Solutions to the energy crisis

Malcolm Turnbull has now, for reasons best known to himself, elevated “energy crisis” to a “national security” issue. Ben Potter puts the situation well:

    A decade of fighting over renewable energy, carbon prices and fossil fuels has left Australia with some of the world’s dirtiest and costliest energy – a bitter yield from historical abundance.

    Three years ago, manufacturers began complaining they couldn’t get gas, and 18 months ago the South Australian grid started to wobble.

    Now, electricity and gas prices across the eastern states are two to three times their levels only a couple of years ago.

    Gas exporters overcommitted to foreign buyers; the federal government mismanaged renewable energy and the regulatory apparatus – and politicians responsible for it – are frozen in the headlights.

With gas at $12-13 a gigajoule, two to three times the level only a few years ago, manufacturers are being slugged by power price hikes, a mothballed methanol plant is being pulled apart and shipped to the United States for reassembly and expansion. The 7.30 Report told us some rural businesses are turning to diesel generators, because they are cheaper and more reliable. The Australian Market Energy Operator (AEMO) warns that in a year or two we won’t have enough gas at any price.

Before we look at possible solutions, Phillip Coorey reminds us of Peta Credlin’s admission that they made the carbon price into a political game:

    “It wasn’t a carbon tax, as you know. It was many other things in nomenclature terms but we made it a carbon tax,” she said.

    “We made it a fight about the hip pocket and not about the environment. That was brutal retail politics and it took Abbott about six months to cut through and, when he cut through, Gillard was gone.”

Coorey comments:

    Oh joy, stuff the entire energy sector for almost decade for personal political gain.

The lack of a policy is now seen by the industry as the largest factor affecting power prices.

Enter Elon Musk with his Tesla batteries. The stories are everywhere. Elon Musk says he can supply batteries to fix South Australia’s energy problem within 100 days, or he’ll give it free. Jay Weatherill and Malcolm Turnbull have been talking to the man.

Michael Cannon-Brookes, co-founder of software company Atlassian, said on Twitter that if Mr Musk could guarantee 100MW in 100 days, he could “make the $ happen”.

It’s a publicity stunt, of course. Tesla was in town launching its Tesla 2 Powerwall. Australia is a prime market for Tesla because of our high penetration of rooftop solar, as well as our concern about electricity prices.

At least three battery rivals have now piped up, saying they could do the same thing as Tesla.

ABC’s Michael Collett has the best explainer so far. Batteries can store energy generated at off-peak times at scale and despatch it instantly to meet peaks. However, he links to Roger Dargaville’s Despite the hype, batteries aren’t the cheapest way to store energy on the grid. He puts the cost of pumped hydro at around A$100 per kWh, which Ben Potter says is about a fifth of the price of batteries.

I hate to say it, but in my post Gas, pumped storage and energy futures of 7 February where I linked to an article by Andrew Blakers, Bin Lu, and Matthew Stocks of the ANU who looked at a 100% renewable energy supply using wind, solar and pumped hydro. They found:

    Using 2016 prices prevailing in Australia, we estimate that the levelised cost of energy in a 100% renewable energy future, including the cost of hourly balancing, is A$93 per MWh. The cost of wind and PV continues to fall rapidly, and so after 2020 this price is likely to be around AU$75 per MWh.

So why don’t we head down that track?

Ben Potter says that Alan Finkel, chief scientist undertaking a review of the electricity system, is keen on the Irish system, where renewables are limited to 50% of the market to preserve grid security. Effectively there are two markets. A baseload of 50% is reserved for traditional suppliers – coal, gas, hydro and nuclear if you have it. The rest is open to competition from renewables. It guarantees a market so that the fossils can keep their plants running.

Yet Blakers et al at the ANU say that it is at the 50% point where the use of pumped hydro becomes relevant.

Finkel would then still have the problem of where he finds more gas, and a consistent supply of gas.

Ben Potter goes through some of the solutions that probably won’t happen.

