Issue 18 June 2006

PM signals further energy reviews

While media and political attention has focused on the inquiry in to nuclear energy, Prime Minister John Howard has also hinted that he is considering a further review of broader energy supply sources.

Responding to a journalist, who asked if Australia did not need a more holistic look at energy sources rather than just nuclear, the Prime Minister told his 6 June press conference at Parliament House, Canberra, that "I could well have something to say further about this in the not too distant future."  He added: "There is merit in looking at other aspects of the whole energy scene, but I think nuclear warrants a separate investigation (because) it has characteristics that other (energy) sectors don't have."

Howard noted that the Government had produced an energy white paper in 2004, but acknowledged that the big changes to crude oil prices had "shifted some of the basis" on which the policy statement was prepared. "I don't shut out the possibility of other examinations in relation to energy because (it) is plainly one of the big challenges this country has," he said.

Meanwhile the Prime Minister has given one of his clearest statements on his own attitude to nuclear power in an interview with a community paper, The Weekly Times, in his constituency. He told the paper: "I think that at some time in the future we probably will (have nuclear power) and I am very much in favour of it. Right now, it's more economical for us to rely on fossil fuels but there will be a time when that will change."

Howard has been Australia's most active Prime Minister in the area of energy policy. Apart from chairing the Cabinet sub-committee that oversaw production of the Government's white paper, he has held the Parer Review of energy markets and the Tambling Review of the mandatory renewable energy target while leading Council of Australian Government initiatives on electricity and gas market reform.  It is not widely known that Howard was the driver of the Australian MRET scheme, which has seen some $2 billion invested in renewable energy this decade in developments already operating or under construction, mostly wind farms. Howard initiated consideration by Government ministers of what became MRET after discussing energy policy in the context of the Kyoto negotiations with President Bill Clinton and Vice-President Al Gore in Washington, DC.  He also played the key role, as chairman of the Cabinet energy sub-committee, in rejecting proposals from Government departments in 2003 for the introduction of carbon emissions trading and in setting up the Low Emission Technology Demonstration Fund, which will distribute $500 million in support for energy innovation investment by business, starting later this year.

Downer talks up uranium industry

Foreign Affairs Minister Alexander Downer says the amount of electricity produced internationally from Australian uranium annually saves carbon dioxide emissions roughly equivalent to this country's total CO2 output each year.

Speaking to the Energy Supply Association in Adelaide on 2 June, Downer has pointed out that one sixth of the world's electricity is being met by nuclear power programs in 30 countries and says countries in the Asian region are realising that nuclear power is an essential part of the energy mix.

The Foreign Minister has dismissed as a "myth" the argument that renewable energy should replace nuclear energy as a non-emitting power source. "Meeting South Australia's (electricity) requirements," he argues, "will require wind turbines occupying some 1,200 square kilometres. Using solar power you would need 34 square kilometres of solar cells – and it would cost $13 billion just to buy the cells, let alone install them."

He claims that it may be possible to build a nuclear plant in South Australia with 1,000 MW of capacity, and the ability to supply 75 gigalitres of water through an associated desalination plant, at a capex cost of $2.5 billion to $3 billion.

Downer also used the speech to ESAA to take a swipe at emissions trading. A trading system, he says, is complex and expensive to set up and, absent similar action by major trade competitors, will undercut Australia's international competitiveness.

Building renewable capacity

The Australian Business Council for Sustainable Energy reports that 400 MW of renewable power and 677 MW of gas-powered plant have been added to national capacity in the past year.

The lobby group adds that, at 31 December last year, 26 renewable energy projects representing 536 MW had been committed to development and were under construction in Australia.

ABCSE also reports that national sales of solar photovoltaics amounted to just over $127 million in 2004 with $140 million in export sales, while solar water heater sales reached 43,000 units in Australia with the local industry exporting another 18,000 units.

Meanwhile Loy Yang Power's house journal notes that the number of wind turbines in Australia has risen from 20 in 1996 with a total capacity of 2.7 MW to 444 in May this year with a total capacity of 638 MW and another 130 turbines under construction.

