Labor’s policy dance likely means more gas, not renewables

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Labor’s embrace of an emissions intensity scheme (EIS) and its decision to dump any specific renewable energy targets will almost certainly mean a significant jump in the amount of gas generation in Australia, and very little new wind and solar.

That, at least, is the assessment by the designers of the scheme that Labor now wants to embrace.

Modelling by the scheme’s designer, Danny Price of Frontier Economics, shows the brutal reality of an EIS as he envisions it for renewables such as wind and solar.

It shows that even if Labor introduced a 50 per cent emissions reduction target for 2030, using the EIS as its principal mechanism would simply result in a boom in new gas-fired generation, and presumably more coal seam gas, and little in the way of new wind and solar plants.

labor eis build 50%

The modelling could not be any clearer, although the graph above could be. (It breaks the options into four scenarios, business as usual on the left, an EIS, a RET and then regulatory action).

Basically, it tells us that an EIS for a 50 per cent cut in emissions will deliver little wind energy (5,000MW over 10 years), no solar, and 17,000MW of gas-fired generation, or at least two new very large gas plants a year.

To meet the 50 per cent emissions cut with a specific renewable energy target, the Frontier modelling tells us, would result in 30,000MW of new wind capacity and 26,000MW of new solar capacity.

And what would this look like in terms of output or generation share by 2030? Again, with a very bad graph from the Frontier modelling report, under the EIS, gas would account for more than 50 per cent of all generation, and renewables little changed from business as usual.

frontier graph 50% emissions cutNow, it is true that Frontier has got some ridiculous assumptions about the cost of wind and solar, but this goes mostly to the costs of such a scheme, rather than the mix.

And it seems that Labor has missed a major opportunity there. It has defended the EIS on the basis that – according to the Frontier modelling – the cost of the scheme is $15 billion cheaper than business as usual.

But that very same report found, dialling in some more reasonable estimates of the costs of wind and solar, that a specific 50 per cent renewable energy target achieves the same savings of $15 billion.

And even those “reasonable” costs of wind and solar are still right out of the ballpark, because it assumes a higher cost of wind and solar in 2030 than exists now. Indeed, a 50 per cent renewables target, on all the evidence, would offer significantly higher savings than an EIS.

Why Labor did not prosecute that argument is a mystery. Perhaps it was derailed by the attack on Bill Shorten by prime minister Malcolm Turnbull, and perhaps even the lump of coal brought in by Treasurer Scott Morrison.

Yet, Labor was still there on Friday promoting the EIS, not a RET as the cheapest option. “We’ve obviously also got mechanisms in place such as an emissions intensity scheme, that we want to see the government get on board with, that their own Chief Scientist says is the cheapest, most efficient way to reduce emissions,” said Senator Murray Watt.

Well, not quite. The chief scientist merely noted the AEMC claims, he did not endorse them.

Either way, experts say that if Labor does want to deliver anywhere near a level of 50 per cent renewables by 2030, which Watt claims is still the goal, it will need something more than an EIS – most likely a reverse auction scheme of the type used successfully by the ACT, and proposed by Labor governments in Victoria and Queensland.

The Clean Energy Council, meanwhile, has lamented the ongoing “policy circus”. CEO Kane Thornton said an EIS would help cause the closure of some coal generators, but it was unclear whether an EIS alone would be sufficient to deliver ongoing strong investment in new renewable generation beyond 2020, when the current RET ends.

“Additional policy support for renewable energy may still be required to achieve Labor’s strong commitment to 50 per cent renewable energy by 2030.”

Bruce Mountain, from Carbon Market Economics, said it was clear that the best option would be an auction system, which had also proved successful in many countries around the world, including Dubai, Abu Dhabi, Saudi Arabia, India, Brazil, Argentina, China, Finland, Indonesia South Africa, Poland and the US.

Not only does it provide low costs, it also provides certainty, because contracts are locked in, he said.

“The mechanism does not rely on political continuity – when governments that are sympathetic to promoting renewables are holding the levers, they can get things done, regardless of what the other side say,” Mountain says.

