rss
44

Fossil fuel industry holding Australian economy to ransom

Print Friendly

How often do we hear it? Australia, with its world-leading renewable energy resources, particularly wind and solar, and its technological know-how, has the opportunity to become a global energy superpower in a global economy committed to rapid decarbonisation.

Is it an opportunity the country is likely to seize? Probably not.

foyster brown coal

Illustration by Greg Foyster, [email protected].

Australia has an opportunity to accelerate that shift at a critical meeting of the federal and state energy ministers on Friday, but it is highly unlikely that the status quo will be troubled. There are still too many powerful vested interests at play.

Take, for instance, the situation in South Australia. This so-called “energy crisis” – July’s big spike in prices that used to be common before the advent of wind and solar – was predicted, hoped for, and possibly even confected in the hope of illustrating the limitations of renewable energy.

Instead, it has simply proved that the fossil fuel industry is holding Australia’s transition to a clean energy economy to ransom, and that consumers are being gouged at every level of the energy industry.

Numerous reports have pointed to the market manipulation by a few powerful interests. The Melbourne Energy Institute outlined how a few generators “gamed” the system, exploiting their unusual market power to charge “monopoly rents”, with parallels to the energy crisis confected by Enron in California more than a decade ago.

The Clean Energy Council has complained about stratospheric prices extracted by fossil fuel generators in the name of “energy security,” while RenewEconomy’s own David Leitch and the MEI have pointed to the huge lift in margins.

A new study to be released tomorrow by Bruce Mountain of research group CME will show that one-third of capacity was “deliberately” withheld at the peak of the south Australian energy “crisis”, at a time when the generators knew that they could cash in on high prices.

The first part of his report, released on Tuesday, showed how the big three retailers – pretty much the same companies that own the state’s gas generators – were price gouging in South Australia, charging $650 more than the cost of generation and delivery, just to act as a go-between for wholesalers and network companies.

istock_000004788026xsmallAnd, of course, there are the network costs, the gold plating of which has seen consumer bills skyrocket in recent years. Even as regulators attempt to crack down on spending plans for yet more poles and wires, the network owners – and particularly the NSW government – is taking the regulator to court to enable them to spend more and pass those costs on to households and businesses.

Little wonder, then, that the ministers’ meeting in Canberra on Friday is being asked to look beyond more fossil fuel solutions – i.e. drilling for more gas – to solve the NEM’s problems, and to open the markets to more competition. Such measures might include new interconnectors, encouraging more battery storage and “complementary” renewables such as solar towers with storage. In short, they want more competition for the incumbents.

“The future of the national energy market is 100 per cent renewable,” says Tom Quinn, the CEO of the Future Business Council. “The grid must be re-imagined with this reality in mind and built to enable diversified generation and simple import and export throughout the national energy market.”

Quinn says Australia needs to rapidly transition from to its “dumb grid” to an “adaptive grid” and embrace those new technologies, which could include solar, storage, electric vehicles, pumped hydro and ocean energy.

“The country has the world’s richest renewable energy resources and the opportunity to create the lowest cost base of energy for industry in the world,” he notes.

The Labor states appear to recognise this. South Australia’s Labor government says its economic future depends on transitioning to a clean energy economy. It is already nearly half way there, a benchmark that the incumbents and ideologues are keen to demonise rather than celebrate.

The ACT is half-way to its 2020 target of sourcing the equivalent of all its electricity from renewable energy, a remarkably canny and visionary strategy that will provide its homes and businesses with an effective hedge against volatile fossil fuel prices and price manipulation in the market.

Victoria and Queensland are keen to follow, and Tasmania is keen to use its massive hydro resources as a clean-energy battery for the mainland. Even Western Australia realises that the future lies in solar and storage.

But there is no sign of this transition at the federal level. Our interview with Josh Frydenberg last Thursday confirmed the worst fears of many in the industry. Frydenberg understands some of the dynamics that are working in the industry, but there is no sign that the Abbott era policies on climate and renewable energy are about to change.

Frydenberg may be less willing than some of his coalition colleagues to blames renewable energy for soaring electricity prices, but he shows he is not about to accelerate the push – ARENA will be stripped of funds; next year’s review of climate targets will be a stocktake, rather than a launch-pad; and there will be no long-term setting of targets, be they for renewable energy or for the decarbonised economy that the Coalition signed up for in Paris last year. The answer for everything appears to be: more gas.

This is depressing stuff. Everyone knows that the transition to new technologies is unavoidable, the question is over the shape, the pace and the cost of that change. The federal government’s role is critical: it can seize the moment and work towards becoming a world leader and renewable energy super-power, or it can be dragged along as it hits the brakes on change to suit the narrow business interests of a few powerful players.

It would, of course, be unfair to blame only Frydenberg for this mess. He, and Turnbull, are constrained by the right wing of the party who, far from wanting to accelerate the transition to clean energy, are reluctant to even accept the science of climate change. The actors may have changed, but the script remains the same.

