Not a sideshow

Settling down to start this post at 7.30pm on a decidedly cold (in Sydney’s Hills district) winter Friday evening, I went to the Open NEM widget to find that power production across the east coast market for the past seven days had been 4,106 gigawatt hours – and 2,986 GWh of it had come from black and brown coal generation versus 259 GWh from wind and 20 GWh from utility-scale solar. The back-up support came from 503 GWh of hydro power and 335 GWh delivered by gas plants.

Switching to the NEM Watch widget, I saw that the current (mid-evening) load in South Australia, the apple of all green eyes, was 2,005 megawatts and just 137 MW of it was being supplied from the State’s wind farms versus 1,794 MW from gas turbines (the balance being sourced over the interconnector).

Meanwhile, the wind contribution in Victoria (load needed 6,722 MW) was 211 MW versus 4,191 MW from brown coal plants, 1,404 MW from hydro and 896 MW from gas.

Tasmania was producing well over its domestic needs thanks to 1,650 MW of hydro power and 259 MW of wind – and a functioning-again Basslink meant it could dispatch power to the mainland.

New South Wales at this point required capacity of 10,635 MW and could provide only 9,039 MW from in-State resources (7,481 MW from black coal generation, 724 MW hydro, 664 MW gas and 169 MW wind) – but succor was at hand from Queensland where 8,643 MW of capacity was operating, well more than was required within State borders. The sources were 7,119 MW of black coal plant, 1,372 MW of gas and 135 MW of hydro.

All these numbers drive home yet again that the backbone of NEM consumption (in Victoria, NSW and Queensland, where most of it by a long way is located) is coal supported by hydro and gas and the interconnection system.

Which really should be underscored in a week where some fuss has been made about a green-boosting Bloomberg New Energy Finance prognostication for Australian generation with a 2050 horizon.

I have made the point here and elsewhere more than a few times that forecasts out to 2050 are just guesswork (try standing in 1986 and conjuring up a scenario for 2018) but my focus on the BNEF material was on 2030 where it believes that (across the whole of Australia) coal, gas and hydro will still be meeting some 160 terawatt hours of a national production to the grids around the 230 TWh mark.

There are so many variables that can affect the level of demand and constituents of supply over even the next 12 years that you can take your pick about what resources will be in play in 2030. Will nuclear take a bow? Will wind and solar fall off the subsidy bandwagon? How will transmission help or hinder things? Etcetera. But, in this time frame, the ongoing roles of conventional generation (coal, gas and hydro) appear obvious – providing you are not in thrall to green enthusiasm.

A particular interest for me just now (and one of the more prominent news stories at the end of this week) is the Australian Energy Market Operator’s “gas statement of opportunities” – notably in my case the punt it is taking on this fuel’s role in NEM power supply out to the end of the next decade (although the media focus, understandably, is on the reversal of the previous year’s forecast of a dire east coast overall outlook).

In shorthand, AEMO opines that “overall utilization of existing gas-powered generation is projected to decline in the next decade as renewable generation sources supply more energy during the day and most existing coal-fired generation remains in service.”

The operator (and I do wish journalists would stop referring to it as a regulator) also comments that the NEM is most at risk of large swings in gas plant output due to a variety of factors, including reduced wind speeds impacting farm output, delays in the installation of new renewable generation, reduced rainfall impacting hydro generation and extended unavailability of coal-fired generation.

The real risk is that gas generation is going to be treated as a sideshow rather than what it is: an ongoing integral part of an efficient NEM on the mainland.

Some context for all this can be found in the EnergyQuarterly report of electricity production for the past calendar year: 21,375 gigawatt hours of gas-fuelled generation compared with 16,183 GWh in 2016 – and then for the March quarter this year when it was 4,837 GWh compared with 5,450 GWh in the same three months of 2017.

It is also notable, in the context of proposed much greater recourse to variable renewables in the NEM, that the largest use of gas generation at present is not in Queensland but South Australia.

Using Graeme Bethune’s data again, this time for the rolling 12 months to the end of March 2018, gas generation was 7,536 GWh in SA (a big jump over the same period 2016-17), a bit reduced in Queensland (6,180 GWh), up by a lot in Victoria post Hazelwood (3,364 GWh) and steady in NSW (2,488 GWh), not forgetting Tasmania (1,195 GWh), giving a total for this 12-month period of 20,762 GWh, up almost 24 per cent on the same 2016-17 period.

What gas-burning plant may we see built in the next 3-4 years? Where? What will fuel these generators – imported LNG, perhaps? What will the gas price be and how will this impact on NEM wholesale prices? Lots of questions, but not much certainty just now.

And this is a reason for focusing on the bit of a joint statement by Josh Frydenberg and Matt Canavan, reacting to the AEMO report, that warns it is still “clear that new gas reserves and resources need to be explored and developed,” re-iterating the Turnbull government’s call on States and Territories to remove blanket bans and moratoriums on conventional gas exploration.

Apart from talking up the more positive tone of the AEMO report, as did the ministers, the Australian Petroleum Production & Exploration Association not surprisingly jumped on the operator’s observation that “further action by both industry and governments can bring even more gas into the east coast domestic gas market” as well as “meeting demand over the period to 2030 will require ongoing industry investment in commercializing existing reserves and resources and finding new sources of supply.”

Of course, the green boosters have another view. As one put it, “the record breaking (current) roll-out of wind and energy actually means less need for gas generation so less pressure on supplies (as well as) falling prices.”

And so it goes. And time continues to fly.

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