“There is little doubt in my mind that this is the most suitable approach for implementation at both state and federal levels in Australia.”

He also said there was no evidence that an EIS has operated anywhere in the world. “To the contrary, it has been consistently rejected …. and it has been accepted in Australia far too uncritically.

“Insufficient regard has been paid to the problem that political will is needed to set an intensity target at a level that is going to make a difference in substituting high emission generation for low emission alternatives. As things stand we can have no confidence that such political will exists.”

RenewEconomy sought to clarify with Labor spokesman Mark Butler’s office about the nature of the party’s policy. Was 50 per cent still an aspiration or a target? Was it just the idea of an extended RET that was dumped? Would other mechanisms be introduced to supplement an EIS in the light of the Frontier modelling.

We were told a response was on its way, but no formal, on the record reply reached us before publication. We did learn though that Labor thinks that an EIS can be calibrated to achieve more renewables, and were reminded about the yawning chasm between its climate polices and the Coalition’s.

That is understood. But as Labor knows, it needs to find that fine line between good policy and public acceptance. This week has not been a step forward.  

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  • Tom R

    wow, so, Frontiers modelling has “extraordinary assumptions” except when it suits to attack Labor.

    It’s either rubbish or not. Up until now, it’s been rubbish, but, when you can use it to attack Labors policy, all of a sudden, it’s the gospel.

    I’m getting dizzy

    • So, let me get this straight. You think the modelling justifying the EIS is rubbish? Then why adopt the EIS?
      You think the modelling justifying the EIS is correct. Then why adopt the EIS if you want to get to 50% renewables?
      We think the modelling is garbage and we think the policy is garbage, and have been absolutely consistent on that all the way through.
      We’ve also made it pretty clear, just about every day in fact, that the Coalition policy is even worse. I think we used idiotic last week.

      • Tom R

        As you said in your previous stories, the modelling is by the libs people, and it is obviously rubbish.

        If you have modelling that is valid that discredits Labors policies, go for it.

        Don’t discredit policies with modelling you yourself have already disregarded.

        And, since we don’t really know the guts of Labor’s policy, wouldn’t it be polite to actually wait for that before attacking it so ideologically?

        • Hang on. Labor has made it absolutely clear that the EIS as proposed by the AEMC (this one) is the one they like cos it will save $15 billion. They have never proposed anything else. If they do, we’ll look at it.

          • Tom R

            I’m not sure it’s the one they said they liked, they just used those numbers to make a point.

          • stalga

            Sounds like Labour should be consulting you and David Leitch.

          • Tom R

            But have Labor said this is their modelling? Because, that is what your argument relies on, modelling that even you claim is rubbish. The scheme itself (as distinct from ‘the modelling’) is supported by the chief scientist, the CSIRO, the Energy Markets Commission and big energy users. Your only line of attack is modelling you readily admit is rubbish. Why not attack the policy itself?

            Unless of course you can point me to where Labor says their policy is in lock step with the modelling. The closest they have got is ” it’s not a change to the RET and the policy we have, has been costed as actually saving – this is by the government’s own people – saving the businesses and the householder, $15 billion across the next decade.”

            They don’t say they agree with it. I know you don’t.

          • Hmmm. So Labor says they want to adopt an EIS, as proposed by all those people, they constantly quote the modelling by its originator, and you are telling me they don’t agree with it.
            As I said, the one thing we have learned from Trump, brexit and Hanson is keep it simple. Renewables are cheaper than new fossil fuels. What is so hard about that?

          • Tom R

            Have you read our newspapers lately? That’s what is so hard about that. And then you feed their frenzy with this simplistic and baseless attack.

          • I’m causing the feeding frenzy? Have you read anything we have written recently, pointing out the nonsense that the Coalition and the Murdoch papers write? Labor backslides and now it’s our fault?

          • Tom R

            Except Labor haven’t ‘backslid’, as your other article grudgingly admits.

            You wrote two article lambasting them, without any real evidence, and wonder why I (granted, a rusted on Labor supporter) am upset.

