Archive for March, 2018

Playing games

Word and number games to bolster positions in our great energy debate are now common currency and it is hardly surprising that the community at large (which still seems to possess a well-functioning BS meter) mostly just ignores the noise and focuses on what really matters to it: the costs of service. However I see a report today in The Guardian that a group of anti-coal activists have conducted an online poll which purports to show that 60 per cent of Australians want to see coal-fired electricity phased out by 2030.

In reality, I think, most of Them Outdoors (aka Paul Keating’s “the mob”) have a dominant wish for electricity to perform a service when required and not to give them a budget headache down the road.

In this context, The Australian this week has quoted Rod Sims, chairman of the Australian Competition & Consumer Commission, as “declaring high energy prices to be the biggest crisis facing the nation” and warning that we should not “overdo the conversation about the reliability of electricity” for fear of replicating in generation the high network costs of the past decade.

It follows, it seems to me, that neither should the conversation on the grid “transition” be overdone in order to promote weather-driven power supply over conventional sources.

On the aspect of the games, one of the things I find highly irritating or just funny, depending on the side of my bed from which I have emerged, is the hocus-pocus of substituting generation capacity for actually electrons produced to bolster propaganda for the “energy revolution.” I find it rather less amusing that our mainstream media don’t seem much inclined to sieve this stuff to provide their readers/viewers/listeners with meaningful information on a consistent basis rather than just regurgitating whatever line activists are spinning on the day.

A case in point is the way capacity at work in the NEM at some selected time of day or season is used to boost the public sense of a “revolution” gathering pace.

What happened in the summer recently ended seems to be providing an opportunity just now for juggling numbers. A reality check can be found in the latest issue of EnergyQuarterly published by consultants EnergyQuest. It shows a NEM generation breakdown for the October to December quarter of 2017, a period including a rather early start to hot weather, from which it can be gleaned that black coal generation delivered 27,398 gigawatt hours, brown coal (sans Hazelwood) 8,388 GWh, gas turbines 5,461 GWh, hydro power 2,809 GWh, wind farms 2,896 GWh and all forms of solar photovoltaics 2,295 GWh.

Renewable energy (excluding hydro, a long-existing conventional power source against which the green movement has been known to rail rather hard) for this quarter was 5,191 GWh versus 29,646 GWh for coal and gas. Including hydro, the renewables tally was 8,000 GWh.

What this data set demonstrates is that, as has long been the case, coal, gas and hydro generation are still the backbone of power supply on the east coast – and especially so in New South Wales and Queensland, which make up two-thirds of the market. Which is not to overlook the fact that households and small businesses in these two States have taken up rooftop solar power with a fair bit of enthusiasm – so long as the relative size of the collective PV’s contribution is understood along with its capacity to serve depending on time and weather. Nor, with the same caveats, should it be overlooked that farming the wind is no longer experimental and will have an increasingly useful role in the NEM as a whole so long as the integration issues are handled efficiently.

Let’s also be clear that there is a lot of genuine information available via the Web and no one side of the debate has a monopoly on presenting facts rather than factoids.

Another useful source is the OpenNEM widget, a product of the Energy Transition Hub, a collaborative academic and research centre initiative. As I started to write this post, it was displaying a seven day report on NEM power production that graphically (sorry) illustrated where we easterners source our power. For the period from 21 to 28 March, the NEM saw output of 3,646 gigawatt hours, leaving aside estimated production from rooftop solar photovoltaics. Black coal generation accounts for 56.4 per cent of this, brown coal plant for 18.2 per cent and gas turbines 8.4 per cent – a fossil-fuelled generation contribution of 83 per cent. Hydro power provides 7.3 per cent and wind power 9.2 per cent.

When we can have a somewhat panicky debate about just closing Liddell power station in 2022, what would be the consequences — in terms of security of supply and affordability —  of pushing out this level of coal-burning generation by 2030 as is promoted in The Guardian today?

