Who would have thought? Yet that is what Giles Parkinson tells us in Myths of baseload and intermittent energy: It’s not what you think.
I’ll come back to that, but my reading of where we are landing with energy policy after the Dutton attempted putsch or insurrection is that the new cabinet Scott Morrison has put together is open to coal-fired power, but has no definite plans to build coal-fired power. So nothing is likely to happen, even in terms of concrete plans, prior to the election which must be held by 18 May next year.
This is evident in what Minister for Resources and Northern Australia Senator Matt Canavan said to Patricia Karvelas on Thursday. We have to remember that developing concrete plans to build a coal mine will take longer than the government has before the next election. Moreover, no private funding would be forthcoming and the likeliest government funding would be through the Northern Australia Infrastructure Facility (NAIF). However, the purpose of that fund is to stimulate and support private investment, plus I understand the Queensland government would have to sign off on the deal. Can’t see that happening.
However, new resources minister Angus Taylor signalled further taxpayer investment in existing coal and gas as reported by Katharine Murphy at The Guardian:
- In a clear nod to internal pressure, Taylor signalled on Thursday the government was intent on boosting supply, and that meant expanding existing plants, upgrading ageing “legacy” generators, as well as pursuing new “greenfield” projects.
“We need to encourage all of these,” he said. “It’s ironic that in a country with an abundance of natural resources – coal, gas, water and solar – we should be in this position.
“We need to leverage those resources, not leave them in the ground.”
Matthew Stevens in the AFR says that the Morrison government has simply given up on a broad energy policy that would provide a framework for future investment decisions and replaced it with a single “laser” focus on driving down energy prices:
“As the new Minister for Energy, my first and only priority is to reduce energy power prices,” Taylor said in introducing himself to a small business conference on Thursday. “And to do this while keeping the lights on.”
Needless to say, we count that as two quite distinct priorities, but there you go.
This graphic attempts to capture what Taylor is about:
Stevens says Taylor’s policy priorities
remain blinkered by retail politics and that reflect an oddly un-Liberal belief that government knows better how to manage power markets than does industry.
Evidently we have a power price crisis even though as Taylor observed: “Electricity prices are turning the corner”. The government is claiming credit for this corner-turning which apparently is purely the result of government action and threat.
They claim credit for the reforms that have forced east coast gas exporters to fully supply the domestic market. Stevens said the prices did go down to three-year lows, but late in June they started to go up again to:
routinely hit trend peaks of $11-14 a gigajoule (GJ) and they were running at between $9.53 and $10.30GJ across east coast markets on Thursday with forward prices trending higher.
I think the key is that we are using less gas in the NEM, mostly using it to top up supply from coal and renewables.
Stevens says the retailers did indeed reduce prices in response to the government’s call, for which they were rewarded by being called “bandits”.
Stevens believes that Taylor’s “default” price is a misrepresentation of the ACCC’s “reference” price. The former will be tantamount to government price-fixing which is likely to make the situation worse.
Lately we have been hearing from diverse sources that electricity prices are falling, as reported by Peter Hannan and Cole Latimer in the SMH:
That’s irrespective of the NEG. And all that while the share of renewables is increasing:
You may recall that the Finkel review forecast that renewables will bring prices down. In fact recently, in the middle of one day, solar power caused the price to go below zero in Queensland, although solar is just winding up in that state.
The latest renewable energy index compiled by Green Energy Markets confirms analysis by the Energy Security Board that wholesale electricity prices are on the way down because of an addition of 7,200 megawatts of extra large-scale supply from renewable energy.
The new analysis charts movements in prices in the energy market. It says prices began to rise when large amounts of supply were withdrawn from the market in South Australia with the closure of the Northern power station, and because of the closure of the Hazelwood plant in Victoria.
It says new investment in large-scale renewable energy projects during that period had stalled because of Tony Abbott’s efforts to wind back the renewable energy target. “It was only after prices began spiking upwards with the announced closure of Hazelwood that we saw significant commitments to construct new large-scale renewable energy supply.”
The analysis says price reductions have followed more renewable projects coming on stream. “Prices have since continued to decline in anticipation of increasing amounts of renewable energy supply reaching construction completion and contributing power to the grid.”