            It’s bad enough when the msm attack them without foundation. It’s worst when someone like yourself who ‘usually’ is so good with facts, does something akin to the msm. I’m sorry if I came across too harsh. Actually, no I’m not.

        • wideEyedPupil

          Guts and Labor policy aren’t two objects I’d be putting in the same sentence, Tom.

          WA ALP leader Mark McGowan just used the infamous “no government I lead will ever…” in relation to the WA RET ask from a historical coalition of 42 organisations in from the a broad coalition of civil society, health, faith, climate, union, rural, business and environmental groups who’ve come together to speak up for urgent action on climate change which is currently being neglected by government. Worth noting WA ALP state platform does not even mention Climate Change once in the Health and Education sections. As Fiona Stanley and many others have said its the chief health threat this century, heatwaves alone already kill more people than bushfires, floods and natural disasters.

        • wideEyedPupil
      • David

        Hi Giles,
        Interested to know why you dismiss the EIS as a rubbish policy. As far as I am aware, all modelling studies conducted in Australia that compare the EIS to a RET show that the EIS will be lower cost. All these modelling studies have limitations (which you are keen to highlight), but without any alternative studies published there is little else to go on.
        In addition, it is important to consider whether the overall goal is to reduce emissions or deploy renewable energy (I would argue the former). While different modelling studies give a different mix of generation, with the rapidly falling costs of solar and wind, the EIS is likely to lead to mix of renewables and gas (with coal retirements).
        The policy experts in the field (Climate Change Authority, Australian Energy Market Commission, Gratta Institute) have considered the different policies in detail and concluded that the EIS would be a better policy to reduce emissions over the longer term.

        • Sorry, I thought i had made that abundantly clear. The modelling that claims an EIS is lower cost than a RET is based on ridiculously high assumptions about cost of wind and solar. On lower, but still inflated assumptions about cost of wind and solar, this modelling shows that a RET is as cheap as an EIS. Given that real cost of wind and solar are even lower than those estimates and then would surely sure a RET is much lower cost than an EIS, why on earth would you dump a RET in favour of an EIS?

          • solarguy

            Giles, Is an EIS a price on carbon, just like what the Gillard Government implemented? If not could you explain it’s mechanism please.
            Just so you know, I’m strongly for a goal that reduces carbon to zero in the quickest and most efficient manner, so a RET is a great tool in achieving that end.

          • Yep, its a price on emissions – set by a government-imposed baseline and on administrative decisions about how emissions below that line are credited.

          • David

            Sorry I didn’t quite understand, are you saying that the Climate Change Authority and Grattan’s analysis is also using lousy
            I had a look at the CCA’s modelling a while back and they did a
            scenario with lower new tech costs, and I believe (although I could bemistaken) still didn’t perform as well as the Carbon price or EIS?

            Have you done any modelling on this? If so, I am
            sure it would be healthy for the debate if you could provide it. Thanks!

        • Ren Stimpy

          Hi David, I am interested to know why Turnbull and the government dismiss the EIS as rubbish policy – seeing as “all modelling studies conducted in Australia that compare the EIS to a RET show that the EIS will be lower cost”?

          • Jane R

            Turnbull and crew went to the election with an EIS as policy. They didn’t think it was garbage then. Actually Labor took an EIS to the election too. It was bipartisan policy- not that anyone was talking about it

          • Ren Stimpy

            I think somewhere along the way the words ‘carbon’ and ‘tax’ were used too close together in the one sentence, and the horses bolted in fright.

      • Jane R

        Giles isn’t this modeling to do with a 50% emissions reduction – not the 50% renewables that Labor is proposing?

    • MikeH

      I acknowledge your absolute loyalty to Labor’s cause comrade but attacking any and all criticism of their policies is a bit counterproductive. Giles’ criticism is pretty clear and fact based and hopefully they will take it on board. That is how good policy is developed.

