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Hazelwood exits, taking with it myth of cheap fossil fuels

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The giant Hazelwood brown coal generator shut down the last of its 8 units at 4pm yesterday, the latest and the most powerful symbol of the vast and rapid change in our energy system.

Conservatives and the fossil fuel lobby might have wanted to describe the closure of the western world’s most polluting power plant as a futile act, given the attempts by the Trump government to jump back into last century’s technology and ignore climate science.

But just one day after Hazelwood closed, a new $1 billion solar PV and battery storage plant was being unveiled for South Australia, with its proponents insisting that construction would begin later this year.

hazelwood zero

On top of that, the former boss of Hazelwood, Tony Concannon, had announced that the combination of solar and storage was already cheaper than baseload gas plants, and would therefore be cheaper than any new coal generators too.

And if that wasn’t enough, the owner of the South Australia electricity network was predicting that the cost to households of solar and storage would fall to just 15c/kWh within 5 to 10 years, less than half the cost of grid-based electricity.

This is where the myth of “cheap coal” finally unravels. Coal dominates Australia’s electricity generation, still accounting for around 70 per cent of total generation, yet consumers pay a ridiculously high price for their electricity, because if they are not being screwed by generators and retail margins, they are paying huge “transport” costs to the networks.

It was ironic to note that the last price earned by Hazelwood on Wednesday was $148/MWh in its last 30 minute period. At the same time, in wind-dominated South Australia, the price was minus $45/MWh.

To be sure, these prices are deceptive. In reality, the price of electricity in Australia is set by neither coal nor by wind or solar, but by gas.

And right now gas is expensive, and the oligopoly that runs the fossil fuel generators are free to massage, or manipulate, prices as they see fit – although that power diminishes when there is more wind and solar, and will be vastly reduced with the advent of large-scale storage.

The whole concept of our energy systems, as chief scientist Alan Finkel points out, is in the midst of change. Where once the perfect grid was seen as centralised and dominated by huge generators – and the Coalition and The Australian might still believe this to be so – the future is entirely different.

Audrey Zibelman, the progressive new CEO of the Australian Energy Market Operator, says the future will be “decentralised”, based around local generation, and it will be quicker, smarter, cleaner, cheaper, and more reliable than the current set-up.

Hazelwood’s owners, Engie, also see a future where half of all demand is met by electricity sourced from homes and businesses, mostly with solar and storage. And they see the future of large-scale generation will also be in solar, which is why they tendered for proposals earlier this year.

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Indeed, solar projects are popping up everywhere. Concannon, the former head of Hazelwood – once a staunch critic of Australia’s renewable energy target – has switched camps, heading up a large-scale solar company and plans 300MW of solar, possibly with storage, in South Australia.

He’s not the only one, with Lyon Solar’s announcement and Zen Energy and others, including Adani and DPP Energy, all planning major solar projects in South Australia.

In Queensland, the push to solar is even more rapid. One major energy user, Sun Metals, is building its own 116MW solar plant because the cost of electricity in a grid almost entirely dependent on coal and gas is too expensive.

Meanwhile, the incumbents have got other things to think about, particularly SAPN’s prediction that the cost to households and business of solar and storage will be around 15c/kWh within a few years.

Think about what that means. That is cheaper than just the transport cost of delivering electricity down the poles and wires.

Few in the industry doubt that we are shifting rapidly to a faster, cleaner, smarter and cheaper energy system. The imponderable is that no one knows what the business model looks like.

Networks are convinced that they will remain essential, because someone has to connect the homes, business, and communities. But they, too, are worried that things will move so fast that consumers – having been badly treated by utilities in the past decade – will simply take matters into their own hands.

If SAPN’s forecast are right, they will have an overwhelming economic incentive to do so. To deal with that, it is hard to see how networks will avoid any other action than to write off the value of their networks so they can compete.

The outlook for traditional gentailers, is more bleak. The cosy oligopoly that dominated supply, and accounted for virtually all demand, is starting to unravel.

Actually, the closure of Hazelwood might reinforce their pricing power for a short term, hence the current surge in wholesale electricity prices. But as these new solar farms and wind farms come on-line, after the three year delay caused by the Abbott government, that pricing power will rapidly diminish.

And it will further diminish if new rules are introduced – as expected – that will level the playing field for battery storage. Right now, they are being resisted by the incumbents and the lawyers and economists who hold so dearly to the original design of the National Electricity Market.

