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.