      • Tom R

        Except the ‘facts’ he has based his criticism on have, in his words ‘extraordinary assumptions’

        • Peter G

          I am perplexed at your point, Tom. The cost assumptions in this modelling are unrealistically high, and Giles offered a commentary on those. The facts in this case are that the projected comparative cost of wind and solar are manifestly inflated.
          The reasonable observation made is that given a critique of the modeling has been out there for months the ALP might have been more sanguine in what seems to be on the hop policy making.
          Shorten appeared to be conflating of the Renewables target (long term structural policy objective to reach zero emissions) with an EIS (short term policy to retire Carbon intensive generation and reduce near term emissions).

          • wideEyedPupil

            Bill Shorten appears to have the policy depth and humanity of a puddle on a summers day. Disgraceful undermining of one of his best shadow ministers.

        • Mark Roest

          No, Tom, you are wrong. In US dollars, the price of batteries right now for the Tesla is $190/kWh at the pack level, and I think it has an 8 or 10 year warranty. 8 x 365 = 2920; $190 / 2920 = $0.065 per kWh levelized cost.
          Now do utility scale solar at a very high (today) $1 per Watt ($1,000/kW) and divide by 30 years of full sun equivalent hours (30 x 365 = 10950 days, x 6 hours per day = 65,700 kWh): $1,000 / 65,700 = $0.01522 per kWh levelized cost.

          Assume you had to run all the electricity through the battery, which is a ridiculously high assumption, and add $0.065 per kWh plus $0.01522 per kWh, to get $0.08022 per kWh levelized cost, total. By the time a new coal or gas plant would be built, the solar will be $0.50 per watt, and batteries will be $100 per kWh with a 20 year life or more, so the respective levelized costs are:
          Battery: 20 x 365 = 7,300; $100 / 7300 = $0.0137 per kWh levelized cost
          Solar: $0.01522 / 2 = $0.00761 per kWh levelized cost
          Add $0.0137 per kWh plus $0.00761 per kWh, to get $0.08022 per kWh levelized cost, total.
          Yeah, we’re headed toward 8.022 cents per kWh (plus interest) levelized cost of electricity from very high amounts of battery coupled with utility scale solar, within 3 to 4 years. Ya wanna double it, and call it 16.044 cents? Be my guest! By 2025, it will be more like 3 or 4 cents per kWh.
          So what is the cost of electricity produced from coal or natural gas, delivered to the end user in Australia? 25 to 40 cents per kWh? Can you say gold-plated?

          So the first rule of marketing is to find a need and fill it. Giles, you and all the people who support renewables and saving our planet are capable of organizing a business that can take advantage of this shall we say, disruptive, economic opportunity, for the good of nature and the people of Australia (and the world). I would guess that this business would plan to use ample storage and solar, sufficient to power vehicles as well as buildings, etc., along with aggressive energy efficiency, energy management, and demand response, plus V2G during outages, and as much smart, islandable, trading microgrids as you can create the political space to create. Organize money, installers and suppliers, create a business culture that matches your exemplary values, and go for it! You might even get a non-lithium Gigafactory in an Australian state that supports it, to supply your program to decarbonize Oz. And be sure to support your great researchers in pushing the solar envelope.

          • Tom R

            What, I’m wrong that Giles has used the term ‘extraordinary assumptions’ to describe this modelling?

          • Jo

            It appears to me that your approach to levelised cost is not correct. You cannot simply divide the investment cost by the kWh. There is also the time value of money to be considered as well as any other costs and income during the life time of the project. This is not a simple formula but it needs a bit more work. I can point you in the right direction if you like.

          • Alex Hromas

            You can for large scale PV, battery and to a lesser extent OCGT and CCGT as they are very quick to bring on line not so with coal that takes about 10 years

  • Malcolm Scott

    For the avoidance of doubt, and as a reference point, this is the policy Labor took to the last election (and is still the current published policy). No RET scheme anywhere is sight. In other policy documents Labor referenced the mechanism would be determined in 2017. It will be interesting to see what the LEAN organisation thinks.