I am a regular reader of Hugh Saddler’s electricity analysis published on The Australia Institute’s website. Saddler provides a mine of careful and dispassionate information. His latest (February) offering observes that at present coal and gas generators provide 95 per cent of all electricity produced in Queensland, 90 per cent in New South Wales, 84 per cent in Victoria and 55 per cent in South Australia. In Tasmania, naturally, hydro, wind and a bit of rooftop solar supply 90 per cent of all electricity generated.

That the east coast power system is changing is beyond debate. The pace of this change, its direction and whether reliability and affordability of supply will be enhanced by developments driven by politics as much as technology are another matter.

Stakeholders are entitled to their views but the exchanges of opinion are not enhanced by attempts by ideologists to balance green angels on the heads of pins while juggling numbers. We are collectively better served if we genuinely know where we stand today and options for tomorrow are evaluated by technology-neutral experts, not obscured by emotionally-charged flag-waving.

Year past

It pays from time to time to pause and look back.  Unfortunately, too often in our current energy environment this involves looking back in anger or dismay and we couldn’t jump over the piles of angst created by this activity even in recent months.

My looking back today is courtesy of the excellent EnergyQuarterly publication produced by Graeme and Susan Bethune, the latest 156-page edition of which has recently reached me. The big focus of EnergyQuest, their consultancy firm, is gas and they do a useful job of keeping an eye on matters electric, too.

In the latest edition, their dissection of the ongoing imbroglio over gas supply in Victoria throws a harsh light on those proceedings, not least the recent Andrews government’s poor mouth assertions about onshore prospectivity to bolster its moratorium and ban approach. “The discovery of gas can only be made by drilling, not desktop studies,” EnergyQuarterly snaps. “Arguing that drilling is not needed is like saying pharmaceutical R&D is a waste of money because there are no new drugs left to be discovered.”

My own immediate interest lies in the publication’s power segment, containing a synthesis of calendar 2017 east coast market production — a year notable for the closure of Victoria’s Hazelwood power station.

In the EnergyQuest data I find something I had expected, more fodder for one of my hobby horses: the growing dominance of New South Wales and Queensland in the NEM and the need to separate the eastern market consisting of these two States from the southern market (Victoria, South Australia and Tasmania) when considering issues such as expanding weather-driven generation and the policy environment.

This EnergyQuarterly edition shows that, when rooftop solar PV is stripped from the NEM numbers, the system’s power production slid back in 2017 to 194,313 gigawatt hours compared with 195,441 GWh in 2016 — but the combined NSW and Queensland output rose from 124,704 GWh in 2016 to 129,255 GWh last calendar year. In other words, the eastern NEM’s generation accounted for 66.5 per cent of the whole market in 2017 compared with 63.8 per cent the previous year.

The dominant feature of this supply, of course, is black coal generation. In 2017 these power plants produced 110,018 GWh in the two eastern States versus 104,078 GWh in 2016 — a 4.7 per cent increase. (Meanwhile, not surprisingly, minus Hazelwood, brown coal generation in Victoria fell back from 45,713 GWh in 2016 to 38,316 GWh last calendar year.)

The other outcomes for the eastern NEM in 2017 were 9,624 GWh of gas-fired generation, 2,875 GWh from hydro systems, 1,879 GWh of wind power (NSW only, down from 2,029 GWh in 2016) and 525 kWh of utility-scale solar (essentially the Broken Hill projects of AGL Energy).

Moving to the southern NEM, leaving aside brown coal, generation production from gas turbines totalled 11,751 GWh along with 9,306 GWh from wind farms (half of it in South Australia) and 9,937 GWh from hydro systems (dominated naturally by Tasmania).

The combined power grid production of the southern NEM last year totalled 69,327 GWh, little more than half of the eastern market and dominated of course by Victoria with 47,489 GWh.

South Australia, about which there has been so much fuss over the past two years, accounted for just 6.1 per cent of all NEM generation in 2017. (Would it be unkind to mutter about too much roaring nationally about a power mouse?)

Another non-trivial aspect of the EnergyQuarterly data is the flow of electricity between the States. In 2017, Victoria, sans Hazelwood, exported less to NSW and imported more from South Australia. NSW took more from Queensland. The net flow from Queensland to NSW rose to 4,979 GWh while the flow from Victoria to NSW fell to 1,600 GWh (it was 5,664 GWh the previous year). The net Victoria/SA flow was just 455 GWh where it had been 2,441 GWh in 2016.