We could keep Hazelwood open, but that would mean stumping up $400 million for maintenance and taking over closure costs from the owners – another $750 million. The Commonwealth Government could purloin some of the gas being exported through Gladstone. This would involve breaking contracts, incurring sovereign risk, which would jeopardise investment. It won’t happen, unless the PM can jawbone the companies into doing it themselves. This is the PM’s tack:

    …the government would consider “all measures” to ensure supply.

    He said while gas companies would resist any change to the ground rules governing existing projects that could place constraints on exports, “security is the first responsibility of every government”.

    “That is, national security and energy security,” he said.

    Mr Turnbull will seek assurances on supply when he meets the big gas producers on Wednesday next week in Canberra.

    “They’ve been put on notice. I’ll be demanding from them their explanation as to how they’re going to deliver security for their customers,” he said.

    The government is expected to demand answers on why fields such as Shell’s Arrow venture and Origin Energy’s Ironbark lie fallow in Queensland, while Santos’ $2 billion Narrabri venture in NSW is crawling towards development years behind schedule.

    AGL Energy has already walked away from its Gloucester coal seam gas project in the Hunter region; Gloucester together with Narrabri could meet most of NSW’s demand for gas.

My bet is that the gas-producing CEO’s won’t budge, and we’ll get more finger-pointing at NSW and Victoria about coal seam gas bans. Effectively the companies have lost their social licence. For now Lock the Gate has won.

The 7.30 Report told of Queensland granting exploration licences on condition that the gas be available for local use. From memory that was 57 square kilometres, anyway a patch about 6 x 10km. However:

    Queensland Energy Minister Mark Bailey said he would be willing to talk to the Turnbull government about further opening up the state’s significant gas reserves to deal with the gas shortage, as well as expand the domestic gas reservation pilot project.

There are two problems here. First, gas producers don’t know how long local gas will be required for power generation. They need to plan over decades. Secondly I understand there is a bit of a glut on the world market at present.

Ben Potter does talk about a second great wave of disruption of the energy market, wind and solar being the first. Now we have digital disruption:

    This wave is made up mainly of so-called “behind the meter” or distributed energy resources – storage batteries, smart thermometers for airconditioners, refrigerators and pool pumps, electric vehicle chargers, and smart software – in people’s homes and business premises.

    Software helps households and firms get the most out of their energy resources and pricing incentives encourage them to give back to the grid when shortages loom to help to prevent blackouts.

No-one knows how all this will work out, but he cites BNEF as saying behind the meter energy resources will account for more than a fifth of power system capacity in a decade and a whopping 35 per cent by 2040.

And talks about smart grids.

All good to see in the AFR.

Potter didn’t mention demand management, essentially paying consumers to turn off the power to solve peaks.

He did mention AGL’s proposal to set up LNG import terminals off the coast of one or more of SA, Victoria or NSW at $300 million a go. For some reason here it would take until 2020-21 although Egypt got one up and running in three months.

Ben Potter said it wouldn’t pass the pub test, but today in the AFR Angela Macdonald-Smith says that grown-up countries like the US, the Netherlands and Indonesia already import as well as export gas. Floating terminals are not a new idea. 19 exist and 20 more are being built. Gas could be landed at $11 per gigajoule. Not cheap, but many now face the prospect of paying more.

Worth a go, I think, but the AGL plans are “tentative”. That’s the problem with everyone except Elon Musk at present. Squarely the blame for that lies with Malcolm Turnbull and his gang.

Rock solid, steadfast and slow to change is the Australian Energy Market Commission. Giles Parkinson tells how they have been so slow to change that AEMO, the market operator has complained about them to the Finkel review. They appear to be in the thrall of the fossil fuel industry. The Commission is set up under COAG (the Council of Australian Governments) with

    two roles in relation to the National Electricity Market – as rule maker and as a provider of advice to Ministers on how best to develop energy markets over time. The AEMC actively considers market development when it considers rule change proposals, policy advice and energy market reviews. These rules are binding on the Australian energy market and enforced by the Australian Energy Regulator.

Clearly these fossils need to be swept away and banished to a Pacific island with a peak two metres above sea level.