    To quote from Climate Change Action Plan Policy Paper:
    ‘A Shorten Labor Government will return Australia to being a leading renewable energy economy by:
    • ensuring that 50% of the nation’s electricity is sourced from renewable energy by 2030
    • providing greater certainty and flexibility for the Clean Energy Finance Corporation, and delivering more funding for the Australian Renewable Energy Agency (ARENA) and community renewables projects
    • establishing a Community Power Network
    • seeing the Commonwealth lead by example as a direct purchaser of renewable energy. ‘

    • Alex Hromas

      Unfortunately Shorten’s latest comments appear to have abandoned this modest plan in favor of gas. We seem to have forgotten that if the leakage rate from well head to final consumption is over 3% we may as well burn coal as methane is such a powerful green house gas

    • Jane R

      50% renewables is different from 50% emissions reductions as Giles is talking about here. Is he providing modeling for the wrong policy?

  • Greg Hudson

    Oh No, not Fossil Fuel Proponents again… or is it Frontier Fantasy Pushers? (FFP)


  • Alan S

    Surely by now some pedant should have pointed out that the first photo is a radio tower and not an HV transmission pylon? Guess it’s down to me then.

  • Askgerbil Now

    I don’t share your pessimism about an Emissions Intensity Scheme – that Labor’s “decision to dump any specific renewable energy targets will almost certainly mean a significant jump in the amount of gas generation in Australia, and very little new wind and solar…and presumably more coal seam gas”

    There are some options that could be pursued under an EIS policy –
    1/ The RET only supports a very narrow range of technologies for renewable energy. An EIS could be used on further options such as solar chemical fuels.
    a. Converting coal to synthetic natural gas with a large component of solar energy embodied in the fuel is one example. This might completely replace the coal seam gas industry. The quantity of coal burned in the Hazelwood power station each year – according to my calculation – could be used to produce 140 petajoules of synthetic natural gas per year. The mining equipment is available for this new activity as soon as the power station closes.
    b. Creating a substitute for diesel fuel is another. Dimethyl ether or DME is similar to LPG and can be used to replace diesel in farming, trucking and mining.

    2/ Most countries that mine coal in Australia also have engineering firms that build coal-fired power stations around the world. Australian industry shouldn’t just focus on changing its own energy technology. It should be demonstrating it has the capability to build and operate plants for solar-chemical fuels such as synthetic natural gas and DME – and then selling this technology to developing countries in competition with coal-fired power plants.

    • wideEyedPupil

      “1/ The RET only supports a very narrow range of technologies for renewable energy. An EIS could be used on further options such as solar chemical fuels.”

      These fuels are storage not generation. The Solar part of it is the generation. Solar is covered under the national RET

    • wideEyedPupil

      Firstly, any fuel that comes from fossil fuels and gets burnt is part of the problem not the solution. Syngas from coal is absurd given the +2º C peak of global warming aspiration coming from the world’s governance community at Paris (noting the commitments so far fall well short). You do realise that means complete decarbonisation by 2035 for industrialised high historical emitters don’t you?

      Watch this presentation by Kevin Anderson of the TyndallºCentre, who knows, the urgency of the situation might motivate you to drop this folly.

      Secondly, If you’re talking about power2gas (or liquid fuel) of any chemistry, the gas (or Liquid) product is just storage. If the generation of the power is solar or wind or any other renewable source, then it’s cover by the national RET. If it’s fossil then it should be assisted in any way bc that stuff must stay in the ground for even a 33% chance of staying below the marker for catastrophic climate change of +2º C above pre-industrial (we’re already +1.25ºC and 1.0ºC above the 18500-1900 average that IPCC uses).

      • Askgerbil Now

        The options I suggest are to derail efforts of the fossil fuel industry to continue with business as usual.

        The oil and gas industry lobbies strongly against restrictions and bans on drilling and fracking, arguing that shortages of natural gas will drive up prices. My answer is to tell them to stop complaining, and look to other technologies to produce natural gas. Note that all plastics and most fertilisers are made from natural gas. These chemical industries can continue after the energy industry stops using fossil fuels.

        The coal industry continues to build new coal-fired power stations that will burn coal for 40 years. Stopping new coal-fired power generators in Australia is not enough to slow climate change.

