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Is NEG just an elaborate plan to fund Turnbull’s vanity project?

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TurnbullSnowyHydro

AAP

Exactly what is the point of the Coalition’s proposed National Energy Guarantee?  What we now know from the advice of the Energy Security Board and chief scientist Alan Finkel is that, based on current climate policy settings:

– It will not achieve any emissions reductions beyond doing nothing;

– It will rely almost entirely on the renewable energy target for the assumed reductions in consumer bills;

– It will likely not encourage any new renewable energy investment;

– And, according to the storage report commissioned by Finkel, it will not address or solve any problems on reliability that may emerge from the government’s modest targets.

In summary, the NEG – as currently conceived – is useless. In fact, it is worse than useless, because it will displace focus on other policies that might actually Do Something.

We do know that the NEG has only been designed because prime minister Malcolm Turnbull and energy minister Josh Frydenberg have been too scared of the Coalition party’s right wing to introduce the policies they know would work best: a clean energy target, an emissions intensity scheme or, heaven forbid, a carbon price and a renewable energy target.

The huge reduction in bills driven by the investment in renewable energy – highlighted in the ESB modelling as it has been in any other serious analysis – puts the fears about costs at rest.

But there may be something else afoot. It could also be that the NEG is just an elaborate ruse to create an economic argument for Turnbull’s pet project, the multi-billion dollar Snowy Hydro 2 pumped hydro scheme.

No one is against pumped hydro – it is likely to be a key element, along with battery storage and solar thermal, in providing the back-up and reserve to the high renewable energy penetration grids of the future. The ANU says the technology will easily guide us to 100 per cent renewables.

snowy hydro

What is less clear is whether Snowy Hydro 2 is the best idea. It is massive – 2,000MW and 385,000GWh – but there are questions on whether the system is best served by having all this storage capacity in one location, and what the cost of the poles and wires to spread the benefits would be.

There are numerous other pumped hydro schemes that could do similar work – three are on the drawing board in South Australia, another in Barnaby Joyce’s electorate in NSW, and at least one, including the Genex solar hybrid project in an old gold mine, in Queensland.

The modeling presented by the Energy Security Board this week ahead of the COAG energy ministers meeting makes the remarkable assumption that Snowy Hydro 2 is a done and dusted deal, and that it will be up and running in six years.

On the basis of what? It hasn’t even completed a feasibility study.

Pumped hydro relies on volatility in electricity markets to get a return: it hopes to be able to source electricity to pump the water up hill at a significant discount to what it will receive when the water is allowed to cascade back down and spin the turbines and generate power.

One of the major claims made by the ESB modelling is that the introduction of a reliability obligation and an emissions obligation on retailers – and the intensive contracting they will have to do – will reduce volatility in the market.

The lack of volatility is not good for Snowy Hydro 2. What is good for Snowy Hydro 2, however, is the idea of contracting. That could deliver the revenue certainty that it would require for financing, even if it is government owned.

Finally, there are some added benefits. Turnbull can convince the right wing that he has reliability in hand, even though Snowy Hydro 2 is more about “dispatchability” than it is about the right wing’s preferred vocabulary of “baseload”.

It also has the happy outcome – at least for the incumbent fossil fuel industry – of crowding out new competitors.

The ESB modelling notes that on low demand profiles – virtually inevitable considering the adoption of energy efficiency, demand management and more reooftop solar – the NEG provides no signal for any new generation, be it wind, solar, batteries, or coal or gas between 2020 and 2030.

That will suit the ideologues and the fossil fuel industry just fine. It means that rather than using wind or solar power to pump that water up hill, Snowy Hydro 2 will be using coal – reinforcing the business case for the ageing, polluting and inflexible coal generators in Victoria and NSW.

And it will leave Turnbull with a lasting legacy, one of his very few: a multi-billion dollar vanity project that speaks volumes of his record as prime minister: The man who vowed never to lead a government that didn’t take climate change seriously, but happily did.

See also: Here are 4 essential fixes for the National Energy Guarantee

and BNEF: Turnbull’s NEG akin to joining a gym and not lifting any weights.

   

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  • Steve159

    I may be missing something in all this — irrespective of when the RET runs out, and there’s no new RET, or similar, wouldn’t the shear economics of rooftop solar, and for that matter utility solar (assuming continued high electricity prices), mean continuing installations?

    Turnbull and the LNP can do whatever they like, the decreasing cost of solar and batteries will ensure their uptake, irrespective. More so, if the LNP continue with their shenanigans.

    • Carl Raymond S

      As of recently, new solar beats new coal, but not old coal. As of soon, new solar, storage included, will beat old coal. We’re at that crossroads where the govt can still ensure nothing hurts old coal, and are at pains to ensure that stalling policy has a name to provide the illusion it achieves something. NEG.
      Tesla, in the US, are planning fixed contracts for clean energy to the trucking industry 24/7 at US7c/kWh. If they can provide energy here for 14 cents Australian, they will have customers beating down their door. Can Snowy 2.0 compete with that? If yes, proceed. If not, batteries win.
      Happy to be corrected. I’m no expert, but that’s what I read.