Parkinson says that tweeting billionaires signal the end of the road for fossil fuel dinosaurs.

However, it really depends on Turnbull actually doing something, rather than talking, and for the present that seems beyond him.

33 thoughts on “Solutions to the energy crisis”

  1. So your post of, what, four and a half weeks ago? canvassed much of today’s discussion.

    The political problem for Mr Turnbull, is that this kind of knowledge and awareness and thinking about the near and longer term future, has already spread far and wide, beyond Federal Ministries, the Cabinet and the Opposition.

    Folk are installing rooftop PV and thinking about batteries, talking about feed-in tariffs, driving past wind turbines or having them built on their own farm; becoming more aware of home insulation and passive solar heating; watching energy efficiency ratings on houses and appliances; noticing hybrid cars.

    Ever since the “oil shock” during the Whitlam Govt, overseas parity pricing for Aussie oil, the home insulation scheme in the GFC, the drop in prices for solar hot water and solar PV, the Australian public has been learning, watching, and waiting…..

    Then under Rudd/Gillard, companies large and small had to consider a carbon price and plan accordingly.

    The genies are well and truly out of all the bottles.

    Politicians will just have to try and catch up. I wish them luck, good advice, and determination. Just this once, don’t b*gger it up, please!!

  2. Keep in mind that part of the gas market is about supplying gas as feedstock for a range of chemicals, a reducing agent for low emission steel manufacture and for direct heating fore things like cement and pottery manufacture.
    The market purists have sstuffed this country like champions.

  3. John, yes “feedstock” was the word I was looking for. Industry needs access to gas.

    I’ve just seen a brokers report on AGL. Over the next three years revenue is forecast to increase by 7.5%. But cop this. Profitability is through the roof. The earnings per share are forecast to rise by 82%. The reason is mainly the price of electricity, apparently!

  4. Ambigulous, South Australia are due to announce their intervention into the electricity market tomorrow. I thought it was Wednesday and wanted to get a grip on what things looked like before they have a go.

    They’ve been thinking about it for months, so we’ll see.

    Federal Labor really only has the EIS to offer in concrete terms. Everyone wants an EIS to give market certainty. the problem is that it won’t unless there is bipartisan support, and is not strictly necessary in any case.

    Labor says that Turnbull and Frydenberg should be out there trying to convince farmers that CSG is a good idea. Firstly, it’s basically a state matter. Secondly, no amount of talking would do any good. Thirdly, we really can’t wait for all that to happen.

  5. Yes,

    CSG isn’t socially acceptable in Victoria, and likely not plentiful. Large resources off shore.

    Let me be basic for a moment. Mr Turnbull professes to love industrial and post-industrial “innovation”, says we should welcome “disruption”, and the nation has to be “nimble”.

    He would have to much nimbler than his Cabinet has been so far, to avoid having the whole schemozzle bite him on the bum!

  6. Some companies in Queensland have taken the bit between their teeth done their sums on energy costs and are committing to large investments in solar to source their energy requirements.

  7. Good on them, Douglas.

    On the “sea level” thread there was some (out of place) comment recently about private companies and private individuals leading the way, in recent years; sometimes aided by subsidies, sometimes not.

  8. The reaction to the SA government’s energy proposal is fairly negative at the moment.
    I am opposed to spending $360m on a new 250MW power station as part of the deal. Fossil power is something that should be phased out not phased in. My gut feel is that the money should be spent on solar towers with back-up molten salt heating.
    The SA government should also be seeking tenders for standby power thus offering the certainty that contracts give and lower power prices.
    Should also be offering shut down contracts. Contracts where a business is willing to take power cut backs during peak loading periods.

  9. John, I’ve just logged on and have been listening to the radio all day. Apart from Frydenberg, my impression is that the reaction has been positive from just about everyone. Tony Wood from Grattan and Giles Parkinson both commented favourably, haven’t checked the web yet.