Then there is the matter of small-scale PVs. In NSW in 2017 output from panels on small business and household roofs was estimated to be 1,700 GWh (18.8 per cent up on the previous calendar year). In Queensland it was 2,568 GWh (up 20.5 per cent). In Victoria 1,369 GWh (also up 20 per cent) and in South Australia 1,020 GWh (up 12.7 percent). Altogether, rooftop PVs accounted for an estimated 6,793 GWh in the NEM or 3.3 per cent of all power output.

A notable feature of the data is the 32 per cent rise in gas generation in 2017 compared with 2016 (with 21,375 GWh of production last year, 11 per cent of the total NEM grid’s output). In terms of gas sales, 2017 saw power stations buy 196,167 terajoules compared with 151,943 TJ in calendar 2016.

With companies now considering whether it is worth their while to build more gas generation in New South Wales — EnergyAustralia, in the context of the rolling row between the Turnbull government and AGL Energy about the fate of Liddell power station and the State’s need for new dispatchable capacity, is pointing to its plans for Tallawarra (near Wollongong) and Marulan (near Goulburn) that could involve adding 1,000 MW — it is increasingly likely that the role of this sector will grow over the next several years.

This, in turn, of course, underscores the need to resolve the mess that is gas exploration and development policy in the southern States.

EnergyQuest observes that recent federal agency analysis “paints a picture of unavoidable shocks” in the supply and cost of offshore gas in Australia’s south-east. A “supply crunch is inevitable” from offshore fields, it says, given current rates of depletion and the time it would take to bring gas to market from new field discoveries. Meanwhile, it adds, even while the potential for resources from onshore Gippsland and Otway basins is smaller than offshore plays, the costs of exploration and development are possibly only 10 per cent of the marine efforts. There is “plenty of promise” in the onshore south-east, the firm opines, and more drilling is needed to establish its real potential.

How to cut the political Gordian Knot to make this happen remains the enduring question with no answer readily in sight. Meanwhile the unadorned power data tells its own story and, in the eastern NEM, it is not the “death of coal.”

Addressing a growing problem

Look at the media today and you will find a raft of stories about the Australian Energy Market Commission’s new analysis taking stock of the east coast power system’s ability to deliver on demand.

Inevitably the media coverage is flavored by the “sinner or saint” view of intermittent renewable energy which is a constant current focus of political argument and side-taking commentary – and by an interpretation of the commission’s work to the effect that the NEM is growing more unstable.

The commission is actually quite clear on its perspective: right now, it says, there is enough power capacity to sustain reliable supply “but we have a growing problem (in) management of the system and more action needs to be taken to integrate weather-driven generation with the grid.” Keeping things like frequency and voltage within technical limits is becoming “more challenging.”

This is rather more moderate language than the Energy Security Board’s description late last year of the NEM’s health – “in intensive care” was the phrase that hit the headlines.

The AEMC this week is at pains to point out how much is being done to address the integration issue – which became joint top of mind nationally (along with angst about energy costs) when the lights went out in South Australia 18 months ago after a big storm. The commission says 10 major steps have been taken to tighten NEM security arrangements and others are coming up in 2018 after four further review processes are completed.

And it also makes a point that should not be overlooked in all the public fuss: “We are focused on addressing the problems we have today as well as looking to what is required for the future.”

Anne Pearson, the commission CEO, notes “it is not well understood that we (currently) have a good supply of available power which makes the system reliable (but) there is a separate problem of maintaining the stability of the system when unexpected breakdowns happen.” In short, she says, the NEM grid has to be managed differently to respond to a changing generation mix.

Writing an op-ed in the Australian today, Pearson adds that the system frequency issues now confronting the grid are “eye-glazing” (for us laymen) but essentially the changed mix is making this aspect harder to control, with less time for the market operator to recover the network from equipment failures before bad things happen.

