Inquiries galore

It says something about our electricity situation that there are four inquiries in to the present state of things and future prospects running at the same time.

One, of course, is the Finkel task force.

Another is the “sister of Finkel,” the energy security task force set up by the New South Wales government (chaired by another chief scientist, Mary O’Kane).

The third is the Senate select committee in to “the resilience of electricity infrastructure in a warming world,” chaired by Greens senator Sarah Hanson-Young.

The fourth, flying pretty well below the radar at present, is an inquiry being pursued by the House of Representatives standing committee on the environment and energy. Using the 2015-16 annual report of the Department of Environment & Energy as a launching pad, this committee, chaired by Victorian National Andrew Broad, is focusing on “modernizing Australia’s electricity grid” and on considering “the critical question of how to safeguard the security and reliability of the electricity system and ensure that the system can facilitate the transition to a lower-emissions economy, all while keeping electricity prices for households and businesses as low as possible.”

But, hold on, that’s what Finkel et Cie are doing. No matter, the Turnbull government apparently also sees value in having a parallel political inquiry. The committee of eight has five Coalition members and three Labor MPs.

“Resilience” is the focus du jour for all these reviews.

O’Kane has been telling media “it is critical that households and industry across NSW have access to a resilient electricity system (and) be fully prepared for any emergencies that might arise,” noting that the State was “very fortunate to get through” the recent run of hot weather in January and February. She adds that her task force will “complement” the work being pursued by Finkel’s inquiry.

In this context, it is worth focusing on a comment to the Finkel review from three professors of the University of Queensland, Simon Bartlett, Chris Greig and Tapan Saha. They say: “The only way that the NEM can truly take advantage of new technologies and business models and remain resilient in the face of uncertainty is for the market to properly value electricity services. This does not mean favoring one technology over another but differentiating the value propositions of technologies depending on their alignment with the power system and customer needs – which can vary significantly with time and location and has different degrees of controllability.”

To me, this pretty well sums up what the whole debate should be about – but there are many people with many barrows all clamoring to get their perceptions and/or needs heard, as evidenced by some 360 submissions to the Finkel inquiry alone. Plus, as I see described in an Australian Financial Review commentary this morning, we have the body politic turning energy markets in to “a sandpit for political adventurism.”

The key to resolution of this situation needs to be the practical, not the populist.

The Finkel submissions include one from Tony Concannon, a leading figure on the electricity stage here for most of this century as boss of International Power and a chairman of the Energy Supply Association. Now CEO of renewables wannabe Reach Solar Energy, which is pursuing development of a 500 megawatt PV farm in South Australia, Concannon observes that “(coal-fired generation) integrity is increasingly difficult and costly to maintain with plant which has exceeded or is approaching its design/ expected life.”

With AEMO, he adds, announcing a number of conventional power plants are planned to close by 2025-2030, “forced outage rates are expected to continue to increase.”

The NEM, he points out, is not going it alone in the complex transition game. “Ireland, New Zealand, Texas and the UK are all implementing and/or exploring options to integrate an increasing proportion of electricity generation from renewables and distributed generation whilst maintaining system security and market incentives which promote competition. It is a highly technical topic which does not lend itself to sound bite discussion.”

This last aspect may be the central dilemma of our situation at the moment. The Prime Minister, some premiers, energy ministers and other politicians are all vying with each other in the sound bite game while responding to opinion polls as well as the ever-louder voices of those affected by current issues (not least manufacturers).

A new Essential Report poll, for example, throws up that 75 per cent of respondents want the federal government to “legislate” that a percentage of gas be reserved for domestic use. However, 25 per cent of them want coal seam gas development “banned completely” and 31 per cent want restrictions of CSG activity on farming land.

A key problem, as the Australian Aluminium Council says to Finkel in its submission, is that, while long-term policy should “prioritize the development of industrial-scale low or zero emissions energy sources,” this has to be done without compromising energy security – and “policy and market design should bring electricity prices down from their current uncompetitive level, not merely minimize future prices rises.”

For my money, the biggest challenge of all is the time factor.

For Australians, whether householders or business people, the short-term threats to system resilience and the pain in their budgets are of paramount concern, but nothing the politicians can propose is a quick fix and each intervention raises new issues.

The Australian Energy Council observes to Finkel that the impact of current price and reliability issues on suppliers, their customers and the economy “is now critical.” This situation, it insists, is not the result of NEM failure but of “sustained policy interference.”

Among the remedies the AEC proposes, two seem to me to be in the immediate grasp of the political class: empowerment of the market operator to manage system security and oversee efficient, flexible management of “contingencies” – and resolution of the domestic gas supply policy and regulation imbroglio.

These are not “the solution” but part of one.

Which leads me to ask whether we actually need wait on long-running inquiries to spur action in these areas? So long as we also bear in mind that they are steps and there is a lot more needed to guide us safely along the lengthy journey to a better (durable, affordable) power environment, the real big picture issue.

Comments are closed.