    I gather the new gas is effectively standby power. It takes four hours to fire up a gas station from a cold start, so I think solar, plus whatever is best and cheapest in the situation – molten salt, pumped hydro, batteries, which are all virtually instantaneous – would be better.

    I don’t think anyone in politics in Oz is seized with the proper urgency of climate change action. If they were, they wouldn’t be building new gas.

  10. $550 milion in reality will be closer to $1.2 billion.
    Screen shot that and in 2 year we shall see.

  11. Australia’s Zen Energy already has the plans in place for a combination of batteries and solar in the Pt Augusta and Whyalla area:

    Zen Energy has already been developing plans for a $100 million solar plant with 100 megawatts of battery storage, based in the Upper Spencer Gulf.

    Chairman Ross Garnaut said the Government’s intention brought its plan closer to fruition.

    “The Government says it wants it in place by next summer and we’re ready to put it in place by next summer,” Professor Garnaut said.
    “And if we’re to avoid a repeat of the instability we had in the past summer, we need it in place before December.

    “We can install our battery in less than three months, but that’s not all you have to do, there’s a lot more.

    “That means the Government process will have to be a short one or there just won’t be time.”

    Professor Garnaut is the economist behind the 2008 Garnaut Climate Change Review, commissioned by the Commonwealth, state and territory governments to study of the impacts of climate change on the Australian economy.

    Zen Energy will still need to compete for the Government tender — it’s likely several companies have their eyes on it.

  12. FYI Wikipedia’s list of power stations in S Aus
    My understanding of the last blackout was that the problem was that the Pelican Point plant decided not to start up because they would actually lose money. This is not a capacity problem. It is the problem of a stupid spot market system that shows no understanding of how power supply systems are supposed to work.
    The blackout would not have occurred if Pelican point had been on a standby contract that had allowed the power system to decide when Pelican point should have began starting up the power station. Also wonder what all the other power stations were doing during the blackout as well. Did any others decide that starting up in the hope of getting paid for peaking power?
    If we assume that SA gets on with hydro storage and solar towers one wonders what the working life of new gas will be.

  13. John, there was a string of failures in gas power stations just before the February blackout. Pelican Point didn’t fire up initially because it had effectively been mothballed and Engie had no gas reserved to operate it.

    Also AEMO was too late in its timing, had called for extra supply at around 3pm, got no response, and when they approached Engie about starting Pelican Point it was about 20 to 6, half an hour before the blackout. With four hours to fire up they were hopelessly behind the eightball.

    SA are effectively doing the reserve standby thing by using taxpayer money to build new gas. For them it’s the quickest and surest way home. They expect to recoup something from selling power into the peak market, but their experience in Australian conditions should give people some idea how much standby contracts are worth.

  14. Turnbull’s whole position is an attempt to force through more coal seam gas production and break the public’s will on protecting their land and water resources.

    From what I can see the “energy crisis” is entirely artificial and the trailing end of Abbott’s now publicly declared political manipulation of the energy industry for his own personal egotistical gain.

    Both Turnbull and Abbott should be publicly flogged, Abbott daily and Turnbull once a week. Abbott’s damage to the Australian economy and industry is extensive. For instance without the auto industry a huge number of materials suppliers have left our shores. More high performance plastics that were held here for the car industry are no longer available and to obtain them a moulder must by 1000 kg to get any at all. Consequently there is a huge amount of non car related business that moves off shore to get access to the materials.

    I am at the moment committing to a tooling set that will now be done in China rather than Perth for that very reason. Plastics, paints, fabrics, metals, wiring, electronic components, tooling, bonding materials, glass forming, …the list is very long and it is not the direct auto production or the direct componentry, but the industries that were possible because of the availability of materials.

    Jumpy, that is a typically pointless Libertarian conspiracy claim there. Did you copy and paste it from Cattlelaxy? It is, as usual, totally baseless as energy infrastructure costs in every renewable and alternative field except hydro and nuclear have steadily fallen over the past ten years. I presume that you are referring to the cost of the Tesla battery (it is hard to tell as I was not able to find a figure to match the one you mention and the comment is typically vague) which the supplier was prepared to halve in an offhand comment.