But there can be no doubt that the NEM has failed. The land of abundant coal, abundant gas, abundant wind, and abundant solar has just about the highest electricity prices in the western world – a scandal that gradually unfolded as the rule makers clung grimly to their economic theories, and the regulators were either unwilling, or didn’t have the powers, to stop the predatory behaviour of the incumbents.

The events in South Australia finally brought that to a head. While the conservatives and the mainstream media have focused on software settings on a dozen wind farms – proof, they say, that renewable energy doesn’t, and won’t, work – the reality is that it’s a sign of a failed system.

The market operator was bound by process; unable, it seems, to react. Remarkably, it says that even with hindsight it probably would not have done anything different.

It didn’t know about the settings on the wind farms, and has admitted that it doesn’t know much about the settings of the country’s coal and gas plants.

Almost airbrushed from history has been the performance of the gas-fired generators in that blackout. The wind industry, and a few other independent engineers, suggest that they didn’t play their role because the settings of the deadbands on their governors were relaxed.

AEMO will only admit that the gas generators were “too slow” to respond, but its 260 page report goes no deeper than that.

The final straw was the heatwave in South Australia and the forced outages when one big gas generator sat idle. A few weeks later, the failure of two of the biggest gas generators took the state within a whisker (an extra 20MW of demand on the interconnector would have seen it trip) of another system black. In NSW, where two coal units and another two gas generators failed, the state also came close to losing power.

The Finkel Review will not, as the conservatives hope, recommend the sort of fantasy dance back into the last century that Donald Trump is trying to achieve in the US. Already, the conservatives sense this and are beginning to attack.

“What would he know,” they say, “he’s only an electrical engineer and the chief scientist.”

And the tribal politics won’t help either. The Greens appear to be the only ones who “get” what is happening, and don’t have vested interests in business and unions to protect. The final report into the Senate inquiry into the retirement of coal-fired power stations split three ways. Only the Greens seemed to understand the need for an orderly transition.

Indeed, denial is the last refuge of the incumbents and the ideologues. Technology marches on, and because it is so readily available to consumers, so will they. This is not about ideology any more. It is about simple economics. The rest is just detail, and politics.  

  • Brunel

    “a future where half of all demand is met by electricity sourced from homes and businesses, mostly with solar and storage.”

    You should remove the word storage from that sentence as it is confusing. Batteries are great but are like grain storage silos – the grain/electricity has to come from somewhere (rooftop solar).

    Grain storage silos do not produce grain – like batteries, they only store it.

  • howardpatr

    Trump joins Turnbull, Canavan, Frydenberg, Joyce and co with their support for “clean coal”:-

    • RobSa

      Bravo! 🎉🎉🎉 This closure is a massive win for the people. I would really like a website where the closure of Australia’s coal mines and coal powered power stations are visualised. I want this so I can watch the glorious fossil fuel phase out which is about to befall the globe.

      🌞Coal mines in Australia
      🌞List of coal fired power stations in Australia

      The myth of clean coal is irrelevant because of its expense. Historically Trump’s action will be seen as one of a litany of crimes. The interesting thing about this crime is that its not currently defined as a crime in legislation. This is criminal negligence and its not equivocal.

      Its ironic that conservatives don’t support the move away from fossil fuels as Chistophere Falvin says “The current energy system based on fossil fuels is undermining global security.” Rather than irony myth making by conservatives on energy is a demonstration of their failed ideology. The shift to distributed power generation also aligns with conservative ideology of less government control or decentralisation as well as ideas of independence and freedom. It is a symbol of the control vested interests have over conservative folk who seek media to confirm their bias.

      • humanitarian solar

        At 330MW, Riverland Solar Storage will be bigger than a number of the coal fired power stations. The solar generation wouldn’t be as consistent with it’s output power though it’s getting up there. Will be interesting to hear when it’s configured to deliver it’s power into the grid.

      • My_Oath

        Here is an article which attempts to show the numbers globally. What it shows is that the number of coal plants operating has flatlined. The number of coal plants planned or under construction is plummeting. This in effect means 2016 was the year ‘Peak Coal Power Generation’ was reached.

        https://cleantechnica.com/2017/03/23/global-number-coal-plants-plummeting/

        There is a reason the Global Coal Index has fallen 95%+. Coal is dead..