The role of mainstream media is also important. In short, it has been appalling. Since when has the media considered its role to turn a blind eye – as it has done, quite literally – to the abuse of power of a few key players in the energy market.

The Murdoch press splashed a front page “scoop” about the absence of wind power at critical moments in early July, part of its long and intense campaign against renewable energy. Apart from being wrong – and sourced from the Coalition – it completely missed the point. Yet it has written nothing of the market manipulation and “economic” withdrawal of nearly 1,000MW of fossil fuel generation. The price gouging of retailers has barely got a mention.

Meanwhile, the fossil fuel industry does as it pleases: demonising renewables, withholding capacity, exploiting market holes to push prices higher, pleading for subsidies to help fossil fuel generation leave the market, pleading for other subsidies to “guarantee” the retention of other fossil fuel generators, fighting rule changes that could open the market to new competition, and taking the regulator to court in an effort to further gold plate the grid.

That is what they are able to do. They have a majority share of the market operator, extraordinary influence over the policy maker and federal and state regulators, and a stranglehold over conservative politicians. And as long as the Coalition refuses to translate its Paris commitment to practical policy, they will continue to run amok.  

Share this:

  • Rob G

    Frydenberg and the rest of his numpty government need to watch this. Matt Canavan should be taking notes. https://www.youtube.com/watch?v=7FSxW-xLhEw

    • Dan

      No, Australia is being left behind!

  • Geoff

    So wind and solar could not produce energy and you somehow blame the 24/7/365 ON DEMAND Victorian electricity.
    Giles you have always known. Solar and wind, by design, are intermittent. Always will be. Battery backup will simply add another layer of capital cost and complexity and not produce 24/7/365. It’s an engineering fact.

    • Matthew Wright

      Actually US DOE Research in the US shows achieving 80% with variable wind and solar and very marginal curtailment is achievable at lower cost than BAU and that’s before you even goto storage or other balancing measures. You don’t need the same output 24/365. demand varies day and night and some of it is artificial and can be shifted while other demand is shiftable and other demand is curtailable at critical times. (btw 24x7x365 is 7 years, not sure why you consider 7 years an important timeframe)

      • Alastair Leith

        7 year timeframe, LOL.

      • Concerned

        Ah,let us reference South Australia recently?

    • Ian

      Your ‘fact’ is out of date and if not already will be imminently.

      Battery backup will reduce the need for the network to put more af fatter wires in.
      So will distributed energy and will load management.as will energy efficiency.

      These strategies are meeting the strong opposition of FF industries and the various coalition governments.

      Innovation should be supported not opposed.

    • Tom

      What are you, autistic? Read the article.

      • wideEyedPupil

        Autistics tend to be very good at processing data, even if they have a large capacity for fictional narratives (telling lies) in some cases. Suggest autistic is not the adjective of choice in this case.

    • Chris Fraser

      Can’t really understand your fear (assuming you are genuine and your role is not to simply shill for fossil unswitchables). Why not leave it to the experts and put your mind at ease ?

    • Brunel

      Batteries add cost?

      What a lie. Must be another troll.

      • Dallas Lane

        Consider the 91MW Wattle Valley wind farm on York peninsula in South Australia at an estimated cost of $180million. A 22MWh Li-iron battery with an estimated cost of $20 million is only capable of provide 91MW of power for (22/91×60) about 15 minutes. Battery technology has a long way to go before it becomes viable for grid backup.

        • Brunel

          That is about A$909/kWh.

          The 100 kWh Powerpack is sold for U$250/kWh. After the gigafactory is fully built, it would be U$150/kWh.

          • Dallas Lane

            Well at that rate 15 mins of battery backup would only cost $3 million. Still not a good option.

          • Brunel

            What would you like the cost of storing electrons to be.

          • Dallas Lane

            The point is battery backup of wind farms is expensive.

          • Brunel

            It is not backup but storage for daily use.

            Solar panels put electrons into batteries during the day for use after sunset.

            Cheaper to get electrons from batteries instead of diesel generators – which is what rural houses had been using for decades.

          • Concerned

            And I live in Brisbane.Last 12 days very little sun.PV at 40% of normal output and SHW on booster.Winner.

          • Brunel

            What does that have to do with the crash in battery prices.

            Straight solar hot water made no sense last financial year. Heat pumps powered by solar panels are cheaper to run.

          • Concerned

            Moore’s law does not have anything to do with batteries.
            And heat pumps powered by electricity.No sun ,no power.Simple stuff.
            Brisbane has prolonged periods of cloud and rain.
            I know,i log stats.

          • Brunel

            You said 40% not 0%.

          • Concerned

            In Brisbane I would need a garage full of batteries,total nonsense.

          • Brunel

            Because Powerwalls cannot be stuck to the outside of houses. Oh wait…

          • Concerned

            Have you any idea of basic mathematics or physics?

          • Brunel

            Troll alert. You are paid by big coal.