  15. The Tesla Power Wall 2 is at the very practical level. I will seriously consider it. At 14 Kwhrs that is sufficient to recharge a plug in hybrid at 8 Kwhrs and run the household where cooking is gas and the water heating is solar. It is coming together just as was predicted, albeit slowly, and thanks to some far sighted clear thinking entrepreneurs. I’m referring to you Elon Musk….and Liquid Piston is not that far behind.

  16. By the way that is a perfect Turnbull shot, Brian. I’ve saved it with the Abbott Lying King photo. Together they really tell the story of the LNP as “good economic managers” myth fail.

    Howard created the never ever affordable housing for millennials and the foreseeable future, Abbott killed the car industry and nearly every other in just 2 years, and now Turnbull hasn’t got a clue as to what to do next except start washing coal and sucking gas.

  17. I see everyone is out tonight, so I will just talk amongst myself here for a while. As my Dad used to say, an expression he honed sitting for long hours at his station in aircraft flying over the Pacific during the war there, “Self,…I says,… what do you think of this article you read in the NYT the other day?”

    https://www.nytimes.com/2017/03/13/business/energy-environment/brooklyn-solar-grid-energy-trading.html?_r=0

    “Well yes that is the future, local production of energy for local use, and energy sharing without the corporate middleman. That is an excellent article with a large number of references to initiatives all over the globe. Good find, You,…keep it up!”

  18. BilB, I’m partial to the notion that both Abbott and Turnbull should be publicly humiliated and punished. The gentler side of me suggests that they should be put in stocks so we can through rotten eggs and tomatoes at them.

    From your link, I was interested in the appointment of Audrey Zibelman to the role of AEMO Chief Executive Officer (CEO), effective Monday, 20 March 2017. As Chair of the New York State Public Service Commission (NYPSC) she led the ‘Reforming the Energy Vision’ (REV) plan.

    The REV plan has been internationally recognised for successfully developing and implementing 21st century regulatory reform with a focus on lowering the cost of energy for consumers while building a more resilient and reliable power system.

    Also this:

    Across the globe, upstart companies like LO3 Energy, which is designing the Brooklyn experiment with the industrial giant Siemens, are building digital networks that offer the promise of user-driven, decentralized energy systems that can work in tandem with the traditional large-scale grid or, especially in emerging economies, avoid the need for a grid at all.

    Siemens, who would have thought? The Germans designed their system to facilitate this sort of activity.

    I’ve heard of similar initiatives here, and it must be noted that the AGL link in the other post tells us that AGL is trying to link 1000 homes with solar and batteries to create a virtual 5MW peaking power plant.

  19. Switzerland would be ideally placed (shaped) for pumped hydro storage, ja?? It has a few big hills and the odd lake, oui??

  20. Think globally, build locally.
    Horses for courses.
    Use nearby resources where possible.
    Learn from the mistakes of others.
    If “food miles” should be attended to, why not “energy miles” too?

    If some States have particular renewables in abundance, use them there. And consequently, it shouldn’t be a big deal if a RET differs from one State to another. Aren’t we supposed to be “nimble” and “agile “??

    I reckon the public have realised that ” one size fits all” need not apply.

  21. I liked the stuff in the AGl link it is in line with a lot of my thinking. For example:

    AGL is still pushing for forms of “capacity” rights, that would guarantee payments for generators to provide sufficient capacity to meet demand – a topical point given the rolling blackouts in South Australia on Wednesday and the possibility of the same in NSW on Friday.

    The standby contracts that I been talking about for years are simply a form of “capacity payment.” Long term contracts provide the certainty that will inspire investors to make very competitive bids. A system of spot sales that may only occur 3% of the time (if that) at a price that depends on volatile spot markets make any sensible investor look elsewhere.
    Also like batteries in the home because they allow you keep on using your solar power in a blackout.

  22. Got to go out to work, but Ambigulous, you mentioned “energy miles”. I saw the figures the other day. From memory it costs about $3 per gigajoule to pump gas from Victoria to Queensland, or the other way. It’s about the same as bringing it from the USA.