  • lin

    Just because it is a myth will not stop their ABC from repeating it ad nauseam. My TV nearly came to a dramatic end last night when the news and 7:30 report both felt the need to squeeze the “cheap-reliable-coal-powered-generators” catch phrase into their broadcast at every available opportunity. They run it nearly as frequently as “blackouts-caused-by-intermittent-renewables”. Anyone would think they are trying to sell us something.

    • John Saint-Smith

      The rabbits at the ABC have been told that their jobs are at risk if they buck the trend of kowtowing to the LNP Coal-ition.

      • Sally Noel Triggell

        Scared of losing their jobs too right, and all this crawling to the lieberal party won’t save them. Can’t wait to see Uhlmann out on his ear.

        • Colin

          There must be some standard that reporters are supposed to adhere to when reporting. Some standards body to which a complaint can be made.

    • Joe

      ‘Clean Coal’, ‘Cheap Coal Fired Electricity’…just like the snakeoil salesmen of years ago. And yes, the punters still fall for this stuff. If you tell a lie often enough the non thinkers start to believe that it is the truth.

  • JIm

    Trust us we’re from the government oops ABC

  • Cooma Doug

    I went to a garage sale last weekend.
    People moving and were clever selling stuff.
    In one box was an old kodak box camera, a kodak 16 mm movie camera, one of those old large black telephones and some CDs of the homicide tv program from the 1960s. Next to the box were some photos of Wallerawang Power Station.
    I left there shaking my head even more amazed that our government brought that lump of coal into parliament.

    • Colin

      Even those I know who are rusted on LNP voters don’t believe they can win the next (Federal) election.

      I hope Labor are ready for the beginning of a Clean Energy Revolution, or it will roll over the top of them, as it is now inevitable.

      These LNP dinosaurs are about to be swept away just as: typewriters were by PCs with word processors; dial-up modems were with broadband; and landlines were by mobiles.

      Good riddance to very bad rubbish I say.

  • humanitarian solar

    Denial, anger, bargaining, grief, acceptance.
    https://en.wikipedia.org/wiki/Kübler-Ross_model

    • Coley

      “Denial”, still simmering, “anger” plenty of that, FF has been caught with its pants down, “bargaining” mmm, give us a golden handshake to exit, including the taxpayer cleaning up the mess and we will go quietly. “Grief” possibly, but only on realising they won’t be able to screw the general public for the foreseeable.
      Acceptance? Yer right, once all the above has been given.

  • ozmq
    • Rod

      Pumped hydro is essential IMO especially if NSW and Vic ramp up their RE %
      Whether we would need Turnbull’s thought bubble add on is debatable.

      • ozmq

        Well, yes. But I mean “in the Latrobe Valley”, as per the RE article in the link.

        • Rod

          Sorry, didn’t follow the link. My bad.

          • ozmq

            No worries. Pumped hydro using the Latrobe Valley pits has a certain je ne sais quoi about it. Not quite irony, nor schadenfreude, but a bit of both.

    • lin

      I am hoping Vic takes a look at Dartmouth as a cheap retrofittable pumped hydro facility. While they are at it, I am sure that there are a number of other hydro facilities that could be turned into pumped hydro at a very competitive price.

  • humanitarian solar

    Retiring centralised power stations is the first step and then there’s the exposed and vulnerable distribution system. After Cyclone Debbie crossed the coast, Bowen has been left without power for three days so far. There are currently 166 unplanned outages in regional Queensland effecting 65,120 homes and businesses. The weather system then moved to the south, resulting in a further 94,134 homes and businesses losing power in SE Queensland. Then there’s damage in NSW. Most of this suffering is unnecessary. It only takes a basic solar system with storage, to have the capacity to stand alone and provide critical system backup for refrigeration, water pumping, a kettle, hotplate and communications. On my property, even when there’s been an outage in cloudy weather, there’s always been enough power for the basics. I’ve had to accept those limits and work within them, though something is far far better than nothing.

  • Gary Rowbottom

    He idea of distributed energy parallels the thinking behind the birth of the Internet. That was a military initiative, they weren’t keen on all the country’s (and specifically the military’s) computing power and ability incorporated into a few centralised Super Cray III or whatever supercomputers, and hence the Internet was born, lots of distributed computing power, very hard to destroy. I wish I had thought of that.

    Long way to go yet with energy, but some good steps in the right direction, getting close to shovels in the dirt.

    And regardless I give homage to the many workers that toiled long hours making energy, from Hazelwood and other fossil power stations left behind, it was not their fault that fossil fuels have been found to be something we need to move away from, rather like asbestos, it was bloody great at what it did in its day but has a sinister side with deadly consequences with a long time frame active harm reach.