        Last Friday (Feb 17 2017) the Thai Government decided to build a new coal-fired power station at Krabi. My answer is to point out that coal power stations are far more inefficient than gas power stations so it is not commercially sensible to build any coal power station. This is an understandable and persuasive argument for people who are motivated solely by greed and will always act without regard to climate change.

        Companies that build coal-fired powers and lend money for them to be built often have no scruples. France’s Alstom Power Company was fined nearly $1 billion by the U.S. Department of Justice in 2014 for bribing government officials in many countries to obtain contracts to build coal-fired power stations.

    • Alex Hromas

      None of the companies mining coal build power stations and their interest in low carbon emission technologies is limited to beat ups in the press. RET supports a wide range of technologies with zero carbon emissions. EIS has failed to deliver any reductions in carbon emissions while siphoning huge amounts of cash to folk who promise to do something some day. Please get real

      • Askgerbil Now

        Coal mining companies, banks that lend money for coal mining and coal power stations, and companies that build coal power stations have a common financial interest in lobbying to oppose new technologies.

        The governments of countries with any of these industries share this common interest.

        For instance, according to Australia’s Treasurer Scott Morrison lobbying the Asian Infrastructure Investment Bank to lend for coal projects “Australia’s national interest demands that coal continue to be part of our future energy equation, not just here in Australia, but around the world.
        That is why following our strong representations, I am pleased that the AIIB has now put fossil-fuel generation investments back into the mix for their energy sector strategy, which is now under discussion.”

        The Australian Government has paid $5 billion of taxpayers’ funds into the AIIB. This is to support coal projects throughout Asia and to allow the Australian Government to influence the AIIB to lend for coal projects.

  • David leitch

    An EIS scheme still only really looks at utility scale generation. It has nothing much to say about distributed generation or whole of system modelling including taking into account externalities.

    I did a podcast with Danny Price, albeit before doing any decent analysis, that can be found here for those that want to here Danny discussion the subject.

    The EIS suffers from some of the same faults as the REC scheme in that it requires confidence that the scheme won’t be changed in the future and good knowledge of future carbon and coal costs.

    I continue to support reverse auctions to bring in new supply but there also needs to be some kind of carbon cost to make sure it is the high emitting, low variable cost thermal generators that are forced out of the system first. An economy wide carbon cost (tax) deals to all the carbon emissions that don’t come from electricity (62%).

  • Some 15+ years ago gas was the fuel of choice for base load and shoulder power generation because it was relatively cheap and CCGT plant provides higher efficiency than any form of coal fired power plant then and now.
    Thanks to inept governments allowing excessive quantities of gas to be sold to the export market and thus starving the local market, gas prices are several times higher and rising. So surely if gas is to provide the power generation of the future surely we will see a continuation of the rapidly rising wholesale price of electricity.
    My understanding is the wind and solar currently provide about 8% of the electricity produce, so how can this 8% be having such a big impact on pricing? It is absolute BS

    • Don McMillan

      The NSW Domgas and NSW State government was happy for QLD gas to be exported as at the time of signing the contracts they expected to get gas from NSW CSG as over 3 Billion dollars had been invested. With the libs effectively shutting down the gas E & P business one should not be surprised what is currently happening. AGL’s solution is to import USA shale gas, which the greens, activists and supporters of this website seem to support or at least do not object.

      • Alex Hromas

        Where is the import dock for AGL? Right now the spot price for gas has fallen due to USA fracking putting the export gas terminals in Queensland at risk of becoming stranded assets yet the domestic price remains high greed perhaps. The problem is that the cost of energy off large scale renewables keeps falling and is now comparable with any of the fossil fuel plants. What is stopping their large scale development is the present government’s hopeless fixation on coal.

