Archive for September, 2017

Watch this space

Whether you are Malcolm Turnbull or Joe Citizen, fitting the gallons of energy stuff going on in to the pint pots of time we have available, to use the pre-metric lingo (it really loses its impact if you have to refer to 3.78 litres in to 0.47 litre pots!), is a constant challenge.

This is especially true for the electricity scene. Most consumers, I suspect, just let 99 per cent of the goings-on wash over them and focus on what they don’t like (prices); those of us dealing with the bigger picture find it an increasingly large ask to give meaningful attention to all the useful information (while ignoring the huge amount of dross available in mainstream and social media).

I’ve always liked the metaphor of trying to get a drink under a waterfall while holding a tin cup.

In getting my act together in the past week for the September issue of Coolibah Commentary – just published on this website – I have finally focused on TransGrid’s 2017 annual planning report, a document I have followed with close interest for most of the past quarter century but have not visited except in passing this year and then only through one of the company’s presentations at Australian Energy Week conference in July.

As always, the report contains a wealth of information about the largest electricity supply region in the country (home to 3.6 million customers, large and small, or 38 per cent of the NEM). And it is a timely reminder, to anyone knuckling down to read it, of the many troubling facets of just the generation and delivery aspects of the market.

I make a point at conferences of reminding audiences that power supply is a chain and every link is important – but it is undeniable that production and delivery of electrons to the load centres is the sine qua non of the process.

How interesting it is, then, to read some of the core comments in this year’s report.

TransGrid (which is now in private hands under a 99-year lease from the New South Wales government) kicks off by reminding us that last summer was the first time in 12 years that the State’s maximum demand could be met only by curtailing the load, an “issue of significant concern,” and it makes the big call that, with respect to maintaining reliable, affordable energy, the NEM as a whole has “clearly failed those it is meant to serve, all consumers.”

I am looking forward to hearing this issue of whether or not the 20-year-old east coast market has failed discussed at the NEM Future Forum I am co-chairing for Quest Events in Sydney at the end of next month.

In NSW, TransGrid goes on, energy consumption and maximum demand are expected to grow further after rising for each of the past three years. And here’s the rub: “Retirement of baseload power stations will reduce firm generation capacity in NSW and put the power system under pressure to reliably meet the State’s maximum demand.” As the company says, new generation, greater interconnection, storage and demand management will all be needed to provide additional capacity to assist to meet the peaks – and, one must add, to help put downward pressure on a significant component of mass market bills.

There are several time frames to consider in this context. One obviously is the summer ahead – where maximum demand may lie between 12,600 megawatts (which it did in the summers of 2014 and 2015) and 13,900 MW (last summer) or 14,200 MW (where it hasn’t been since 2011).

Another is the next couple of years because any adverse events (whether related to security or affordability of supply) will play in to the next federal and NSW elections (the latter falling just after summer 2019).

The longer horizon is out to the middle of the next decade – which is the one used in TransGrid’s planning review and which is expected to see the closure of the 2,000 MW Liddell power station in 2022 perhaps followed by the 1,320 MW Vales Point plant, which reaches its 50th birthday in 2028.

The challenge, succinctly put by the company, is that, “when replacing baseload generation with variable generation, around two to three times the installed capacity is required due to the variability of wind and solar resources.” This, it says, means around 10,000 MW of new renewable generation will be required over the next 10 years – the assumption obviously being that no new fossil-fuelled baseload will be constructed and that the residual coal-burning plants will not be upgraded.

The Australian Energy Market Operator in its “stocktake” of the NEM delivered to the government this week notes that the supply shortfall risk in NSW increases when Liddell closes and asserts this can be mitigated by development of more renewable generation – the issues being, of course, the impacts on reliability, security and cost of supply.

The AEMO report notes that there is currently 16,193 MW of generation capacity in the State – of which 10,160 MW is coal-burning, 2,121 MW uses gas, hydro accounts for 2,706 MW, wind 665 MW and large-scale solar 254 MW.

The operator says it is aware of 5,834 MW of proposed capacity development – of which 4,466 MW are wind farms and 837 MW utility-scale PVs. This does not include the $2 billion(?) Snowy 2.0 project towards which Turnbull last week threw $8 million in feasibility funding.

It’s worth tossing in here a warning from TransGrid: “the best (intermittent) renewable resources (in NSW) are in areas with limited transmission capacity.”

(It also should be well noted, I think, that AEMO acknowledges “uncertainty in all NEM forecasts remains extremely high, so all estimates of reserve requirements must be regarded as subject to progressive refinement.” Quite so.)

Meanwhile, as Turnbull has revealed in federal parliament today, the federal government is in talks with AGL Energy about what it would take to fend off the company’s plan to shut Liddell in 2022 and keep it operating “for at least another five years.”

As well, in a contribution to lobbying on the State situation, the NSW Minerals Council has released details of an opinion poll in the Upper Hunter region (the heartland of the State’s power supply) that shows 67 per cent of respondents would support construction of a new low-emissions coal plant in the area. The council’s CEO, Stephen Galilee, argues that a new HELE generator in the region “would lock in NSW energy needs for decades” while producing power with 25 per cent lower emissions than Liddell.

I suppose that, if you wanted a catchcry for this situation, and for the NEM as a whole, it should be “watch this space” – but, as the TransGrid planning report underscores, the need for policymakers (and, surely, especially the State ones) to genuinely resolve the future framework for supply in NSW could hardly be more pressing. Throw in South Australia and Victoria, where the supply problems are no less worrying, and there are some 6.4 million mass market accountholders alone who are caught up in the present ride on the edge.