While Malcolm Turnbull equivocates on a Clean Energy Target, he has called the electricity retailers to Canberra once again to jawbone them about electricity prices. Yet the industry keeps telling him the single factor most needed to bring electricity prices down is more investment in renewable energy, which would be facilitated by a Clean Energy Target (CET).
Whether the CET is central or not, it is what the industry believes. But Turnbull will not move until he has a report from AEMO on what the future need for ‘baseload’ power will be, which in the minds of hardcore recalcitrants within his own party, means coal-fired power, throbbing away.
Giles Parkinson says Turnbull does not need baseload, he just needs balls. He thinks Turnbull probably knows this and places some hope that the old Turnbull may be about to appear, along with the leather jacket, which has come out of the cupboard:
- “It is very important you have the right plan going forward. So vitally important that we also get that information from (AEMO). We have to get a handle on the size of the problem we are facing in terms of dispatchable or baseload power.”
What he needs to do is drop “baseload” and replace it with “dispatchable” – “dispatchable power”. He seems to be heading that way.
Parkinson says no-one in the industry, including the body representing fossil fuel generators want to build ‘new baseload’.
- The CSIRO and Energy Networks Australia have said anything between 30 and 50 per cent penetration of wind and solar should be considered “trivial” to the operations of the grid – and that would include the 42 per cent renewable energy share contemplated by the Finkel Review.
Transgrid, the major grid operator, says a 100 per cent renewable energy share is both feasible and affordable, and wants to get on with it.
And numerous studies show that what Australia needs is reliable, dispatchable energy – and this will not come from new coal or gas baseload generation, but through any number of new and existing technologies such as pumped hydro, solar thermal, battery storage, not to mention the smart software and program that focus on managing demand, rather than just simply building new peaking power stations.
AGL has reinforced this point, saying that only renewables will provide the new “baseload” power, not coal.
“What’s the new baseload for us? It’s going to be large-scale renewables,” AGL CEO Andy Vesey said in June. “It’ll be firmed up by probably open-cycle gas and, eventually, when storage comes down, that’s what it will be.
“We don’t see anything baseload other than renewables.”
It is not hard to work out that renewables in the NEM system in the eastern states will not reach 50% before around 2025 when batteries will be competitive, leaving aside pumped hydro, molten salt and other storage systems.
AEMO has now painted an outline as to how they see demand working out over the next two decades in a paper Electricity Forecasting Insights for the National Electricity System. In their Neutral Scenario assuming 30% population increase and average growth in the economy they forecast the need for grid-supplied electricity to be flat over the next 20 years.
Within this, they expect business demand to increase slightly and home consumption to decline slightly, offset by rooftop solar and
energy efficiency initiatives.
And here’s the rub, the maximum daily demand will increase overall and migrate to later in the day when the sun doesn’t shine, while the minimum will decrease and move to the middle of the day.
To show this effect I’ve truncated the following tables in the interests of legibility, showing forecasts for NSW, SA and QLD. Here’s the maximum daily demand:
And here’s the minimum:
So in 20 years time the minimum demand in summer in NSW will be 2,236 MWh in the middle of the day, followed by 15,276 a few hours later.
The net effect is that the market will be drastically disrupted by the prohibitive expense of new ‘clean’ coal and the increasing tendencies of consumers, domestic and business, to provide some or all of their own power. Jacobs Consulting as background for the AEMO paper have had a look at the impact on electricity prices. This graph tells the tale:
They’ve taken existing prices in 2017 as 1.0 for all states and charted the historical and future changes from there. They summarise:
Retail prices exhibit three distinct behaviours across all markets and scenarios: (i) increasing trend between 2017 and 2020; (ii)
declining trend between 2020 and 2030; and (iii) levelling out from 2030.
The problem up to 2020, they say, is cheap old coal shutting down leading to an increased use of expensive gas. Thereafter for the next decade, prices will fall perhaps up to 3% per annum, largely driven by declining demand. No doubt driven by consumers generating their own power, as well as smarter appliances and other factors.
Thereafter, the closure of old coal will be roughly offset by new renewables at the same price.
Jacobs Consulting have been criticised before for overestimating the cost of renewable energy and underestimating how much of it will be built. Nevertheless their numbers are the ones that the Coalition government will likely use in policy making.
There is further overall uncertainty in the AEMO report, because I’ve been quoting the ‘neutral’ scenario, which is deemed the most likely. Their ‘strong’ scenario sees a 15% growth in demand, whereas their ‘weaker’ scenario sees a 21% fall. It all depends on how the economy performs. Also forecasts for battery penetration of the market have changed radically in the past few years.
The good news is that AEMO seems to be taking account of the complex and somewhat fractured nature of the future of electricity generation. With a bit of luck their forthcoming report on ‘baseload’ will chart the change to ‘dispatchable’ power in a way that Turnbull and Frydenberg can get it past their fossilised recalcitrants. Maybe there will be a window of opportunity when Barnaby Joyce and Matt Canavan are out of the way.
It would help if Turnbull and Frydenberg stopped perpetuating the myth that what happened in South Australia was due to renewables. Parkinson says that the failures in South Australia last year and this year and the near misses in NSW and Victoria this summer were not about renewable energy, but primarily the overall management of the grid. Plus both coal and gas fired power stations failed when the heat was on.
New dispatchable renewable electricity is likely to be more reliable in such extremes.
19 thoughts on “AEMO sees electricity markets reshaped”
Is this graph accurate ?
[ I comment not, in any way, positively or negatively, on any implications possibly drawn by any other person or group ]
Jumpy, why didn’t you say it was a post by Alan Moran at Catallaxy?