The big complicating factor, of course, is that all the market changes being pursued, including the “national energy guarantee,” have to implemented without adding to consumer costs – especially for households in the present fevered political environment – and even in a way that enables charges to fall. This is a feat that even Jack of serial fame couldn’t achieve with one bound and, I suspect, it is unlikely to be achieved during the current political season (which runs until after the Victorian, New South Wales and federal elections).

If politicians did not fully appreciate this particular risk, they should be better informed now following publication of a NEG submission to the Energy Security Board from the Australian Competition & Consumer Commission.

In it, Rod Sims, the ACCC chairman, poses a number of questions, including this: “how will the trade-off between reliability and affordability be determined (via the NEG) to ensure that end-users pay no more than the value to them of increased reliability?”

As last weekend’s Batman and SA polls demonstrate, the judgement of the people is not to be taken for granted by politicians and the community is looking at political conjuring tricks with increasingly beady eyes.

The rift between soundbites from politicians and the complexities of power system management, including its interaction with gas supply, is wide and growing wider.

Here, for example, is Sims again in his letter to ESB chair Kerry Schott: “How can the NEG be designed in such a way that it does not impose significant regulatory costs and burden on retailers? Additional regulatory costs ultimately result in higher prices for consumers.”

And again: “If the current contracting instruments in the market need to be redesigned to incorporate emissions and reliability metrics, there is a risk that a series of smaller, less liquid markets (will) develop in place of existing arrangements. Such an arrangement would expose both retailers and generators to more risk and result in higher prices.”

All this stuff, to quote Pearson, is “eye-glazing” for what Prime Minister Paul Keating used to describe as “the mob” – ie us.

The sort of work that the AEMC has undertaken and is continuing to pursue is essential to the efficient functioning of the NEM but it is way too complicated for “the mob” – and it is only part of the interventions being eyed by political leaders and their advisers across a federated government system.

We all know that the NEM cart has flirted with the edge of the ditch a number of times in recent months; keeping it on the road towards a genuinely affordable as well as secure and technically reliable future (let alone a greener one) is a Herculean task and the heavy lifting is far from over.

In closing, the AEMC analysis points to modeling that burgeoning solar PV uptake and more energy end-use efficiency should see NEM power demand stay flat for a while longer before falling by 1.6 per cent by 2026-27.

PS: You may be interested to know that in the seven days from the middle of last Wednesday to the middle of today, including an awfully hot Sunday in New South Wales, the total input of electricity on the east coast (including an estimate of rooftop solar PV) was 3,913 gigawatt hours – of which black coal contributed 2,201 GWh, brown coal 590 GWh, gas plants 396 GWh, hydro systems 288 GWh, wind power 259 GWh, rooftop solar 158 GWh and utility-scale solar 17 GWh. (Source: the OpenNEM widget)

The wheel turns

Josh Frydenberg would be less than human if he did not permit himself a quiet chuckle at the failure of the garage warrior, Jay Weatherill, to win re-election in South Australia yesterday.

At a far more serious level, Frydenberg and Malcolm Turnbull will now be seeing a better prospect for the “national energy guarantee” to be advanced this year because South Australia is the lead State in the legislative process for the NEM and because Weatherill (to quote The Guardian newspaper) was “an implacable, one-man road block to the NEG on the basis that the scheme is not sufficiently friendly to renewables.”

At the same time the failure of the much-hyped Nick Xenephon thrust to be the big influence in the next State parliament will bring some relief to energy retailers, who would not have been looking forward to the wider implications of his populist plan to create the “Community Electricity Trust of SA” to provide electricity to households with an income below $75,000 a year and to small businesses. (Even so, the issue of gentailer market power in the NEM, and not least in South Australia, is not going to go away.)

More broadly, last night threw a bucket of water over the Greens, who were hoping for a boost for their radical policies from the by-election in the federal seat of Batman in Melbourne. The Greens also picked up just 6.6 per cent of the primary vote in South Australia on Saturday, well down on the previous election and half of what Xenephon’s SA Best garnered at its first showing. Victory in Batman would have given the Greens a new launching pad to promote their energy spiel and, inevitably, would have seen federal Labor under Bill Shorten trying again to play catch-up.

