How South Australia turned the Feds’ energy policy on its head
Mick Daley | 6 November 2017
The Australian energy landscape has undergone seismic changes in recent years, none more critical than the Federal Coalition’s October 17 party room consensus to dismiss a Clean Energy target and instead adopt the euphemistically titled National Energy Guarantee (NEG).
Backed by the Coalition’s hard right wing and the science-free zone of One Nation, this fossil fuel-heavy policy positions the Coalition in opposition to the empirical wisdom of market forces.
Australian energy industry insiders beyond the coal market are now almost unanimous in touting renewables as the current and future inevitability in the field.
The NEG was pre-empted by South Australian Premier Jay Weatherill’s initiative in abandoning traditional electricity generation in favour of a 100 percent renewables target. This direct challenge to the energy market was also a gauntlet thrown down to the conservative political power base and the confected gas crisis that has seen Australian power prices surge so relentlessly.
Just as South Australia’s reliance on wind turbines has already shown a correlation with decreasing prices, Premier Weatherill’s gamble has turned the Feds energy policy on its head.
The NEG is based on the premise that only coal and gas can deliver reliable dispatchable power to the grid. It specifically requires retailers to include significant percentages of coal and gas in their mix, thus fixing its success to their rapidly diminishing market viability.
Coal is un-investable
James Wright of the Future Business Council puts that position into perspective;
“The marketplace is saying that coal is un-investable. Gas is still regarded as an investment option but in the time frame we have, pure economics will play out. Wind and solar coupled with storage and with the right market rules, purely on an economic basis will be the most effective way to introduce new generation into the network.”
Meanwhile the infrastructure of the renewable economy is surging ahead, with wind farm installations increasing by 513 per cent nationwide, solar 118 per cent and electric and hybrid car sales over 150 per cent on average. Consumer preferences are at the root of this demand, constant technological advancements making low emissions products increasingly cost effective.
The Future Business Council puts the sustainable business boom on a par with the technology revolution of the 1970’s that gave us the Walkman, mobile phones and personal computers.
If the Turnbull government’s internal political compass is too skewed to read the future, South Australia’s Labour Government under Premier Weatherill has grasped the banner of change and run with it.
Weatherill has put his political future and reputation on the line by investing in a radical renewable infrastructure profile that is transforming the energy landscape in South Australia.
In the face of determined efforts by the Coalition to derail his plans Weatherill has put his political future and reputation on the line by investing in a radical renewable infrastructure profile that is transforming the energy landscape in South Australia.
His $650 million dollar gambit will be shored up by nine new diesel and gas generators, providing up to 276MW of energy to safeguard against power blackouts.
With his bottom line secured by these generators, Premier Weatherill has embarked on what’s perceived as edgier terrain with the two significant other planks of his energy initiative.
Soar thermal plant at Port Augusta – 700 jobs just to start
The flagship of his plan is a solar thermal plant to be built in Port Augusta. Symbolically, it replaces the obsolete coal fired plant retired last year.
This plant will, when completed be the biggest of its kind in the world, delivering 700 jobs and 495 gigawatt hours, or five percent of SA’s daily electricity needs. Construction on the emissions free plant begins next year.
Elon Musk making good on his promise
Construction is also half way through the 100-day deadline given by Californian entrepeneur Elon Musk to build the world’s largest lithium-ion battery in Jamestown, 216 km north of Adelaide – failing which he says he will complete it for free.
Paired with a 99 turbine wind farm, the battery will power 30,000 homes in the district, also providing emergency power in the case of blackouts.
The half way construction point on September 30 came propitiously at the one year anniversary of the 2016 storms that destroyed SA’s energy infrastructure, provoking a tsunami of criticism to which Weatherill replied that Malcolm Turnbull, mired in apparent thrall to the fossil fuel industry, was an “unfit” Prime Minister.
Mr Weatherill told reporters in March that SA would; “lead our nation’s transformation to the next generation of renewable storage technologies and create an international reputation for hi-tech industries”.
He said the state must act now, rather than wait for policy changes in Canberra.
“The sorts of timelines and decisions that need to be taken are much more urgent,” he said.
