About a month ago Meridian Australia’s CEO Ed McManus said that while the electricity market can turn on a dime, stability had returned to the market and the trend looks good. They had just concluded a swag of hydro, wind and solar power deals which will deliver cheaper electricity than the company could buy in the wholesale market. So their retail arm Powershop was offering a 5 per cent price cut to consumers.
- Electricity contracts for delivery in 2019 were trading at more than $92 per megawatt hour in Victoria and $108/MWh in South Australia a year ago, when SA and NSW had just suffered power shortages and the closure of Victoria’s Hazelwood power station loomed.
Contracts for 2019 have since fallen to $82.90 in Victoria and $94.36 in SA, while contracts for delivery in Victoria in 2020 and 2021 are trading at $76/MWh and $69/MWh and contracts for 2020 and 2021 in SA are trading at $86/MWh and $85/MWh.
In December last year the Australian Energy Market Commission said in its annual review that a typical household bill of $1433 a year will fall by 12 per cent over the next two years as more wind and solar energy comes into the market. According to the AEMC:
- Wholesale electricity costs will fall by about a third to $405 as National Electricity Market costs fall, network charges will rise slightly to $628, and charges for environmental measures such as renewable energy targets and solar feed-in-tariffs will increase by a fifth to $89.
Those articles were all in the Australian Financial Review, which business leaders are likely to read. Do politicians read the AFR, or do they get their news from the Murdoch Australian?
On Tuesday Ben Potter had another article in the AFR Five ways the power grid changed for the better over summer, the second hottest om record.
Here are some interesting graphs. First, electricity prices:
In Queensland rooftop solar shaved as much a 1000MW off the daily peaks:
And in SA:
Here’s how renewables delivered against brown coal and gas during the peaks:
Coal doesn’t respond to peaks. And it is prone to fry on hot days which are increasing in number:
AEMO notes in its Quarterly Energy Dynamics for the December quarter that two new participants, Hornsdale Power Reserve (the 100MW Tesla battery at Neoen Australia’s Hornsdale wind farm in SA) and EnerNOC, a US-based wholesale demand response firm, entered the FCAS (frequency control ancillary services) markets during the second quarter, reducing costs in this sector.
As to the future, Ben Potter’s article says:
- With more than 5000MW of large-scale wind and solar capacity under construction, and more than 1000MW of rooftop solar going in each year, these trends can only accelerate. If regulatory hurdles can be overcome, demand response will grow in leaps and bounds.
Plans for “virtual power plants”, rooftop solar panels home batteries and other “behind the meter” energy resources, are becoming more ambitious. The same goes for plans for “synthetic power plants” – combinations of wind, solar, gas, pumped hydro, demand response and batteries proposed by AGL Energy and Whyalla steelworks owner Sanjeev Gupta’s GFG Alliance.
So in terms of price and supply, the markets seem to have the matter in hand. The last thing we need is the Commonwealth Government blundering around intervening and telling private enterprise what to do. This is effectively what Malcolm Turnbull and his mates are doing in telling AGL to keep Liddell open, or sell it to someone who will.
AGL has a $1.4b Liddell replacement scheme. Governments should let the market fill supply gaps for best results for consumers, Audrey Zibelman, chief executive of AEMO, said in her advice to the Turnbull government last month. Her advice is that Malcolm Turnbull’s bid to flog Liddell to Alinta is ill-advised.
In other words, don’t panic and blunder into a market you barely understand (not her words) because you will just make things worse.
The AFR has picked up her theme and pointed out that the Commonwealth Snowy 2.0, the SA $550 million energy plan, and now the Victorian big battery plan are already examples of government intervention in the market, which for free enterprise operators creates sovereign risk.
Turnbull, of course, is being pressured by his reactionary, nativist right who have launched the Monash Forum to promote coal power, as BHP Billiton finally quits the World Coal Association because of its climate change policies.
On the Monash Forum Marc Hudson from Manchester University has an excellent article at The Conversation – The pro-coal ‘Monash Forum’ may do little but blacken the name of a revered Australian.
Descendants of Monash have demanded that the use of his name be withdrawn, but these people are too arrogant for that.
Mark Butler told Patrician Karvelas that revamped Liddell power will be more expensive than the alternative renewables, from memory $106 per kilowatt hour to $83, but I can’t find the link. Funny that.
Then as Ben Potter in the AFR again says, there is a significant risk with 50 year-old coal power plants of killing people:
the boilers, and the pipes running from the boilers to the turbines, are still said to be the original ones, with all the wear, tear and fatigue of 46 years of faithful service.
Beyond 50 years, the risk of leaks and burst pipes becomes unacceptable. A leak in a boiler can be contained, but if one of the pipes bursts between boiler and turbine, steam can hit workers in the surrounding area, killing or maiming them.
To make Liddell safe and extend its life would cost around $900 million. Alinta is said to be offering around $1 billion. If AGL sold they would be effectively handing over a million customers to their opposition. Their own Liddell replacement plans are around $1.4 billion, which would establish a new facility, able to offer the flexibility of dispatch required by the modern electricity market.
Not surprisingly AGL are not selling:
AGL will defy pressure by the Turnbull government to sell its ageing Liddell power plant, warning that interference in the market would raise issues of ‘‘sovereign risk’’ that could deter investment in new energy assets.
Mr Vesey said his rival had indicated in the email a ‘‘desire to engage in a potential acquisition” of Liddell and asked about the purchase process.
Mr Vesey said he had replied ‘‘we are not in the process of selling so there is no process’’.
On security of supply, that is, the avoidance of blackouts, I can’t find a link, but I understand that on our record this last summer, Australia has the most secure energy system in the OECD.
On emissions, I’m partly finished a post where analysis of the proposed National Energy Guarantee shows that in terms of emissions the NEG will be worse than doing nothing. In other words it will actually preserve the use of coal.
There is an obvious case now for the Commonwealth to return accountability for electricity systems to the states, as the Constitution specifies. This would allow the states to work with the NEM mechanisms now established (ESB, AEMC, AEMO and AER) through GOAG without Commonwealth interference.
You are in the way, Malcolm and Josh. If you stay there you will probably be run over.