It will be a mistake to see the SA poll outcome as being all about energy – Reuters, for example, in its report today asserts the result is “a blow to national renewable energy plans” and bizarrely “the vote was seen as a choice between solar and wind energy, pushed by Labor, and coal, backed by Turnbull’s conservative government” — although the issue obviously played a prominent role in the election campaign.

Perhaps the most significant influence of all on the outcome is that the Electoral Commission’s reworking of State seat boundaries required Weatherill and Labor to win seats to hold office – and that was always a bridge too far, given the baggage he and his government were carrying. Steven Marshall led the Liberals in 2014 to victory in the popular vote but couldn’t muster enough seats to take office.

It seems Marshall and the Liberals will have a clear majority in the new parliament, enabling them, depending on the outcome in the State’s upper house, to wield their new broom rather than just wave it.

Whatever this means for policies within the State, the big national implication of the poll result is that Frydenberg and Turnbull now have a better opportunity to use the rest of this year to advance the NEG in an environment where there is some chance that the wildly unpopular upward trend in energy prices in eastern Australia will be depressed and just possibly reversed.

From an industry perspective, the bugger factor remains that this is still likely to be a work in progress at the time of the next federal election (which realistically needs to be before May next year) and Shorten frequently gives the impression on this issue of being Weatherill writ large. There can be no investor confidence about a NEM built around a NEG until the federal poll is out of the way.

Meanwhile,to counter the green boosters, who can be relied on to describe the SA election outcome as a version of the invasion of the Daleks for renewables, it is worth recording what the incoming Liberal government actually said during the campaign: “The State Liberals fully support renewable energy, but there must be a sensible transition to renewable sources which does not compromise the integrity of the grid and leave South Australians vulnerable to blackouts and massive prices.”

The SA Liberals have a three-cornered energy plan: to achieve greater security of supply for the State, to lower its power bills and to be part of the push to meet a national renewable energy target.

Marshall declared: “Our energy policy will be practical, not ideological.” He added: “A Liberal government’s discussions with the energy supply industry will not have a bias towards any particular technology. All options must be on the table if we are to resolve the current crisis in reliability and affordability of electricity supply.”

High on the list of a Marshall government’s desires is a new high voltage transmission line linking SA and New South Wales – which would allow the former to better export its excess wind generation and to rely on access to black coal generation when there is a lack of wind.

Nonetheless, the practicalities of politics in a State with a community that likes renewable energy (despite their fortunes in the past having been built to a not inconsiderable extent on Cooper Basin gas) dictated a Liberal election promise to subsidize battery installation in 40,000 homes and provision of a $50 million fund towards the development of new storage technologies. (Why a small State in Australia wants to throw money at storage R,R&D given what is going on in the world to drive this technology beats me, but that’s politics.)

Now that this election’s done and dusted (more or less, counting continues), attention will turn to the 20 April meeting of the CoAG Energy Council in Melbourne, with Energy Security Board chair Kerry Schott telling a forum last week “I really do believe the worst is over on the (electricity) price front.”

Game-changing or game?

April 20 is now an important date on the Australian energy calendar for 2018. It is when the CoAG Energy Council, following the South Australian election on Saturday, will meet in Melbourne to next consider the “national energy guarantee,” which Josh Frydenberg described in the past week as a “critical component” of future policy.

The next card to be played in this process, due in the near future, will be the Australian Energy Market Operator’s evaluation for the federal government of AGL’s post-Liddell plan.

And not unimportant to the discussion will be a report the Australian Energy Regulator is to publish at the end of this month on the impact on the NEM supply/demand balance of the closure of Hazelwood power station.

Both reviews, one imagines, will feature in the Energy Security Board advice to the ministerial council as will the board’s reporting of its latest consultations on the NEG that finished last week.

What follows?  Providing that CoAG agrees to direct the ESB to continue its NEG work, a high-level design paper will need to be produced and then papers on specific elements over the next few months. The federal government’s aim is to finalise the design of the NEG before the end of the year to enable drafting of legislation and rules to begin.

