A myth has been vigorously stoked by Malcolm Turnbull and Josh Frydenberg that an irrational frolic with renewables has made the electricity grid unreliable, as demonstrated conclusively by the state blackout in South Australia in 2016. This is now being taken into actual policy by Angus Taylor and Scott Morrison with “big stick” penalties and government intervention to produce “fair dinkum 24/7” power.
This myth has now been thoroughly debunked by a Grattan Institute report Keep calm and carry on: Managing electricity reliability. Blaming renewables for reliability issues is “wrong and dangerous”.
- shows the idea is wrong because almost all outages are caused by problems in transporting electricity, and have nothing to do with whether the power was generated from new renewables or old coal or some other technology.
And it’s dangerous because if politicians over-react to public concern and rush to intervene in the market, electricity bills could rise even higher.
That quote was from the media release. This graph from the report, enhanced in the AFR, shows the minutes of outages, essentially steady over the last 10 years, plotted against the magnitude of newspaper commentary:
Outages overwhelmingly occur in transporting power, not generating it, to the extent of 97.7% attributed to distribution and 0.7% to transmission. Here’s their graph:
I would suggest that the 1.5% from the SA blackout should be attributed to the transmission network. The basic problem was that a ruddy great storm blew down 22 power pylons:
That leaves 0.1% attributable to generation source, which includes fossil fuel generators failing in the heat.
Networks are also temperature-sensitive, as this graph shows:
Now the basic approach should be to carry on as we are, with AEMO formulating Integrated System Plans, and the market and the states investing to implement the plan within the national cooperative framework set up with the COAG Energy Council. The report quoting AEMO says that if we carry on as we are then reliability standards, high by world standards, will be met:
The Commonwealth should understand that it has one vote on the COAG Energy Council, which operates by consensus. NEM legislation by convention since 1996 has been SA legislation first, then replicated in the other jurisdictions.
The Commonwealth’s head of power comes through its foreign affairs responsibility and its involvement in the Kyoto and Paris agreements. The Commonwealth sets the targets, which, under the excellent institutional architecture set up by the Gillard government with the Greens and independents, used to be formulated by the Climate Change Authority to de-politicise the function. The Gillard architecture also established national organs such as ARENA and the Clean Energy Finance Corporation (CEFC) to stimulate the transition to clean energy.
After the Finkel Review, I understand all that the Commonwealth as such had to legislate was the targets, best framed in the context of a national energy policy to give everyone, including industry players confidence. The main issue now has become an assurance that the Commonwealth won’t take unilateral action on the basis of a confected crisis.
There is indeed something of a crisis in power prices, appropriately investigated by the ACCC, but the genesis of this crisis is more about the gold-plating of the networks, retailer behaviour, and, ironically, the lack of a national policy framework. The Grattan report has debunked the notion, stirred by the Commonwealth government, that there is a reliability crisis stemming from intermittent renewable power. For the genesis of the crisis myth see for example, After the blackout, a new dawn for renewable energy, and Renewables under attack – again in October 2016, then Turnbull goes feral on electricity from September 2017. Then remember this in What the biffo between Weatherill and Frydenberg really means?
“Ten years of brutal, opportunistic politics has left this nation with no credible energy policy.”
The money quote from Jay Weatherill’s outburst was this:
- “Josh Frydenberg was humiliated back in December. We were working with him to introduce an emissions intensity scheme. He knows that. It was well advanced. It was about to happen. Coal interests in the federal Coalition government basically cut him down before he even had a couple of hours explaining it.”
That was highlighted in Paul Bongiorno’s piece in The Saturday Paper. Bongiorno goes on to say:
- Ten years of brutal, opportunistic politics has left this nation with no credible energy policy. We are now seeing climate change denialism preventing any rational path to achieve the goal of net zero emissions by 2050. That’s a bipartisan target that Australia – under the Turnbull government – signed up to in Paris. It’s just 33 years away. Investors get it, and they are unwilling to put their money into coal-fired power stations that have a 40-year horizon to turn a profitable dollar.
Resources Minister Matt Canavan, a Queensland National, is pushing hard in the opposite direction. He is arguing for taxpayers’ funds to build a new “high-intensity low-emissions” coal-fired power station. And he is not talking about carbon capture and storage, but championing the oxymoron of “clean coal” – basically a technology that delivers 70 per cent dirty emissions rather than 100 per cent. Gas delivers 50 per cent and renewables zero.
Investors need to know that the Commonwealth government will stick to its constitutional role. Instead ScoMo has put an activist Coalshevik in charge which creates sovereign risk. That in turn either results in inaction, or action with the risk priced in.
To repeat, the Grattan Institute sees the current interventions as wrong and dangerous. Giles Parkinson’s article summarises Grattan’s policy approach:
- the way to get that investment is to achieve something the government has failed to achieve over the last five years – develop a coherent emissions and energy policy.
Grattan prefers a carbon price, but says an emissions intensity scheme, a clean energy target or an emissions obligation will do. Grattan also supports the reliability obligation, have short term emergency supplies in place, developing demand response and boosting transmission -in short, much of the intent of AEMO’s Integrated System Plan.
It does not support government intervention, capacity payments or capacity markets, which are being put forward by some of the major generators as a means to support coal and gas generators (despite the enormous profits they have been pocketing), or requiring – as the Finkel Review had suggested – of requiring all new generation to have back-up.
We can argue about the detail, but the main message is that there is no crisis in reliability, keep calm and carry on.