Auckland blacked out – again

For the second time in eight years New Zealand's main city, Auckland, has been subjected to a major power blackout. In 1998 the city CBD was without power for weeks after a failure of its underground transmission cables – this time the blackout lasted only a day (12 June) after storm winds snapped an earth wire off a high voltage pylon at the isthmus city's choke point sub-station of Otahuhu. The earth wire fell on to the sub-station's 110,000 volt switching equipment, cutting its output and also cutting off two small local power plants from the national grid. The city's CBD and some 700,000 people were affected by the blackout. Business losses are estimated at up to $NZ70 million.

Unlike most other large cities, including Sydney, Brisbane and Melbourne, where power supply is transported over several routes, Auckland's geography makes its highly vulnerable to equipment failure at Otahuhu.

The NZ Electricity Commission, with which government-owned transmission service provider Transpower is embroiled in argument over plans to strengthen the North Island's (and Auckland's) network, has announced an inquiry in to the incident.

The New Zealand Government, under attack from political opponents, business and community leaders and the media over the blackout, has argued that $NZ83 million is being spent currently on transmission upgrades in and near Auckland, part of an $NZ300 million national outlay on networks this year after only $NZ518 million was spent in the past six years. 

Critics respond that the Government has failed to ensure that a new junction sub-station is installed to serve the main load centre for the country.

Auckland, which is home to a quarter of the NZ electorate and 17 per cent of the country's jobs, relies mainly on power supply from the 1,050 MW Huntly coal-fired plant 70 km to its north and depends on other generation in South Island during peak demand periods.

Meanwhile government-owned Genesis Power has said the start-up of its new 385 MW gas-fired plant at Huntly is likely to miss its August target and may be delayed until early 2007 because of faulty welding in boiler casings. The plant, the first gas-fired generation built in New Zealand since 2000, is considered critical to meeting the country's winter power demand in 2007.


Once again the ability of power providers in a disaggregated but heavily regulated market to maintain secure supplies to major urban areas has been called in to question.

For 700,000 people in Auckland, the blackouts were mercifully brief – at least when compared with the six-week power collapse that confronted them in 1998 – but their anger at infrastructure failure will have longer-lasting political ramifications, as it has in Brisbane, for example.

The latest Auckland failure is one of a number affecting big cities that have had critics of the power supply structure and system in full voice this decade – most notably the massive cuts that affected 57 million people in Italy, 50 million in north-east USA and Canada (both in 2003) and millions in California (2001 and again last year,although more briefly).

(The problems do not only happen in market economies – last year 10 million people lost electricity in Moscow and there have been estimates that 100 million Indonesians were affected by their power problems in 2005.)

The supply failure causes sometimes can seem risible – while New Zealanders were battling to deal with no power on 12 June,  40 per cent of the citizens of Pnom Penh, the Cambodian capital, were blacked out by a mouse reportedly short-circuiting the city's small main power plant – but the problems are real for all the victims, costly for businesses and a turn-off for tourists and investors.

As was the case with Queensland inquiry in to the reliability of network operations, it is a fairly safe bet that the New Zealand inquest will throw up both the need for higher, faster capital outlays by service providers and emphatic political commitments to ensure it happens.

This response, however, masks a deeper problem and one that will not go away for network service providers around the world who are confronted by both the demand for high-quality, uninterrupted power provision and regulators who are loath to allow them to raise rates to adequate levels to provide the necessary improvements – and trigger politically unpopular price rises for customers.

The electric grids servicing almost all large cities were built between the 1950s and the 1970s. A substantial segment of these assets are now at or approaching their designated life spans. The average age of the assets may be falling as a result of present investment efforts,  but the ability of a significant portion of the networks, and notably in sub-stations,  to support supply reliability and safety is questionable. Expert international commentators have described the situation – especially in North America, the European Union and Australasia – as "an epic roll of the dice with unforeseeable consequences."

The kneejerk reactions by the authorities in Brisbane in the recent past and now in Auckland are not a substitute for a holistic plan to deal with this situation, including a political approach to overcome voter and business antipathy to the inevitable large increase in power prices.

Keith Orchison

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