In an op-ed in the Australian Financial Review, Environment & Energy Minister Frydenberg has continued his dogged advocacy for the measure. Its implementation, he says, “will have a significant impact on the wholesale market.” By integrating energy and climate policy, “we will have a mechanism that will bring more certainty for investment and at the same time put a premium on reliability which is needed to address the volatility plaguing South Australian and Victoria.”

In continuing to needle South Australia’s and Victoria’s Labor regimes over their renewables approach, he points out that “alarmingly” wholesale prices have spiked above $5,000 per megawatt hour nine times in the former State and six times in the latter – “and nowhere else in the NEM” – so far this financial year.

Responses to the ESB’s consultation paper are now starting to emerge: green-related interests continue to leap up and down about the NEG’s perceived support for coal power and others are fretting about the future state of competition in the east coast market.

A collective of 10 retailers representing 10 per cent of the NEM’s sales have voiced concerns about making “significant, costly changes that (may) have dire consequences.” Given the track record of intervention in the market over the past decade, this is a not unreasonable point.

The retail group sums up the challenge like this: “The problem policymakers are working to solve is the imbalance between electricity supply and demand, particularly diminishing reliable (firm or dispatchable) power over the next five years due to displacement of large, dispatchable, carbon-intensive power plants. This, and poor policy and planning, have led to market concentration in firm generation and price increases, exacerbated by gas availability and cost.”

The nub of their worries emerges as “(holding) retailers responsible for generator reliability, emissions and investment is a misplaced risk (with) a range of market implications.” One outcome they fear is that the NEG will see even more market power in the hands of the “big three” NEM gentailers.

ERM Power’s Jon Stretch offers their alternative view “We suggest a lighter touch safety net model which would ensure the benefits that liquid markets bring to price transparency and hedging efficiency remain for competition and consumer outcomes. It would avoid the risks and costs associated with change in law complexities to existing retail and wholesale electricity contract arrangements. Our model requires no penalties or costly compliance mechanism.”

He concedes that “like the current NEG, our alternative involves a degree of centralist planning and procurement that isn’t ideal” but argues “our proposal addresses the fact that loss of market liquidity and market power abuse are greater risks under the current option than is the risk of (generation) over-build.”

The Academy of Technology & Engineering (ATSE) says there are numerous design challenges facing the NEG, including minimizing the complexity of its mechanisms and their associated compliance costs and dealing with the “high risk” of increasing the power of the incumbent,vertically-integrated gentailers.

“It is important,” the academy adds, “to ensure that emerging technology-based solutions will be able to contribute to reducing prices through effective competition.”

One of the “big three” gentailers, AGL Energy, includes competition in its submission to the ESB, listing five principal design points it believes the measure must manage:

  1. The greatest regulatory efficiency possible, which consists of minimal disruption to existing markets at the lowest net cost to customers.
  2. Ensuring the NEM achieves its pro-rata share of Australia’s international commitment for emissions reductions with a view to ramping up to a potential of net zero emissions by 2050.
  3. Providing direction on the appropriate mechanisms by which market reliability can be maintained as a result of increasing amounts of intermittent generation.
  4. Enhancing existing operation of the market and also considering other market reforms and reviews.
  5. Delivering a competitive, transparent, efficient, and liquid market.

The company’s chief economist, Tim Nelson, in sending its submission to the ESB, writes that “in our view, there may not be a compelling need to make significant structural changes to the existing operation of the NEM to drive better reliability outcomes.”  He adds: “The best way of reducing wholesale prices over time is by increasing supply through policy certainty on emissions reductions, which may necessitate a further refinement of the existing market settings to ensure market reliability. In meeting these objectives, consideration of a lowest cost approach that utilizes improved market settings and existing market infrastructure should be a genuine option for policymakers to consider.”

For its part, Origin Energy, while saying the overall objectives of the NEG are “sound,” says that “placing the point of liability at the retail level for the reliability and emissions obligations adds a layer of complexity to the design which is unnecessary.”

And EnergyAustralia, declaring “we favor simplicity,” urges that the NEG should put the emissions guarantee on generators, not retailers; doing it the other way round will “threaten liquidity in the financial markets.”