        • Don McMillan

          ALG’s ASX announcement 14 Nov 2016 Pg 33. $17m study into putting terminals in SA, Vic and NSW. They have stated they’ll endeavour to get most of the gas fro the NWS but this gas is contracted out. What they’ll do is bu US shale gas and do a swap with NWS ships to save on shipping costs and trick people thinking its OK.
          QLD gas will never be stranded. These projects due to the size of the investment the financial institutions that lend the money insist that the gas be contracted out. Even worst case scenario is you assume all monies spent todate as sunk cost this would be the cheapest gas to produce.
          Gas prices in OZ hubs are RBP $10/GJ, SQWP $16.5/GJ and in the USA only $2.83 USD/mmbtu or $AUD3.68/GJ.
          The Gov does not have a fixation with coal and especially not with Natural gas. Remember it was the libs that destroyed the natural gas industry. What they are worried about is both cost to manufacturing and reliability 24/7. With manufacturers we are now un-competitive. Reliability. The renewables industry had a choice bring to market a reliabily energy source which would mean combining Wind, solar etc with Gas, batteries etc OR get the politicians to manipulate the market.

          • Alex Hromas

            Don thanks for the data on AGL. I still can’t figure it out as I understand the US gas prices are lower than the ones our companies used in evaluating their hubs and hence the companies, banks and share holders will all have to take a haircut just a question of whether its a No.1 or No.3 comb. I assume the difference in gas prices that you quote is liquified FOB for Oz and at the well head, US. Or perhaps AGL has an export arm that is separate from its generation business.
            Gas will reduce your carbon footprint if especially if you burn it in a CCGT plant. Hower if your leakage rate is above 3% you might as well burn coal. Methane is a very potent green house gas. We have the renewable technology in solar thermal to provide dispatchable zero carbon energy and the technology is mature with large plants in Spain and California. The Lb/Nat governments form Howard to the present have been busy trying to cut the renewable energy industry off at the knees. This has kept us mired in large scale PV and wind both are cheap and quick to build with short payback periods. In the current political climate no one wants to build solar thermal at a price per kW slightly higher than coal and a comparable payback period. No one wants to build coal for the same reason. Most of our coal stations are old and need to be replaced in the next 10 to 15 years. With the current crop of pollies we will be stuck in this vortex for a long time with our generation system slowly morphing to wind, large scale PV and CCGT as the probable mix with the renewables forming the base load due to price and CCGT or OCGT providing back up not the best way to run a national grid

          • Don McMillan

            The gas prices are delivery price at internal hubs in both US and OZ. For LNG price you have to include the cost of refrigeration [-160C] which is expensive and takes about 15% of the gas to do this then add shipping costs. So AGL’s solution is to supply basically US gas for the next 10 – 20 years and is will be expensive. Due to the capital costs these will be long term contracts, so much for their confidence in storage. The history of gas prices in OZ is that we have been generally lower than the USA but with the banning of Gas Exploration in Tas, NSW, NT, and now southern SA has scared investors off thus the reason for high prices. Note investors lost $3 – 4billion dollars of investment in NSW when liberals kicked them out, they will not come back. It has been a conscious decision to have high gas prices and full knowledge that manufacturing reliant of gas [chemicals, plastics and fertiliser] will have to close and power generation will become unreliable and expensive.
            There is plenty of investment dollars in the market available for investing in in renewables and storage. The uptake is small and compared to FF, government approvals very quick.
            This is why the claims made do not match what is happening in the market place.

      • Farmer Dave

        Don, I am a supporter of this website, and I certainly object to AGL’s proposal. It makes so little sense thermodynamically, that I would be very surprised if it made sense economically. In short, I don’t think AGL are serious about it as a proposal, but they are so serious about how badly the east Australian gas market has been regulated that they came up with this incomprehensibly stupid proposal to demonstrate the depths to which the market has sunk.

        Essentially, the Energy Return on Energy Invested (EROEI) for shale gas produced in the US, converted to liquid (at a significant energy cost), transported to Australia (more energy cost) and then heated up to turn it back into a gas (more energy cost) must be ridiculously low, and certainly much, much lower than coal seam gas produced in Australia and transported by pipeline in Australia.

        • Don McMillan

          They are serious about this. The reason AGL put this in the market was to gauge the objections & there is none. Greens etc are all silent. Most on this website dream of not using natural gas but it is integral to our day to day lives.
          We are gradually economically & militarily disarming ourselves. Refineries have been closing down making us reliant on product from Malaysia, Indonesia. In the future gas from OS will make up totally dependent on foreign countries for our energy. It is naive to think surrendering energy independence will not be taken advantage by other countries.

