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Can coal generators fool the government a second time?

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It is just three years since some of the heads of Australia’s largest coal fired generators warned that the lights “would go out” in Australia if the carbon price was introduced, and coal generators were forced to close.

Richard McIndoe, the former boss of EnergyAustralia, which owns the giant Yallourn brown coal generator in the Latrobe Valley, was at the forefront of these claims, predicting it would be “lights out overnight” for Victoria.

It was, of course, absolute nonsense, as pointed out at the time by energy analysts, economic experts such as Ross Garnaut, and any number of environmental NGOs. But the government fell for it hook, line and sinker, and doled out billions of dollars in “compensation” anyway.

Now the absurdity of these claims have been laid bare by none other than the Australian Energy Market Operator, which says five power stations the size of Yallourn could be closed down and consumers wouldn’t know the difference. The lights would not go out.

That’s right, five power stations of the size of Yallourn – the generator that EnergyAustralia boasts provides 22 per cent of Victoria’s electricity, could be closed, and nothing would change. Two of those generators could disappear in Victoria, and there would be no impact on deliveries.

In Queensland, the situation is just as dire. The Queensland government is trying to sell both the Stanwell Corp and CS Energy generation companies, but the AEMO data suggests that the entire CS Energy portfolio of nearly 3GW would not be needed in a decade’s time. That’s a direct result of a Queensland government decision of more than a decade ago to overbuild capacity – with cheap government finance – to try and bring down the cost of wholesale power.

aemo statopp

All told, AEMO estimates that between 7,650MW and 8,950MW of capacity is surplus to requirements across the NEM – the result of falling demand that has been the result of growing energy efficiency, the growing impact of rooftop solar, a decline in manufacturing, and reduced consumption due to rising prices.

A total of 7,500MW of capacity would need to be removed from the NEM to affect reliability issues. That is equivalent to around one quarter of all the base load capacity that has been built in the country. It is not needed.

“For the first time in the National Electricity Market’s (NEM) history, as a result of decreasing operational consumption, no new capacity is required in any NEM region to maintain supply-adequacy over the next 10 years,” says the AEMO report, Electricity Statement of Opportunities for the National Electricity Market.

Of course, the coal generators are now trying to turn this into their advantage. Having succeeded in diluting the impact of the carbon price, they are now seeking to do the same with the other big environmental energy policy, the renewable energy target.

They are arguing that there is already too much capacity, and by forcing more renewables into the market, that will force more coal fired generation out the other end.

This AEMO publication will now doubt be used to fuel those claims. But who’s responsibility is it for the excess capacity?

As RenewEconomy reported last month, most of the increase in generation has come not from the addition of wind farms or other large scale renewabls, but by a big rollout in fossil fuel generation.

energy australia new capacityThis graph (above) comes from EnergyAustralia itself. The underlying theme is that the generators are desperate to protect the value of these recent investments, just as the network operators are seeking to protect their “gold plated” investments in poles and wires. The costs of both are being passed on to consumers and simply overwhelm the impact of increased renewables.

In fact, as numerous analyses have pointed out, the increase in renewables actually serves as a dampener to the rising wholesale prices – coal generators would like more expensive gas to be burned because they benefit from the rise in wholesale prices as well.

When there is too much sun and wind, and the share of solar and wind increases, then the wholesale price falls. As the government’s own forecaster, ACIL Allen, pointed out, cutting the RET might boost the coal generator’s revenues by around $5 billion. Others say it is much more.

So, the fossil fuel generators are trying to fool the government again. The tragedy is, given the make-up of this government, and its RET-Review panel – it is very likely to succeed.  

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  • Zvyozdochka

    It’s starting to feel like the energy policy of this country is a complete shambles.

    • Miles Harding

      Considering the other LNP policies, it is in good company

  • Andrew Blake

    I don’t think the Government cares about being fooled. Coal is King so they have to protect them.

  • Rob G

    When the current government does wake-up to ‘why were we trying to save the doomed fossil fuel power industry” it will be sitting in the opposition seats still pondering how could they have been given the biggest election hiding in history, The Australian public want the change to renewables.