Standing back and looking at what’s going on, it seems obvious that, while consumers are obsessed by the cost of their power – Energy Consumers Australia says the NEG “must be about delivering the transition in a way that lowers bills” – and environmentalists are obsessed about using the electricity market to meet a high level of carbon abatement, the chief issues for progressing the measure are complexity, time and politics.

With respect to the latter, it is interesting to see the Property Council, representing owners and investors in a $670 billion sector, expressing the view in its submission that the NEG is an opportunity to depoliticize energy policy in Australia. Seriously? Almost four decades of being involved in energy issues tells me that there is fat chance of this happening, no matter how right it is to wish it would.

As the council itself says in the same breath: “In the past decade Australia has lost its advantage in reliable and competitively priced energy due to the ongoing and highly partisan debate on energy and climate change policy.”

The national interest, for example, will not stop Labor working to thwart a win on energy for the federal government, so the immediate elections that matter are in South Australia next weekend and in Victoria in November while the standing of Turnbull’s administration (including public faith in its ability to cut energy costs) is being weakened opinion poll by opinion poll.

The NEG’s complexity plays in to this situation: the ESB has 79 questions in its discussion paper. Working through them in a way acceptable to all east coast governments by August (the Frydenberg/Turnbull aim) and capable of delivery through legislation before next summer (and the arrival of the campaign season for the New South Wales election) seems a tall order.

(As an indicator of public sentiment, a recent Essential Report opinion poll shows 73 per cent of respondents believe their cost of living has worsened in the past 12 months and 75 per cent say this is true of their electricity prices.)

Above all, with the NEG,  are politicians seeking a game-changer or continuing to play games?

Assessing ADGO

Last week was a pretty big one in the energy arena, starting with the surprise announcement by newly-formed Australian Industrial Energy of its LNG import plan, encompassing the many aspects of the Australian Domestic Gas Outlook conference and ending with the federal government cutting a deal to buy all of Snowy Hydro from Victoria and New South Wales for $6 billion.

It also was a week that saw a former State premier, Colin Barnett, single-handedly lift the issue of a west/east gas pipeline back in to the mainstream debate through his engagement at ADGO.

It was a week in which the Australian Competition & Consumer Commission signalled, both via ADGO and in an appearance at Senate Estimates hearings, that it sees the east coast market as still being “incredible tight” and posing a threat to the operations of manufacturers.

And it was a week in which the Victorian government, facing an election in November, signalled (via an address to ADGO by State Treasurer Tim Pallas) that it will defy pressure to pursue onshore gas developments as the east coast’s biggest offshore gas production area, the Gippsland basin, reaches the end of its existing operations.

(The other State government facing widespread pressure over its handling of gas developments is New South Wales and its Energy Minister, Don Harwin, given a prime speaking slot at ADGO, pulled out on 24 hours’ notice, claiming other commitments. He later tweeted about a visit to a wind farm near Goulburn that day.)

The core message from the ACCC’s chairman, Rod Sims, is “the fundamental problem of a lack of both sufficient and divergent sources of gas supply, particularly in the south, needs to be addressed and this needs to happen soon, given the lags in bringing supply to market.”

“Soon” looks different to a factory owner confronted with “now” decisions about business viability and gas suppliers confronted with all the requirements of development.

It is apparent from ADGO that “soon” in terms of supply is most likely to be the LNG import projects of AIE and AGL Energy, the former focused on Newcastle, the latter on Victoria, should they proceed.

As a mark of how times and circumstances can change, veteran manufacturing executive Peter Dobney of Orora Group, a frequent speaker at ADGO, wryly complained in a panel session this week that he was mocked at the event five years ago when he raised recourse to importing LNG to NSW………

This, it seems to me, should be borne in mind when dissing the pipeline from Western Australia to Moomba about which former WA leader Barnett is so passionate. The Australian Financial Review, which along with The Australian provided extensive ADGO coverage, sees the west/east pipeline as a threat to the LNG import plan, but a case can be made, looking out to 2030, for “all hands on deck” for eastern domestic gas supply, never forgetting the ongoing critical role for the fuel in power supply to the dominant demand areas of the country (NSW, Queensland and NSW).