Edis himself is blunt about it – Turnbull was knifed by a lie: Renewables are already bringing prices down.
The AEMC (Australian Energy Market Commission) also predicts power prices to fall, but says it won’t last without proper policy. Historically the AEMC include the role of high gas prices in the rise of power bills, a factor often neglected.
Elsewhere in July the Australian Energy Regulator (AER) stripped $2 billion in revenue off the networks, whose charges make up at least half the bill paid by consumers.
increases in power bills had “eroded the trust of Australians in the capacity of government and politicians to deliver affordable, reliable energy”.
“We need to re-establish this trust.”(Emphasis added)
The Fedral Government story here is that state politicians have erred in pursuing renewables based on green ideology, whereas federal politicians now need to intervene in the private enterprise market which is populated with “gougers” and “bandits” to restore trust.
I monitor selected company performance, and can tell you the AGL now has a prospective ‘return on equity’ (ROE) of about 11%. That is about half the average of other leading companies I follow, leaving aside the banks (which if included would bring the average down to about 17%).
In fact government policy is now firmly based on an alternative reality created by themselves.
In brief, the September 2016 blackouts are routinely blamed on renewables, whereas a ruddy great storm blew down 22 power pylons. In the cold start for the network south of the wrecked grid, wind came on before gas.
In the subsequent summer there was a blackout in a few suburbs in Adelaide, garden variety in terms of what we experience in SEQ every summer, again blamed on renewables. In fact AEMO, the market operator, got the forecasts wrong that day in terms of temperature, demand, and the degree to which wind dropped in early evening. The result was they called in a gas power station, sitting by idly without even a supply of gas available, minutes before it was required instead of hours.
That was after the previous CEO of AEMO had retired and before Audrey Zibelmann took up duty.
When the heatwave hit NSW, AGL preferred to ask Tomago smelter to close for a short time rather than inconvenience domestic consumers on a Friday afternoon/early evening.
Subsequently it was found that several coal-fired power stations malfunctioned in the heat and solar actually helped the situation.
On the Sunday evening the brutal heat hit SEQ, where there were rolling blackouts for about four hours which were not reported anywhere in the mainstream media. What happened is that demand reached record and unpredicted levels which had two consequences. First there were spikes in the spot market price, and five coal-fired power units failed.
To this day the former stands as evidence of Qld power generators ‘gaming the system’, whereas an AER investigation published in May told the truth as oultlined above.
Josh Frydenberg even says he called out the Qld rogue operators which were then reigned in by the Qld government. He did no such thing.
Quite separately in early June Mark Bailey, the relevant Qld minister, wrote to Stanwell, along with CS Energy a government generator which together supply two-thirds of the market, directing them to change their bidding strategy.
CS Energy and Stanwell operate with two conflicting aims – to provide affordable power to Queenslanders, and to provide revenue so that the government can pay for schools hospitals and other infrastructure and services. Very simply, Stanwell had the balance wrong. I understand NSW private coal operators who were effectively setting the market price at the time, allowing Stanwell to lift their prices.
In any case the futures price, which has a fair bit of sentiment and guesswork in it, dropped by 25%. This was a result of Queensland action, the Feds had nothing to do with it.
Now Giles Parkinson has come up with two remarkable articles on 29 August:
The spinmeisters in Canberra have been spruiking the need for reliable ‘baseload’ energy, basically coal supplemented by gas, which they are confusing with dispatchable energy, dispatchable with minutes notice, which coal is not.
In terms of reliability, we’ve had more than 100 trips of big fossil fuel plants since last December, often at times of soaring heat.
In terms of intermittency, the spinmeisters have been spruiking ‘synchronous’ generators, by definition coal and gas.
At a recent seminar Kate Summmers, one of the country’s leading electrical engineers, has turned the whole issue on its head.
You see, no-one checks whether the ‘synchronous’ generators actually supply synchronous power under stress. She says, they are actually more likely to transgress the operating bandwidth than wind or solar.
Those with the requisite skills can look at the detail, but the simple story is contained in this graph of what happened in NSW in February 2017:
Wind and solar are the blue lines in the second and third graphs.
Taylor says he is looking to base policies on the “truth”. He should go to those who know, which seems to exclude many who have plenty to say, as well as some operating in the industry.