You can compare it with this one from a source I’d trust.
So the shape of the red line looks right, but the termination of the carbon tax was a bit later. And, I would suggest, the green line has nothing to do with recent price rises. It’s mainly about gas.
Hazelwood was past its use-by date, and had to be closed sooner or later. Moran, I would suggest, is a climate change denier. As to the future, try this. Not sure it’s right, the future is the future.
Comes from here.
To be fair, Jumpy’s graph shows unequivocally that the introduction of a market mechanism forced the price of electricity, which had been trending down, to rise dramatically.
And hence my caution, I don’t know Alan Moran any more than I do John Menadue but both their sources of data look legit.
Just asking if it looked accurate to you, that’s all.
I realise your interest in the electricity market and thought I’d ask.
And to be honest I didn’t think you’d have seen it as your ” trusted sources ” are highly unlikely to show you.
As for the future graph it comes from here, they made it.
I don’t know who originally made the graph Moran posted at Catallaxy.
In any event, I made no comment on it and went to lengths to state as much.
Zoot, NEM started in December 1998.
Brians trusted graph shows the ” rise dramatically ” started when Kevin 07 got in almost a decade later.
I know correlation doesn’t equal causation but you don’t even have correlation.
Funnily enough, when I wrote “Jumpy’s graph shows …” I wasn’t referring to Brian’s graph. Your reply is a non-sequitur.
Jumpys, Morans, someones graph shows the same thing, addressing it’s validity of it then.
Jumpy’s Moran graph prior to 1975 I suspect has been “corrected” to reflect the lower household buying power of the wages at the time. I remember my father balling me out in 1965 for running a one bar radiator in my room bellowing “shut that bloody thing off, its costing 10 cents an hour”. This recollection casts doubt on the nature of the graph. Another article I found with a similar graph referred to the “real” cost of electricity, ie corrected for the relative value of money rather than the actual numerical cost at the time. Those Libertarians are only too happy to mush figures around to make their arguments when it suits them.
“when Kevin 07 got in almost a decade later”
That is exactly right. If you look back you will find the article in the SMH which announced the price increase schedule as laid out by IPART.
The price increase was to parallel the introduction of Rudd’s CPRS… https://en.wikipedia.org/wiki/Carbon_Pollution_Reduction_Scheme
…which was agreed to by the then leader of the opposition…..Malcolm Turnbull….who was almost immediately removed and replaced with Toxic Tony Abbott, who immediately renigged on the policy.
If you read the official announcement by IPART carefully you will see that it clearly states that if the CPRS did not eventuate then the electricity price would be reduced.
………and we all know that that did not happen……….and what did happen was that the electricity industry happily pocketed the money that was intended to build renewable energy infrastructure, in the biggest industry rort in Australia’s history.
Responsibility for this theft of monies, amounting to by my guesstimate well over 200 billion dollars, from Australian electricity consumers is laid squarely at the feet of Tony Abbott.
Juimpy, I understand you were looking for information in good faith.
I don’t think it’s all that useful to go back past around 1990.
I forgot to link to the Jacobs paper, which is here.
If you look at the history of the NEM I think the first moves came with privatisation of SA electricity around 1996, but the NEM as a coherent organisation, with AEMO coordinating power demand and supply the way it does now, didn’t start until about 2009.
Jacobs has this to say about power prices:
That’s probably roughly right. Gold-plating of the grid, followed by carbon price and the gas, with lower prices when the carbon price came off (not sure about that) and later the regulator (AER) who sets network prices, trimmed the margins a bit.
However, there is no evidence that privatisation and competition, which was supposed to drive prices down, helped at all. In fact the Jacobs graph in the post shows that the states that have done best are Queensland and Tasmania, where there has been more government ownership and less competition amongst generators.
Brian the real history of this is laid out in Larvatus Prodeo archives I’m sure. I remember commenting extensively on this in 2007 and 2008. It would also be interesting to read “jumpnmcar’s” comments of the time regarding Global Warming and Climate Change.
Yes, BilB, but last time I tried to get to LP it didn’t work. I think the site was hacked. I know the National Library archived it.
These are some of the IPART announced price increases to electricity from 2007.
These are some of the IPART announced price increases to electricity from 2007 which give perspective to the changes at play that gave rise to the current situation.
…and some more
BilB, you’ve made your case. A couple of things to note.
First, prices were going up in May 2007, before Kevin Rudd was elected. It was about updating the grid.
Second, when prices went up in 2010 it partly the grid and partly the CPRS. The price rises were to be 42% over three years without the CPRS.
Third, it’s worth noting that prices were given three years out, I think to allow forward contracts.
Yes, Brian. My memory of the timing was not accurate. I’m still trying to track down the actual SMH announcement of the changes which was worded differently and had other information, I believe.
Jumpy might like to know. I’ve just discovered that Alan Moran used to work for the IPA, where climate denialism is pretty much compulsory, but was sacked in August 2014, apparently for Islamophobic remarks on social media.
Brian might like to know. Bill Shorten was best man to John Roskam [ executive director of the Institute of Public Affairs (IPA)].
The is also nothing wrong with disliking a certain religious ideology, only this one has fancy made up word for dislike of it.
Just quietly it has two “O”s rather than two “A”s.
But none this has anything to do with electricity prices or graphs showing them, you must agree.
Good on Bill and John.
Thankyou for the spelling correction.
Well, it does actually. His main graph of electricity prices was probably correct, but there was a green line on the graph that was meant to implicate renewables in price hikes.
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