Generating heat

There has been a lot of interesting stuff on electricity supply in the past 10 days, much of it sparked by the Australian Energy Market Operator’s integrated systems modeling report, as well, of course, as the inevitable guff from the usual suspects.

One of the oddest media contributions came from the Daily Telegraph – not exactly an unusual occurrence from that source – in the shape of getting het up about New South Wales’s imports of power from Queensland (a front page pointer and a prominent inside story headlined “State of anxiety in power shortfall.”)

The cause of this fuss in a teacup was a 50 per cent rise in NSW’s imports of power from Queensland in the past year with federal MP Craig Kelly (from NSW) quoted as saying “it is an appalling state of affairs that we now have to rely on Queensland to make sure we can keep the lights on.”

Well now, here’s the thing: (using data from Graeme Bethune’s excellent EnergyQuarterly), for the 12 months to March this year, the interconnector flow west in to NSW did indeed almost double (up from 2,889 gigawatt hours in the previous period to 5,332 GWh) – but that was because the long-standing reliance of the State on Victoria for back-up power fell away (dropping from 5,347 GWh to just 239 GWh in the wake of the closure of Hazelwood).

And, if you went back to comparing the year-to-March 2017 data with the same period 2016, you would find that NSW dropped imports from Queensland from 3,489 GWh to 2,889 GWh while increasing the flow east from Victoria from 3,954 GWh to 5,347 GWh.

Appalling? Nope. Cause for “state of anxiety”? Nope. Actually, situation pretty well normal in meeting NSW needs for most of the past decade.

While those who know a thing or three about the NEM would have smiled wryly (at best) at the Telegraph story, it does represent just how much the current situation gets beaten up by various elements of the media (including social media) and how far down the garden path the broad community (aka voters) gets led.

Black coal generation is indeed the backbone of NSW electricity supply and in three years (all 12 months to March) it has bobbled about from 55,883 GWh (2016) to 54,782 GWh (2017) and 58,096 GWh (2018). And, as part of compensation for the loss of Hazelwood, the State’s black coal plants have pushed up production by some 3,300 GWh over three years even as consumers got fed more electrons from across the Tweed River (most of them from Queensland coal plants). In the year to March 2018, by the way, NSW in-State coal power represented 88.7 per cent of domestic production with the balance coming from gas plant (2,488 GWh), hydro (2,344 GWh), wind (2,020 GWh) and solar farms (541 GWh).

How many of the hundreds of thousands of NSW households who get to read the Telegraph would have any idea of these numbers, even broadly speaking, do you suppose?

Now, shifting away from the strident and the silly, as the Grattan Institute’s Tony Wood and Lucy Percival opined on The Conversation, the beholders of the AEMO report seem to divide in to those seeing different futures for coal generation (which is all in Victoria, NSW and Queensland in the NEM – in other words where the vast bulk of power requirements are sited). “It’s either on the way out,” Wood and Percival wrote, “or its going to be needed for decades or perhaps even new coal plants should be built.”

You can read the institute’s perceptions on The Conversation under the heading “AEMO’s new electricity plan is neither a death knell nor a shot in the arm for coal.”

The pair’s central point is that “The (AEMO report) provides a hard-nosed engineering and cost assessment of what our energy system needs. It applies neither an accelerator nor a brake to the closure of existing coal-fired power stations. We need more of this approach and less ideology if we really want to see a lowest-cost, reliable and low emissions (electricity) future for Australia.”

Meanwhile, the Australian Energy Council, representing the gentailers, has reacted that the report is “a rebadged version of an earlier model.”  The plan, says new CEO Sarah McNamara, is “simply the first step in a process to align the transmission system with a rapidly changing generation mix.”  AEMO’s work, she adds, reinforces two main points “everyone in the energy industry already knows” – first that the sector is in the midst of “transformative and unprecedented” change and second that “coal-fired power stations will remain the cheapest provider of energy for several decades.”

Most of the debate heat we are witnessing results from the report, and that of the Australian Competition & Consumer Commission in to electricity costs, feeding in to the ongoing verbal jousting between members of the federal Coalition government over power generation, between the Turnbull regime and federal Labor over an emissions target, and between Josh Frydenberg and some of the rest of the CoAG Energy Council over the “national energy guarantee” ahead of their important meeting next month. All of this is eagerly pursued by the media, not least by opinionated commentators eager to push their own (mostly green) perceptions.

Depending on how much credence you place in opinion polls, it may be interesting to note here that Essential Report in the past week has recorded respondents as lifting their support for the notion that “governments should prioritize support for the coal industry over renewables” from six per cent in mid-2015 to 16 per cent now – and have reduced support for the reverse from 50 per cent in mid-2015 to 38 per cent now – with 34 per cent thinking they should be “treated equally” (up from 28 per cent).

The same poll sees 80 per cent wanting an inquiry held in to power prices and anti-competitive conduct by supply companies – presumably the ACCC activity, despite many headlines, has not had much impact Out There – while 40 per cent think “the government” should spend up to $5 billion on building new coal plants or extending the lives of existing ones.

I’m afraid that the noise off-stage can only become more strident in the run-up to the CoAG meeting – and then, depending on the outcome, we will have to wait and see what further steps are needed to actually produce a workable plan for “NEM 2.0”.

Looking at the AEMO report and the operator’s ensuing comments, I rather think a basic take-away is that it supports a continuing relatively large contribution by coal generation (some 100 terawatt hours annually in 2030 versus 150 TWh at present), wants to see most of it (producing roughly 70 TWh) gone by 2040 and replaced by about 33,500 megawatts of weather-driven renewables plus 17,000 MW of storage and just 500 MW of new gas plant and to see “significant and unavoidable” investment in transmission between some three dozen “renewable energy zones” and the (mainly urban) load centres to help this to happen.

To which, the central question must surely be “at what total system cost?” in the context of supply reliability and the expectation of consumers (including those who use 60 per cent of our production of power in commerce and industry) that their bills will be “affordable.” The price expectation, of course, is centrally about the here and now as, naturally, is the focus of government.

Equally in context is this observation from Robert Barr, president of the Electric Energy Society of Australia: “It is impossible to see what the capabilities will be (of electricity generation and storage technologies) in 10 or 20 years’ time; the best approach is a technologically-neutral (one) in combination with a capacity market with a low dollar cap energy market where environmental incentives are built in to the pool.”

Is this where we are heading, do you think?

And, in passing, it would be worthwhile for multiple stakeholders to read the Engineers Australia submission to the Energy Security Board’s latest NEG design consultation paper.  In particular, the bit sounding a warning about what the board considers to be dispatchable supply. Without a clear definition, EA says, “ambiguity may arise” and this could be the case in particular “if new technologies develop and have the ability to increase or decrease output in a predictable manner.” This is what my economist friends have the habit of calling a “non-trivial” issue.

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