Archive for December, 2016

Beyond coal?

Let’s start with some facts: in calendar 2015, on the data provided by the Australian Energy Market Operator, black coal provided 51.5 per cent of electricity sent out by east coast power stations and brown coal contributed 25.8 per cent.

According to the Cedex report produced by Hugh Saddler, total coal generation in the 12 months to September this year was 75.9 percent with brown coal output at 22.3 per cent.

With the closure of the Port Augusta generation earlier this year and the planned closure of Hazelwood in March, the output by brown coal plant will continue to change – but to what extent and how much of the slack will be taken up by black coal production in 2017 remains to be seen.

The role of coal as the current bedrock of the eastern mainland States’ power system, however, is not open to question. How to shift to a lower-emissions, affordable, efficient and reliable new mix is the challenge – and the idea that this can be achieved in the next decade or so without coal power at all seems to me, at least, to be fanciful in the extreme.

This is backdrop to the tabling of an interim report on coal power by a Senate committee chaired by the Greens’ Larissa Waters.

The Greens/Labor majority on the committee want the federal government, in summary, to produce a plan now to close all Australia’s coal power while maintaining energy security and helping the power workers displaced by the move.

Needless to say, these senators want yet another government body – an “energy transition authority” – to oversee the process.

Coalition senators have produced a minority, dissenting report warning that what the Greens and Labor propose would transfer the energy transition risk from power businesses to taxpayers while increasing end-user prices and reducing supply security.

Not surprisingly, Environment & Energy Minister Josh Frydenberg points to the Finkel energy task force and says the government intends to wait on its advice.

Meanwhile the Australian Energy Council is reacting to the Victorian Labor government setting up a retail energy market review by pointing out that, apart from the Australian Energy Market Commission regularly reporting on NEM retail competition, the State’s consumers are likely to see “significant increases in energy costs next year as a result of Hazelwood ceasing operation.”

AEC says: ““This cost increase is a by-product of the reduction in the State’s generation capacity of around 20 per cent.”

It has also responded to the Senate report by saying that the policy focus needs to be on reducing emissions rather than closing power stations. “We need to think hard about how we are going to run the system at the lowest cost while maintaining reliability.”

What I find notable about the Greens/Labor majority report for the Senate committee is that, despite calling for an “honest and robust” discussion on the coal closure issue, it has turned a determined tin ear to the expert evidence delivered to it in a 17 November hearing by EnergyAustralia executive Mark Collette.

He told the committee that replacing the energy coming from coal and gas plants with renewables – which is the goal of the Greens and their fellow travellers – would require construction of about 75,000 megawatts of new capacity or about 500 power projects.

Collette estimated the cost of this at between $100 billion and $150 billion and pointed out such a system would need significant back-up – with the storage offered by batteries and other technology costing about as much again as generation investment.

The senators mightn’t like to hear this and might want to disbelieve it, given all the Pollyanna advice they are getting from elsewhere about how green technology costs will tumble in the best of all possible worlds, but they surely should acknowledge to the Australian community that this is what they have been told. They haven’t.

For lay people struggling to comprehend the size of the task, Collette offered senators this further thought: if the whole extra renewables build was wind power, two to three turbines would need to be erected daily every day for 30 years.

Elsewhere it has been pointed out that just building the projects needed to deliver on the federal government’s current national carbon abatement target for 2030, something the Greens and Labor want to ditch for much higher ambitions, would require spending about $25 billion on wind and solar developments (before the system resilience issues are addressed).

As it happens, there is another green-as-grass administration at present providing an object lesson is how hard it is to go down these paths. This is the Alberta government in Canada. Having committed to ditching the province’s coal power, it is moving to cap retail prices to be paid by consumers and introducing a capacity market over the top of its current NEM-like system.

The Alberta regime aims to junk 6,300 megawatts of coal generation (owned by the private sector, who want compensation) and replace it by two-thirds renewable and one-third gas capacity.

Leaving all else aside (and these matters are complex, as we know), the Alberta government is planning to subsidize electricity (in a province with winters that make Tasmania look like St Tropez) for mass market consumers. You might like to place your bets now on how well this will go.

(In passing, another Canadian provincial government, Ontario, equally green, is currently in more political trouble than cod at a cats’ picnic with sky-rocketing power bills, an issue opinion polls there say is voters’ chief concern. Ontario’s energy minister is vowing this week that the policy will now become “technology agnostic” and acknowledging that his government’s efforts to force intermittent renewables in to the provincial system have been “arbitrary, leading to sub-optimal outcomes and have heightened community concern.” And this in a region with recourse to major hydro capacity as well as nuclear power.)

As it happens, Frydenberg was giving a keynote address to an energy conference at the Australian National University (for some reason that is beyond me the text is to be found on his personal website and not the official departmental one) as the Senate committee’s perceptions were being publicized.

As an example of just how hard it is to please critics at present, I note an email circulating among some of my fellow travellers in this space (people collectively with several centuries of experience of the business) which (a) praises Frydenberg for providing a very candid description of the local context and challenges and (b) notes that he did not dwell on the reform barriers or show appreciation of the scale and timing issues that affect the transition.

Frydenberg acknowledged to the ANU Energy Change Institute audience that “it is a big job to ensure stability, security, and reliability in the energy system while at the same time balancing the costs to industry and consumers and the need for a transition to a low carbon, low-emissions economy.”

He went on: “Policies need to provide the right environment to create and maintain flexible, well‑functioning and competitive energy markets that provide clear price signals. They need to provide investment certainty for industry but also provide an environment that encourages and rewards innovation. This means having an energy market that is technology neutral. Building on from our current energy market reforms, we need to take a whole-of-system approach that addresses all of the interlocking components of the energy market.”

Quite so. Senators please note.

Now on to the CoAG Leaders’ meeting in Canberra at the end of next week — which will receive an interim report from the Finkel task force.