  • Colin Edwards

    Giles, I know there’s a big desert between you and me, but I would dearly love to see some WA data included when you present regional energy data.

  • johnnewton

    Just to report that Ausgrid are out in force in Glebe, Sydney, replacing wires the length of Glebe Point Road,a bout 25kms … gotta spend that loot somewhere

  • coomadoug

    The elephant in the room is the micro load side options that are in the pipeline.
    If a 500 MW gen fails without warning we have to ram another 500 onto the grid, even though, in truth we don’t necessarily need it. So in the future there will be millisecond load side response to such events. You get a better result because you don’t have to wait for the response of reserve generation. There are no costs. The instantaneous response eradicates much of the power swing and inertia problem. We don’t burn fuel inefficiently fixing something that is not a real problem. So we can replace a billion dollars in reserve infrastructure by switching off things the customer has agreed
    to for a contractual reward. The truth being they will most likely not even be aware it has happened.

    From a market perspective, the retailer who provides this service will be rewarded in the market by achieving the same return for the reduced output plus a premium calculated on various critical issues and load side responses provided.

    This government could influence such evolution and rightly attribute it to their direct action policy.As the electric car and other storage systems come into the mix, the load will, in my view be eventually a constant 24 hr figure. Generation can be totally green and run at the optimum efficiency.

    I am looking at the technology options available now and in the future and can see that the carbon pricing in 10 years will be a less then optimum method of controlling emissions. I believe the most cost effective methods will be all aligned to the eradication of large scale fossil fuel generation purely because of economic realities.

    • suthnsun

      I can’t see why the (actual) load figure will eventually be constant 24hr? It just seems to me there are not many significant power demands which naturally occur overnight so the low cost storage options (which are coming) will be optimally charged preferentially by excess wind while most demand sleeps. I purchased an EV recently, the charge power is modest and the thing that is striking me is that most next day demand is quite predictable, only 3-4 kwh needed for me overnight for optimum regeneration in the early commute. Other household demand is truly trivial.

      • coomadoug

        Ok lets raise a few pointers.
        The world is transitioning to increasing areas of high density living. There will be no solar roof space at all for 70% of the customers.

        There will be large scale solar generators dispersed across the nation and also wind.

        The transport industry will be about 40 to 50 % of the load. The cars and trucks will provide all the storage required.

        Wind will generate at night and provide more than enough of the early hours generation. The excess will be charging cars.

        During the day and in heat waves the solar and wind will supply the energy requited. Excess can be provided by the cars.

        For example your google car can drive itself to the charging stations at night when the home is sleeping.

        The essemtial thing is that the load side management can be so complete with endless options and synergies of all connected plant and loads, the loading could be flat and steady 24/7

        • Jan Veselý

          I just looked at the numbers here in Europe. Energy needs are approximatelly: 40% electricity 40% heating 20% car/truck transport. So switch to EVs would mean that transport would be add to the rank electricity where it would be 33% of total. But EVs are 4-5 times energy efficient and gasoline transport/refinning/mining consumes A LOT of electricity. All in all EVs will add 0-10% to electricity consumption. The same number which was Germans able to save in last 8 years. http://www.renewablesinternational.net/looking-beyond-year-to-year-changes-in-the-electricity-sector/150/407/80889/

  • Ben Verbaasd

    We here in Europe are in the first contemplations on a carbon tax on Australian (and other free riders on our environment) imports.

    • PCalith

      That would be awesome. Do you have a link?

    • shinytop

      The sooner the better, we need something to prod these neanderthals out of their caves

  • ac baird

    The answer is yes. Of course the Coaltion can be fooled again ‘cos they wanna be. There is no alternative. It’s quite possible that if the ALP formed govt they’d be pretty underwhelming in their approach too, finding yet another Martin Ferguson. They do have a solid ring wing you know. And wasn’t he from the Left? Laughable.

  • Miles Harding

    This reminds me of a light bulb joke:
    Can the government be fooled again? Yes, but it has to want to be fooled.With no shortage of fools, can the outcome be anything else?

    I find it particularly concerning that Barnaby Joyce is possibly the most reasonable and coherent member of the LNP ministry.