      • Ken

        I think you are on the money.
        Thats what I am reading too.

  • Joe

    It seems clear now that the ESB is a bit of shonky show. We have Two Tongues Turnbull as the defacto ‘ESB Managing Director’ and John ‘Coaler’ Pierce as the defacto ‘ESB Chief Executive Officer’. Together their mission statement is to stymie RE for as long as possible with ‘pointman’ Joshie F. dishing out the public sprays to any State Labor Govt. that decides to promote RE.

  • AndrewATA

    On the info so far, Snowy hydro 2.0 is a “must-do”. Nothing else approaches its energy storage capacity. 350 GWh of energy gets us most of the way to being able to buffer a 100% renewable grid. That’s what we need to get through a cloudy, calm week.

    At an estimated $4 billion including upgraded local transmission, its energy storage cost is only $5.70 per kilowatt-hour of rated capacity. The cheapest home battery is about $830/kWh including inverter (Solar choice index). 145 times more expensive!

    Whatever the rationale now, just get it started. Then it’ll be there to buffer the inevitable large amounts of solar and wind that’ll be built. When it’s sunny and windy, storage makes perfect sense – the alternative will be curtailing (wasting) the generation.

    Our paper from yesterday has some nice charts putting Snowy 2.0 in perspective:
    http://www.ata.org.au/wp-content/general/One_Hundred_Percent_Renewable_Grid.pdf

    • David Osmond

      I agree that Snowy 2.0 seems hard to beat on a $/kWh basis. But to go 100% renewable according to Blakers, we don’t just need ~400 GWh of storage, the storage must be attached to 15-25 GW of generating capacity, ie. far more than Snowy 2.0. Moreover, it needs to be able to deliver much of that power to most of the NEM states, which again Snowy 2.0 can’t do.

      • David Osmond

        Having said that, I’m not opposed to Snowy 2.0, though it would be a lot more useful it it was upgraded to 8 GW as this article suggests: http://www.smh.com.au/federal-politics/political-news/after-the-flashy-announcement-heres-whats-next-for-the-snowy-hydro-expansion-20170426-gvsil2.html

      • AndrewATA

        Yes to go 100% renewable you need other things too. Add on these and you’re good to go: 21 off-river pumped hydro facilities on the Blakers model, some in Tassie and consumer batteries, plus a few other small energy storages already announced like Tesla, Cultana, Kidman and Aurora.

        Plus heaps more wind and solar generation of course, and a new transmission backbone. All doable by 2030 if we got serious. And cheaper than building new ultra-supercritical coal to replace the ageing clunkers.

    • solarguy

      Before I read this paper, I believe that snowy 2.0 will take years to build, 17km of tunnelling through hard rock. Plus a bottom dam has to be built.

    • Mike Shackleton

      An issue that hasn’t been addressed is water – there are water shortage problems within the system as it stands. I totally understand that the water is contained within a loop but we need to build that volume up. It has to come from somewhere and it will deny downstream users for a time.

      • RobertO

        HI Mike Shackleton, its not a lot of water out of the river flows, one good rain fall will do it, and if we are in drought, take only 2% daily for 50 days (or winter melt will do)

    • RobertO

      Hi AndrewATA, I have read this paper and I agree with it. I suspect that we will pay more for kWhr in the short term because we have buy and build things, however we will see a long term drop in prices, only to rise again as we go to transport, and thenafter that long term drop should be locked in (I suspect about 10 cents / kWhr). I see empolyment rising as we do this.

    • Ken

      And if the link from snowy hydro to the transmission network fails ?
      Its like everything ( that will never happen),, you get so used to relying on the storage as your base load or backstop, then when the connection link goes down you will have blackouts.
      The more you distribute the generation and the storage, the less likely the widespread disruption as occurs when you have transmission failures.

  • Hettie

    Surely COAG will see this nonsense off tomorrow.
    NEG
    Nonsensical Egregious Gibberish.
    No parliament next week,
    No government by Christmas
    New government by Easter.
    NEG consigned to the bin.

    • Ian

      It is interesting to hear (through the grape vine) that the AEC is currently recruiting staff for polling stations. This never happens unless there is a really good chance of an election.

      • Rod

        I’ve got everything crossed

  • Robert Westinghouse

    Agreed NEG is LNP rubbish. The science and clever country experience is showing that REGIONAL generation and SMALL grids are the way of the future.

    But if we follow the science BIG Power will not be to continue to rape and pillage the population…. I am saving to get more PV and more Batteries and then I am going to stick it to IDIOT Malcolm and his Snowy 2.

    • Cooma Doug

      Research what happenned in Navada to the solar boom.

      • neroden

        That was before batteries got cheap.

