of the Labor movement, is tipping a bucket on the moratorium, arguing it “threatens industry, jobs and job creation while deflecting investment from the State.” Its spokesman declared: “We cannot keep on closing doors and expecting jobs to magically appear from nowhere.”

Not related to this issue but worth quoting in this context is a thought from the maiden speech in Federal Parliament this week by Tim Wilson, the new MHR for the blue-ribbon Liberal seat of Goldstein in Melbourne (vacated at the last poll by the retiring Andrew Robb). Wilson declared “cynicism pervades modern political life.” He’s not wrong.  But real life has a way of re-asserting itself — as recent other developments have reminded us.