After NSW endured heatwaves in February 2017 that created a load shedding event similar to SA’s 2016 disaster, popular opinion began to turn, with the realisation that NSW’s reliance on its coal fired power stations had not saved it from climactic disasters.
Weatherill’s energy “intervention” suddenly became accepted wisdom, taking his reputation from that of a laughing stock to national leader in energy politics.
James Wright of the Future Business Council agrees with the SA Premier that he’s pioneered an inevitable shift in energy infrastructure.
All the states are going to move this way whether we like it or not
“The grid is moving to support higher renewable content and South Australia has been at the leading edge of that transition. Longer term all the states are going to move this way whether we like it or not really, that’s how the world’s changing and we need to be more overtly getting on that program.”
Wright posits the point Australia needs to get to in renewables as a triangulation of reliability, cost and reduced emissions that he calls the trilemma.
“One of the reports that we put out last year was called the Smart Grid and it recommended that our energy market move into the 21st century so it would better accommodate a higher proportion of renewables, but also be better placed to optimise the trilemma,” he said.
The spirit of his declaration is backed by energy giant AGL, the company whose decision to shut down the coal fired plant at Liddell in NSW by 2020 put the Coalition’s muddled energy policy into such stark focus.
At the time AGL CEO Andy Vesey had outlined specific plans to commit to a low emissions energy strategy, emphasizing that planned wind power plants in NSW and Queensland would provide the bulk of the energy to replace that supplied by Liddell.
As Turnbull desperately tried to convince AGL otherwise, investors provided the fiscal spine to this outlook with 95.45 per cent support for Vesey’s remuneration report.
OneSteel can do baseline energy thanks to Zen Energy
That trend has been further validated by the October 31 announcement that clean energy company Zen Energy is to power the OneSteel steelworks at Whyalla in SA with a $700m, solar, battery and pumped hydro project, confounding the notion that industrial grade baseline power is beyond the generational power of renewables.
As heavy industry moves into a low emissions phase, gas and coal production will constitute a significant headache for the NEG targets, rapidly eroding Australia’s commitments to meeting the Paris Agreements.
Engineer Graham Davies pointed out in the Fifth Estate in February 2017 that the cost of emissions is not considered in models that do not use an emissions pricing scheme, which puts into question the entire climate change responsibility of the NEG.
Cherrypicking parts of the Finkel Report to support the NEG has created anachronisms that will come back to haunt Malcolm Turnbull and only serve to further debilitate the market, according to James Wright;
“Some of the recommendations in the Finkel Review that have been endorsed by government are on an unnecessarily slow timetable,” he observed.
“A great example of that is the ‘five minute rule’. The generation price is set by the last piece of generation that goes into the network.
“It leads to is higher prices because effectively it’s being set by peak load gas-fired generation and secondly it makes it harder for new generators to connect to that market.
“The operators indicate that they will move to a five minute
rule but it will take a couple of years to do. So there’s still some market rules which, on a national level, are impacting both on costs, reliability, source of generation and level of investment in generation.”
AGL’s 2017 statement on its future direction frames the facts shaping Australia’s sustainable energy future.
It observed that the downward trend of pricing in wind and solar is likely to continue, that their operating costs are considerably below those of coal and their total costs remain competitive with both coal and gas. Interestingly, its transition arc from baseline coal to renewables will skip baseload gas.
It has stated that its closure of the Liddell coal fired plant and the planned closure of its two other plants at Bayswater and Loy Yang A are part of a planned transition to invest in grid scale renewables and storage.
Significantly, it also framed storage cost as the lead indicator in its strategy.
As seen with Elon Musk’s Telsa projects, battery technologies are becoming exponentially more efficient, but they are compromised by the pollutant-intense mining of heavy elements such as lithium for their manufacture. The disposal of waste batteries will remain a contentious environmental issue.
But if storage is the key to the future of energy systems, as Dr Alex Wonhas of global engineering and infrastructure advisors Aurecon points out, it requires a complex and nuanced strata of different components to create a reliable source of dispatchable power.
Wonhas points to the 2200 potential hydro storage locations across Australia, identified by an new ANU report claiming that if completed, they would provide 1000 times Australia’s energy needs.
“I think the significance of all these projects is they are all existing plants that are being expanded and that’s often a cheaper way of creating new and additional storage capacity,” he said.