  • Cooma Doug

    The issue about peaking plant and lack of market hunger for pumped hydro would apply to all pumped hydro. But we go back again to the market rules. They will need to change. When the rules change to suit a 100% renewable grid, an empty dam on the hill will be just as valuable as a full dam. The most valuable will be a system that can be large enough to cover both these opportunities. Its not going to be a peaking market as now. Its going to be a load shifting flat profile. A discharging battery is an asset, so too a charging battery.
    A combination of wind solar and snowy 2 is a huge load shifting potential.
    In the lead up to that outcome Snowy and all other generators will will function in the market design to maximise returns. But snowy 2 is a plan for appropriate flexibility when we get rid of fossils.

  • Radbug

    Snowy 2 smells a lot like the NBN, concocted after a weekend project “lovefest”.

    • RobertO

      Hi Rugbug, The NBN was never a weekend project. It was a well though out project that was going to cost a lot of money. The problem is that the COALition decided that it is better to spend more money (about 4 times more) to get a product that is so much rubbish and will never work until they go back to the original plan which in 20 years time we will have to do. Bell Labs in USA were working on 1000 frequencies of light on 1 pair of Optical Fibre at 2.5 Gbits/sec each frequency in 2005. Telstra installed a mux near Wollomombi that had 8 cards in the mux and each card has 8 frequescies of light so Telstra could use the 3 pairs of fibre to Coff Harbour (CH) to increase capacity between CH and Armidale.

  • riley222

    If the LNP under Mal can get Snowy 2 started it would indeed be something positive for the country. If the federal govt doesn’t do it I don’t know who else would tackle a project of this size .
    Realistically given the right policy certainty a number of smaller commercial projects could fill the need, but the way energy policy chops and changes could deter investment . Policy certainty is needed, and thats in short supply at the moment. Perhaps the States will take the lead on this one too.

  • MaxG

    All I can say: if you want control over your energy bill, make your won power and attach storage. I have done it; never looked back 🙂

    • solarguy

      Agreed Max, my system supplies all my loads 24/7, 365. My last power bill was in credit for $210. Need I say more!

  • Gary Rowbottom

    No weights being lifted… plenty of poncing about in front of the mirror though.

  • bigtreeman

    The Snowy Hydro will especially provide power security for Canberra.
    Can’t have the all important functions of federal government interrupted.

  • Robert Comerford

    And very conveniently the last day before the Qld poll we have Joshie out there spruiking a new inter-connector to Tassie with his mate the Tassie premier and pretending this has something to do with the NEG.

  • Ray Miller

    Thanks for the distilling all the political spin (con) down to its fundamental components. But the whole “Energy review” has been manipulated from the very beginning. The bounds of the “Energy System” have been too narrowly defined on purpose to preclude focusing on the real issues and problem.
    The way forward is to change the fundamentals and focus on efficient (low carbon) delivery of energy services.
    We are currently building about 100,000 dwellings annually and retrofitting many times more. The building efficiency standards and built to regulation are both sub-standard, causing massive cost shifting to the energy sector, resulting in increasing treats to customer health and safety plus economic stress. There are not plans at present to significantly improve any of these standards, no even using current climate data for our modeling which contain the warmest years since we have been keeping records.

    Appliances are typicality replaced anywhere from 7-12 years, but our efficiency standards are sub par, with Australia used as an international dumping ground for appliances not permitted in other countries. The efficiency of many appliances are improving but at rate which is far from ideal and lacking in technical competency, excluding items like power factor, crank case heating and performance under extreme heat conditions especially for air conditioning systems (which massively impact the energy system).

    Do we need Snowy Hydro 2.0? If we have learnt anything over the last two decades is that large centralised energy generating systems are very much last century, are high risk in many areas, inefficient and inflexible.
    What we do need is a new strategy to build a 100% renewable, efficient end-use energy delivery system for the 21st century with an expanded definition of what an energy system is.

    • riley222

      Ray, depends on whether you think keeping an interconnected grid is worthwhile. If you do then the advantages of a project like Snowy 2 are obvious. Far greater penetration of renewables can be accommodated with 24/7 dispatchable power.
      The alternative is a series of microgrids, each with their own way of achieving 24/7 availability of power.
      Look on Snowy 2 as a really large battery. You can be as efficient as all get up with use of electricity, but there will be times renewables need backup. As we phase out coal pumped hydro is a grid scale alternative. It may be that with tweaks to the grid Snowy 2 may be all that’s needed. If 100% renewables is the goal we really need to get started now on some major storage projects . Delays will just play into the hands of the fossil fuellers.

  • eric

    No. The NEG is really a way to ensure that while renewable energy projects are rolled out the cost of backing up the renewable is priced into those projects.
    Otherwise, it is a bit like telecommunications where you have the incumbents providing services to far flung regions while startup sharks pick out the eye teeth in urban areas. Long term it is not sustainable and will result in system failure.

    Regulations need to ensure that new entrants pay the real cost of providing 24/7 power. The NEG is a very good model for this.

    The issue of carbon abatement is a separate political issue. The NEG can adapt to whatever policies are put in place regarding this.