    I hope the assistance packages helps those workers that need it.

    • Coley

      Coal provided the power to get to where we are, and society should recognise that, in ensuring that the workers past and present are suitably rewarded and protected.
      The owners? They have had their rewards and more, screw them. Oh aye a retro tax on the damage they have (knowingly) caused would be nice, Rex, Rex Tillerson, you listening?

      • My_Oath

        Yeah. The problem is those workers are being influenced by the powers that be to vote in opposition to their own interests.

        Recent figures I have seen suggest there are 77,000 coal jobs in the US. In 2016 alone, solar added 73,000 new jobs and employs double that of coal.

  • Gary Rowbottom

    Very good wrap up Giles, as usual. I believe the STEM facts of all this will win out over denialism and anti renewables biased reporting. The growing acknowledgement from within the ranks of energy industry heavyweights, is a telling factor. We are still a long way from where we need to end up, but I sense a shifting in the momentum. I look forward to witnessing a succession of political backflips coming sometime, and no doubt somehow they will say it was their belief and championing of renewable energy all the time that made a successful transition happen. That thin greasy black layer in Australian politics that will be unearthed by future political paleontologists that Scott Ludlam referred to some time ago.

  • EdBCN

    The energy wars are just heating up. Until now renewable energy hasn’t been seen as an existencial threat to fossil fuel. But that’s changing fast. Ironically, we can expect the fossil fuel industry and their conservative politicians to ditch all their pious ideological arguments about not “picking winners and losers”, deregulation and free markets; to instead champion generous government hand-outs and regulatory relief for their failing industry. The major force on the side of renewables will be the growing realization by the general public that they don’t have to put up with the toxic stink of fossil fuels in order to enjoy the advantages of a modern, mechanized society.

    • JoeR_AUS

      just saying at NEM Watch

      SA is running at 20% renewable, gas for the rest.

      Also, VIC brown coal, gas at 90%

    • Gordon Bossley

      I’m not sure I agree. I think the change is happening so rapidly, and with such grass-roots vigour that the corporates won’t be able to react in time.

      I’m bound up by ‘golden handcuffs’ – a 48c (or whatever it is) FIT here in Qld, so won’t move yet.

      But the minute there is an end to that tariff, we’ll switch from gas to electric hot water, double or treble our PV capacity, and install storage. I’ll plan to ‘island’ our house, and look for a deal for the spare energy I generate.

      I’ll bet I’m one of thousands. If I was in SA, I’d have jumped already, not wanting to be an innocent victim of political ineptitude or corporate greed again.

      The consequence of this ground-swell is a spiking of new jobs in the industry, so governments won’t have quite the justification to protect coal jobs.

      Fascinating time to be alive!

  • Coley

    “And the tribal politics won’t help either. The Greens appear to be the only ones who “get” what is happening, and don’t have vested interests in business and unions to protect”

    I take it the Australian tourist industry isn’t unionised? And the RE sector is too ‘young’ to have mastered the ‘fat brown envelopes’ political technique?

    • RobSa

      I recently met someone who works part-time welcoming cruise ship visitors to Australia. She voted for Hanson and hates the Greens because they want to protect the sand or something.

  • George Darroch

    The lies will get worse before they get better.

    There are generators with billions of dollars worth of assets and future income at stake.

  • Geoff

    first nail in the coffin and something that people are just going to have to get used too. Now time for the demolition!

  • humanitarian solar

    There’s 30 sewerage pumps on the sunshine coast with no power, the shit is overflowing and no centralised generation appears to be reconnected as yet. It’s been similar with water supplies, with no power to pump water to refill reservoirs. Local solar would have done it.

  • Pedro

    Met some people a few weekends ago and SA blackouts, the utility scale Tesla battery deal , along with the closure of Hazelwood came up in conversation. And the elderly lady with no previous electrical or power supply knowledge I was talking with asked a simple question. “Why dont they just put the tesla batteries at Hazelwood with some solar and wind”. Finally at last, Joanne Public gets it!

    I replied, “Bang on you got it, an absolute no brainer. We just need to get the government and regulators out of the way”

  • Gordon Bossley

    If Hazelwood shut down last week, where is the brown coal generation coming from in Victoria? Currently according to the NEMwatch graph, Brown Coal: 3,843 MW is currently being generated?

    • Barri Mundee

      The 3843MW is coming from Loy Yang A and B and Yallourn brown coal generators