  23. Thanks John, that face is classic. And good on Weatherill in returning the merde to Turnbull and Frydenberg, which they have dumped on SA, for a situation the liberal party has essentially created with their self serving energy policy approach.

    Absolutely Ambi, that is why I am strong on regional focus of energy security for some time now. Ideally actually we should talk about ‘energy ecosystems’ built around communities. Individual roof top is great to counter the energy oligarchy, but not necessarily an efficient way to produce and consume energy. We should take look at energy in terms of natural fit ‘energy communities’ configured by geographic, economic, ecological and technical constraints and as well as economic opportunities and potentials, within dynamic ‘energy ecosystems’.

  24. That is delightful, John D.

    I did not see an “I’m sorry I offended your state, Jay, I apologise”, response forming in Frydenberg’s head at all.

    I have to watch that a few more times.

  25. Nope, that is not getting old any time soon. I like the guy behind nodding in agreement, then Freydenberg attempts to move aside but is crowded back to shoulder touch by reporters.

  26. Thanks Brian and Ootz.

    I was thinking more of transmission losses on long distance high tension electric power lines. Relative costs of piping gas should be considered too.

    You may be right about rooftop solar costs Ootz, but some house owners will value certainty and a measure of autonomy. Like owning one’s bicycle rather than hiring or sharing it.

    JohnD, you are following a valuable lode, in emphasising contracts for base load. Keep at it. Has Finkel canvassed that?

    BTW, Adelaide Advertiser online has a transcript of the Weatherill/Frydenberg press conference. Both W and F have their say. Apart from a few typos (“Snowdon” for Snowy, e.g.) it’s an instructive read.

  27. Here’s the transcript.

    The bloke behind nodding agreement is energy minister Tom Koutsantonis. The bald guy smiling is Andrew Vesey of AGL.

    Please note that at the end of the transcript Frydenberg repeats the lie that SA’s problems were caused by the state going alone.

    It’s not been reported in much of the coverage I’ve heard how much Frydenberg goaded Weatherill before he let loose. Have a look at this ABC video at the Guardian.

  28. That cursed blood oath of Abbott makes a liar of every Liberal minister since, as they are still committed to the lie, extension or iterations thereof. That is all they’ve got when it comes to energy policy. In the process they fnekud the country and themselves. They can’t really come to the table again until they come clean, as Peta said, it has been and ever since all just political gaming, a simple drive to win at ALL COST. How can we win as a nation with a bunch of turkeys like that? So good for Weatherall, for saying as it is and it may do Frydenberg good to get splattered with inherited merde. Like Turnbull, he might be a good politician and capable minister, just not good at lying and standing up to the political troglodytes in the party and the fossil bullies.

    And so I fear that Malcolm’s retro idea is more in line of infrastructure planing as per Utopia comedy few years ago. Yes it is unfortunate nowadays one has to go to comedy to get the truth about important subjects. Clark and Dawe spoke some home truth last night too.

  29. I am in two ways about the batteries, particularly Li-ion. They have a limited life time, every smart phone, laptop and tablet user owner knows that. Once they are used on industrial scale they become a consumable and have to be manufactured, transported, disposed and recycled. I am not aware how much lifecycle management and cost have been considered so far. According to this study The environmental impacts of recycling portable lithium-ion batteries, the largest environmental impacts contributors are electricity generation for the pyrometallurgical process and incineration of plastics, as well as landfilling of residue.

    On the other hand a pumped hydro projects takes awhile to get established are costly and require a lot of geological, economic and political conditions to align for it to happen. According to this Why pumped hydro beats batteries as a storage solution though:

    “‘ .. a flat electricity rate of 25c per kWh means that batteries would need to cost around A$300 per kWh to be cost-effective. That’s less than a third of their current costs.

    Pumped hydro, on the other hand, is a relatively inexpensive storage technology (already at around A$100 per kWh) as it can store large amounts of energy using a very inexpensive material.”

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