A model future

I’ve lost count of how many times over the past four decades I’ve tried to persuade people that models are not scrying glasses, enabling specially-skilled people to divine our future. Scenarios are not forecasts.

Energy professional don’t need persuading, of course, but our world is jam-packed these days with the naïve as well as the meretricious players, not a few of them engaged in politics.

The fuss that’s going on at present over modeling undertaken for the Energy Security Board as it strives to sell its “national energy guarantee” to the body politic is just another reminder that any such exercise will be seized on by all sorts for their own purposes.

What various people take from looking at the spreadsheet the ESB has made available will depend on the mindset they have.

In my own case, the work serves to underscore several things I have thought noteworthy in recent times.

The folly of the “death of coal” notion is one.

The model (produced by ACIL Allen and factoring in many current trends and policies) sketches a substantial ongoing role for both black and brown coal, the former the mainstay today of power supply in New South Wales and Queensland, the latter important to Victoria.

It suggests that, starting with output of 54.5 terawatt hours in the financial year just ended, NSW coal-based generation will rise to 56.3 TWh in 2019, decline to just over 45 TWh when Liddell shuts and end the ‘Twenties at just over 47 TWh.

Next door, Queensland generation is shown at 49.4 TWh in 2018 and sliding down to under 41 TWh in 2030.

If this occurs, the technology’s 88 per cent hold on generation output in the two States will be 80 per cent at the next of the next decade.

In Victoria, the model sees brown coal generation, which it estimates at 33 TWh this year,pushing up to just over 34 TWh in 2030 even as wind energy production quadruples to 10.7 TWh and solar farms deliver 2 TWh a year from 2020 onwards. (Their 2018 contribution is set at 2.6 TWh.)

But what about South Australia, that bellwether of the green revolution, I hear you ask? Well, the model sees local electricity sent to the grid sinking to 8.3 TWh at the end of the next decade from 11.5 TWh currently while rooftop solar use doubles – and it expects 5.4 TWh will be met by wind farms, about a fifth of the whole NEM’s wind supply. No wonder, there is a sense of urgency over there to pushing for substantial new interconnection.

Looking at the NEM as a whole, the model sees overall power sent out (which excludes rooftop solar PVs) will barely shift from just under 180 TWh a year (178.4 TWh in 2030 versus 179.3 TWh in 2018). It allocates a market share of 49.1 per cent for black coal plant, 19 per cent for brown coal, 15 per cent for wind power, 8.1 per cent for hydro power, 5.6 per cent for utility-scale solar and a rather dismal 2.6 per cent for gas generation.

Neither at present nor down the track is this what an ABC News reporter has labeled “the delicate mix of coal and renewables.”

For the crowd who are concerned about a sad fate for variable renewables to be brought about by the NEG, this model in fact suggests the NEM output from wind farms will almost treble – from 9.4 TWh in 2018 to 26.9 TWh in 2030 – while solar farms’ output will shoot up from 0.7 TWh in 2018 to 10.1 TWh in 2030. (The green activists want much more than this, of course, and Labor keeps flirting with risk by promising to deliver it to them — a brazen pursuit of marginal parliamentary seats where the main competition is the Greens.)

Rooftop PVs’ contribution is perceived in the ESB model to jump from 7.4 TWh this calendar year to 20 TWh in 2030, underlining the need set out by the Australian Competition & Consumer Commission for the NEM as a whole to embrace cost-reflective network charges.

What all this boils down to is a NEM supply from fossil fuels in the past financial year of 155 TWh sinking back to not quite 127 TWh in 2030.

And what strikes me, looking at the spreadsheet, is the large investment in capacity required to deliver this mooted outcome: an extra 5,200 megawatts of wind units plus 3,500 MW of new large-scale solar plus 2,300 MW of battery and pumped hydro storage – not to mention rooftop solar PV jumping from 5,900 MW in 2018 to 16,000 MW in 2030.

(A big part of this generation investment would be in three States, NSW, Queensland and Victoria: 1,700 MW of wind and big solar capacity in NSW, 2,900 MW in Queensland and 3,100 MW in Victoria.)

What’s not revealed is the total system cost – think of the network augmentation this scenario will require – and I am ever-mindful of the wise advice of royal commissioner Kevin Scarce three years ago: “For those planning a future electricity system (and the market in which it will operate), the relevant issue is the total systems cost, accounting for the cost of generation, connection, inter- and intra-regional expansion of transmission and distribution networks and grid support costs.”

There is still no analysis to hand of a future NEM that examines total system costs on a credible basis – and that is what will dictate the trajectory of power prices.

In particular, it seems to me, if the move to much increase renewable energy in NSW and Queensland (beyond what the ESB modeling encompasses) is to be pursued, in States with more than half the market and a large dependence on coal power, then total system costs — from the power plant to the wall socket — need to be in sharp focus.

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