          • Concerned

            So,a lack of understanding of basic mathematics and physics brings you to that level?Astounding,and thanks.

          • Concerned

            I have had SHW for 20 years.Makes total sense.20 year life,almost no maintenance.
            Heat pumps are mechanical,more expensive,can be maintenance intensive and lucky to last 10 years.

          • Concerned

            Economic nonsense.

      • Concerned

        How would they not add to the cost?

    • Barri Mundee

      Show us that “engineering fact” Geoff.

  • Geoff

    If anyone is tired of GETUP/CRIKEY journalism have a look at this page.

    http://batterytestcentre.com.au/project/battery-basics/

  • Analitik

    Tasmania is keen to use its massive hydro resources as a clean-energy battery for the mainland

    Yes, it did so well over the last summer.

    However the BassLink interconnector only has a 500 MW capacity and all of Tasmania’s hydro plants only total to around 2.2GW, so some major infrastructure investment is needed including Gordon below Franklin

    • Concerned

      Apart form the recent months when the rain did not fall,and the Bass Link failed et al .Reality?

  • Cooma Doug

    Using Tasmanian hydro as storage for the entire east grid is not going to work while the wholesale market retains its current design.
    The national grid has more storage capability and is not limited by weak interconnection. Indeed if the market is going to recognise it and reward accordingly via market demand it will happen.
    However it is possible to provide more then enough storage in the present status quo from operation of what we already have. It just makes no sence to do so because of the market design.
    I am reluctant to use the words scam, Enron and so on whilst all that has taken place is legal and logicly in line with the market rules and its design. A business chases money within the market guidelines.

    Staying loaded and waiting for price spikes is more then 100% better in terms of income then it is to completely cycle each day in the interests of efficiency and reduced emmissions. The market just doesnt do that and is not designed to encourage it.
    The original design back in the early 90s did include price node adjustments to reflect the cost of pollution. The logic in the original thinking had included incentives for reduced emmissions and encouraged the pump storage process.
    This design was adjusted to eliminate all clean energy and efficiency considerations. Pumping ended up being used in a way that encouraged coal. The market agrees with the concept that coal gens dont have to pay for the cleanup.

    • Jack Gilding

      Doug: can you provide more information to explain how “it is possible to provide more then enough storage in the present status quo from operation of what we already have” and what changes to market design would use this more effectively? Do you mean mainly Snowy Hydro?

      • Cooma Doug

        There is a growing awareness of the value of smart load side response. Some of the main advantages are the millisecond response time, different and more effective ancilliary services, market forces that reward the shift and recognition that load shifting, smart switching and batteries are effectively the same thing.
        If a retro fit of the Empire State building reduced its load by 40% that is one huge elephants in the room. There are still more options to improve it. When we talk about hydro storage we must highlight the point that the dams are already loaded.
        When we fully utilise smart switching, retrofitting and batteries the storage requirement falls significantly.
        At the moment the market doesnt encourage these things.
        The price swings in South Australia put pressure on prices at the home eventually because the hedging arrangements to manage these moments does edge up the long term contract value.
        The smart switching and load shifting options will reduce those contract pressures.
        Building a squillion dollar interconnecter will encourage the continuation of the unsmart status quo.
        We can eliminate the price swings in the first place by being smart on the load side. Or we can allow them to continue and provide more infrastructure on the Supply side to sustain a problem that we dont need.

  • Chris Fraser

    Good link , bookmarked that one. Also try this ;-
    http://batteryuniversity.com

    • Geoff

      wow that is a totally awesome website, and for free!! such a good idea. I’d pay a donation for that, much like I do with khan academy. https://www.khanacademy.org/
      gosh got a hell of a lot of reading to do 🙂

  • Jack Gilding

    Keep up the excellent work Giles. True that we are unlikely to see a breakthrough recognition on renewables and climate change from this COAG EC meeting, but the public awareness and pressure is certainly building. A RenewEconomy article summarising the various contributions from Solar Citizens, GetUp, CEC and the briefing coordinated by ACF (https://d68ej2dhhub09.cloudfront.net/1883-Executive_Summary_COAG_100__Briefing_Doc-110816LRSUM-ISSUE.pdf) would highlight how much has been done. My own contribution at http://www.themercury.com.au/news/opinion/talking-point-tasmania-poised-for-key-role-in-energy-reform/news-story/bda740c3927bb013494b9ab35adce70e

  • Les Johnston

    An opportunity for Australia to have a competitive energy market in the future comes on Friday. Great article.

  • Geoff

    gas gas gas… everyone is talking about it, but really? RE will be cheaper than gas in the long term. Sure China are shifting their focus towards gas for GW power, however the tech, flexibility and cost will make RE far more attractive. Extraction methods are equally as damaging especially if it’s synthetic. Again no vision or leadership from josh, just a band aid fix. No matter, financial markets and investors will determine who wins and it won’t be gas…

    • Concerned

      Wind and solar require gas to work.

  • Geoff