Archive for May, 2018

Pressure cooker

It was written almost 160 years ago but nothing I can think of comes closer to encapsulating the atmosphere of today’s energy debate: “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way.”

As learned readers know, that’s Dickens, still spot on today right down to his reference in the opening of A Tale of Two Cities to “noisy authorities” and comparisons being offered “in the superlative degree.”

The latest example of how old Charles nailed it for us in the here and now (and in many other respects than energy) is to be seen in the past week’s sudden outburst of rowing over whether an investment case can be made to build new coal-fired power stations in Australia.

Mind you, I am not complaining because the ruckus is a great lead-in to the upcoming Australian Energy Week over three days in Melbourne, which includes an Energy Policy Forum I will be chairing next Friday featuring Josh Frydenberg, Kerry Schott, the Australian Energy Market Commission’s John Pierce, Labor’s Mark Butler and the ACT government’s Shane Rattenbury.

Also on the Friday forum program will be Ron Ben-David (Victorian Essential Services Commission), Simon Corbell (former ACT deputy chief minister and now renewable energy advocate for the Victorian government), Matthew Warren (Australian Energy Council) and Mark Williamson (executive GM of the Clean Energy Regulator).

And this will come after two days of plenary and concurrent sessions of Energy Week,including input from the Australian Energy Market Operator’s Audrey Zibelman, Manufacturing Australia’s James Fazzino and a host of CEOs and senior executives from across the spectrum of the power business, not forgetting a panel discussion on the evolving energy mix.

It’s worth reminding ourselves at this point that the Prime Minister (15 months ago in a National Press Club address) has described energy as the “defining debate of this Parliament” – perhaps now limping towards its finale – and declared the Coalition “stands for cheaper energy” and more reliable supply.

For commerce, industry and 10 million household accountholders, this remains the touchstone of the debate. And for those who focus seriously on policy development, the key to long-term success is being faithful to the need to be deliver an over-arching neutral system that allows investors to decide which technology stacks up for their shareholders.

What makes at least some investors twitch is hearing leading participants in the policymaking arena continue to utter statements that promote favored forms of technology, dismiss others and decline to even think about some (e.g. nuclear). Too often, these utterances include claims about the relative costs of technologies. For example, “the cost of coal is always going to be more than the cost of wind and solar.”

As I said to a number of people this past week (and tweeted about it, too), anyone making such claims needs reminding of the sage advice of royal commissioner Kevin Scarce (in his report two years ago) that: “For those planning a future electricity system (and the market in which it will operate), the relevant issue is total systems cost.”

Scarce went on to say:  “In developing Australia’s future electricity system there is a need to analyse the elements and operation of that system as a whole and not any single element in isolation.” (He called in his report to the South Australian government for the development of a “comprehensive national energy policy that enables all technologies, including nuclear, to contribute to a reliable, low-carbon electricity network at the lowest possible system cost.”)

In this context, especially for those wearing green glasses, it is also worth pointing to a recent paper by Simon Bartlett, a former electricity network senior executive now a professor at the University of Queensland, that sums up things this way:

  • Power systems have fundamental needs: load following, flexibility and dynamic response.
  • Increasing intermittent renewable generation in a power system has a “pressure cooker” effect and can involve an unaffordably high level of integration costs.
  • Every power system is different but, in most systems, the practical upper limit for renewables is around 40 per cent of total electricity generated. This may be exceeded but it is likely to require a greater level of interconnection with adjoining power systems, more energy storage, increased recourse to demand-side management and regulatory changes.
  • The scale-up of intermittent renewables not only diminishes the robustness of a particular power system but can also magnify the short and long-term risk of investing in non-renewable generation assets and the power grid itself.

(You can find Bartlett’s paper on the Energy Policy Institute of Australia website.)

As for the Energy Policy Forum on Friday, if I am in need of an introductory comment from the chair, I may just plagiarise one from John Pierce (in the AEMC’s Making Market Transformation Work paper): “The changing mix in generation sources means we have to manage the power system differently and evolve the market. There is no silver bullet. There are many options we could take. But we need to understand how different solutions would interact with the rest of the system: affecting prices, reliability and security. Decisions made today will affect national economic development for decades to come.”

Not as evocative as the one from Dickens with which I started, but very much to the point for those participating in Australian Energy Week and for those wrestling in national leadership with the “energy crisis.”