“There are many other forms of storage especially in the built environment, so for example through intelligent building control you can also optimise the energy consumption of a building and therefore effectively use the thermal mass within a building as an energy store.
“And the same applies for the residential sector. For example I have signed up with an electricity retailer that not only provides me with my electricity but also operates my swimming pool and by basically having control over my swimming pool it effectively works as an energy storage device.
“I think the key to success in the future will be to identify all of those opportunities where we have natural storage reservoirs that can help us shift energies, from the time when it’s produced to the time it’s actually needed by consumers.
“The built environment will play a huge role, being one of the largest consumers of our electricity. There are interesting things that can be done through passive design to reduce energy consumption and actually makes it more amenable to the output profile of the renewable.
“If that gets coordinated across a whole precinct you can get significant amounts of storage that can help stabilize the electricity grid.”
Andy Chambers of Seed Consulting Services (overseeing many of SA’s large sustainable infrastructure projects) emphasises that changes in consumption patterns are equally as important in managing energy demand.
He observes that the SA government has funded an Energy Productivity Program to help large energy users find savings in demand rather than in consumption.
“Whenever equipment fires up and uses a large amount of energy it puts demand on to the electricity network,” he said.
“From a sustainability perspective, if you can reduce demand before you start looking at any other form of energy replacement that makes a lot of dollars and cents to people in business, so we’ve got big projects at the moment going around demand management and the decisions that find those demand savings.”
Chambers says that the SA government is encouraging businesses to provide analysis and initiative in tackling the state’s energy future.
“There are a large range of venture businesses undertaking energy audits to understand how they consume energy, what parts of the day they consume energy and how it aligns with the demand at the peak period of the day.
“So in that peak period when people go home and turn their air con on, whenever people can reduce that demand during that period then that’s going to result in savings for those businesses.”
Chambers maintains that a careful and clear-headed assessment of such nuanced variables will contribute to the long-term stability of a renewables energy market.
South Australia’s issues are a taste of what’s to come elsewhere
“What we have seen here in South Australia is probably a taste of what’s to come interstate. I mean, how do you value the security of your network? When you have an aged asset like the coal fired power station that’s been removed, then you need to replace that energy into your network.
“You’re going to see governments and industry looking at what presents the best cost-benefit in business investments. We’ve reached the stage where renewables are on a par with current costs around coal and looking at the projections they’re clearly going to get cheaper and cheaper. So getting in early with those investments enables the grid to have more security. Being ready for a high percentage of renewables I would have thought is more of a far sighted investment into the future rather than relying on coal, that clearly doesn’t have a space any more, when you look at where we’re at with climate change.
“There’s a responsibility factor for government that goes beyond the next election cycle. That has to be about investing in future benefits that are not tied into coal.”
James Wright points to the 2020 deadline AGL has named for the closure of the Liddell power plant as the crucial horizon for SA’s energy planning to take effect.
“The economic pendulum will have swung in favour of those renewable technologies in that time frame,” he said.
“I think we’re closer to the end than the start and it’s clear that the generation industry recognise where this is headed and that will become the accepted wisdom in that time horizon.
“In the medium term our reliance on gas as an electricity generation source will come off as well, when the economics aligned around solar coupled with storage and or pumped hydro (become) a reliable and cost effective way to add to our generation capacity.
“So there’s a number of alternatives that are economically compelling that would solve our trilemma, whilst reducing our reliance on fossil fuel.”
But as the Feds continue to pressure the states to increase coal and coal seam gas developments, embattled South Australia stands firm on its commitment to a wholesale embrace of a renewable energy-powered grid.
Even as the Coalition’s NEG attempts to starve renewables of oxygen, it would seem that a strategy which ignores market forces and factors out realistic emissions reductions is not a guarantee at all, but rather a forlorn political hope. Being inextricably tied with the party’s right wing and the fortunes of Tony Abbott, the success of a Coalition policy based mainly on coal seems about as likely as Abbott’s own desired return to power.
But while Premier Weatherill faces the political threat of Nick Xenephon’s challenge at next years SA elections, for now at least he seems to have provided the crucial leadership required in the vacuum of Federal energy policy.