A thread running through all this is the need for greater competition on the east coast energy scene, a strong pursuit of the ACCC’s Sims but also a topic that comes up continuously now in the general debate and which was well-canvassed at ADGO.

James Baulderstone, who is fronting the Australian Industrial Energy import project, argued  at the conference that the mooted AGL development will entrench a market incumbent while AIL is “a completely new entrant with a focus on the forgotten sector of commercial gas buyers suffering from sky-high prices.”

Users, whether representing manufacturing or power generation, were vocal at ADGO on the issue of prices and the fact that more supply without shifting costs down will not alleviate their problems.

Baulderstone told ADGO that his project (offering 40 petajoules of gas a year to the 140 PJ New South Wales market) will be the equivalent of discovering a large new field right off the coast of Greater Sydney, a point that could also be made about the AGL import plan focused on Victoria. This focus raises in my mind just how many other such deals could be pursued as others view the AIE/AGL game plans? In practical terms, it would seem perhaps another two.

Again, to come back to Dobney’s point, how fascinating that this stuff can now be discussed without suggestions about loss of mental marbles.

Their potential doesn’t change the fact, as Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association declared at ADGO, that the policy approach to the gas supply issue in southern States represents “failure on a grand scale.”

Not surprisingly, the States deny this. Pallas was at pains to point to the Andrews Labor government’s support for new exploration offshore Victoria. Harwin emerged from his wind farm foray to tell Fairfax Media that “there is no moratorium in NSW; we have a Gas Plan with science-based regulation – we are taking a sensible approach.” Which, of course, is cold comfort to 500 large industrial users and 33,000 small businesses in NSW freaking out about their gas contract problems or the million household customers considering their much higher bills.

The approaches by the Andrews and Berejiklian governments, both described by Malcolm Turnbull last September as “comprehensive failures” in this respect, sees gas reaching their States from Queensland carrying a transport price tag of $2 to $4 per gigajoule. That’s not a “Gas Plan” for today’s consumers – it is a dog’s breakfast. As the Energy Users Association’s Andrew Richards said in an ADGO panel discussion: “There is a great level of frustration and desperation (among industrial consumers). We need a price correction, not a softening of high costs. Too many (factories) are concerned about whether they can survive long enough to enjoy (mooted) future benefits.”

And, in terms of end-supply costs, the continuing strong efforts by governments of both stripes in Queensland, is not really a solution for southern consumers. (Queensland Natural Resources Minister Anthony Lynham gave an ebullient talk, back to back with Pallas, announcing new acreage releases with any gas found earmarked for domestic use – “further demonstrating we are a reliable and affordable gas producer” – which both in terms of time and final price prospects does not cut today’s mustard in Melbourne and Sydney.)

Pallas declared his government, in imposing onshore gas project bans, was looking out environmentally for the State’s $13 billion food and fibre industry with its 190,000 employees – which drew a riposte later from a Victorian manufacturing executive in the audience that the food and fibre businesses badly needed an adequate supply of competitively-priced gas.

The C-word (as in “cost”) was again perhaps the most used one at ADGO.

The harsh reality was summed up by EnergyAustralia’s Mark Collette. “After 30 year of an ubiquitous resource with constant availability and stable prices, the golden age of gas is over, “ he told attendees. “Cheap gas has gone.”

Collette and his colleagues have since announced plans to evaluate new gas-fired generation, as well as energy storage, in Victoria.

Not surprisingly, a fair bit of discussion at ADGO revolved round the impact of gas availability and cost for generators in a market environment where increased investment in intermittent renewables and impending further closure of coal plants creates opportunities for the “bridge” technology – and the determination of the Turnbull government to forge ahead with “Snowy 2.0” raises issues about its role.

The conventional outlook is for NEM generation use of gas in 2020 to be half what it was (200 petajoules) in 2010 and then to rebound to this level by the mid-Twenties.

The advent of LNG imports could change this trajectory – AIE’s thinking encompasses feeding gas to generation in NSW, including possibly new plant – and how this plays out seems very likely to be a topic high on the agenda of future ADGOs.