  • I’m confused about the nature of a reverse auction scheme within the NEM.

    Whom would be the counterparty on the contracts (the buyer of the energy)? Would it be the government, a distribution business or a retailer? Obviously the normal market structure is for a retailer to purchase energy via a PPA/CFD/Swap. Given that most retailers are now privately owned entities, I’m not clear how a reverse auction mandated by the government would work.

    I’m a big fan of what Simon Corbell achieved in the ACT, but I was under the impression that the cost or benefit of the swap contracts that have been struck is passed through to consumers via the government-owned distribution business (ActewAGL). Is that incorrect?

    Can somebody please explain how such a scheme would work in Victoria?


    Dave P.

    • wideEyedPupil

      That’s correct, but Victoria is about to launch the same thing, with privatised electricity retailers and networks in place. They’ll be finding some kind of mechanism to transfer the difference either way (retailer to RE farm or RE farm to retailer if the wholesale price lifts above the strike price) I expect, a CfD can work without it as you say.

      I’m wondering if the wholesale price of energy spikes to $10,000/MWh for five minutes does that feed into the strike price contract for difference or are they averaged out over longer periods?

    • For anyone that’s interested, it appears that the Victorian scheme will take the same form as the ACT scheme:
      * a government agency will be the scheme administrator
      * the same agency will be the contractual counter-party
      * the contracts will be a CFD, with payments to the “seller” structured as a feed-in-tariff
      * costs will be recovered from consumers via increased distribution business charges.

      A few quick comments on this approach:
      * The government will enter into binding contracts to buy energy and LGCs from a wind/solar farm for the next 10 to 20 years. They are competing with retailers to be the buyer. I’m not sure that’s the role of a state government.

      * Consumers will pay for the government scheme through distribution charges. Hopefully the cost (or benefit) will be clearly articulated as a line item on each invoice (generated by the retailer). Generally speaking, customers don’t dive into the detail however – they just see a higher bill that needs to be paid and blame the retailer.

      * The VRET scheme cost will be largely unavoidable, except by a few very large energy users who will make their usual claims to be made exempt. In other words – there is no choice for consumers to direct their money towards businesses that support renewable energy (e.g. Powershop and more recently EA and even ORG) or for householders who seek the lowest cost provider to reduce their bills. In effect, it is a regressive tax.

      I thought it was a very good move for the ACT Government, as a first mover and JV owner of the dominant retailer/distribution business. I’m less sure about the same approach in one of the world’s most competitive energy markets.


      Dave P.


  • Radbug

    The 21st century will be the century of electrochemistry, not pyrometallurgy, not the Rankine Cycle. You can sell electrochemical fuel internationally, just witness the vast amounts of methanol tankered around the world from Qatari Syngas plants. The methanol will be used in Direct Methanol Alkaline Fuel Cell stacks which will replace Combined Cycle power plants. The main financial effect will be on the $AU60 billion investment in Curtis Island, which looks more & more likely to end up stranded. Use of Syngas, steam reformation-derived, methanol will usher in the new nanotechnology-catalysed, methanol production methods. Beijing likes this new technology a lot, to the detriment of its coal-fired generators.

    • wideEyedPupil

      interesting, certainly power2gas/fuel is going to get a lot more attention this century as ubiquitous, virtually free PV applied to all external facing cladding surfaces becomes the norm (~2036 according to Ray Kurzweil for virtually free PV modules).

  • More important than an EIS or RET is to have policy that enables local electricity trading with blockchain microgrids. Please read this petition:

    • wideEyedPupil

      *More* important to have rooftop PV and chemical battery storage at multiples the cost of storage at the grid level? Perhaps you work in the financial sector James and have more money attachments than sense.

      Of course micro-trading on the main grid and between and inside micro-grids will be important. It is going to be disruptive if allowed onto the grid (Western Power the grid operator in WA is already studying the White Gum Valley very-small-scale trial of this technology).

      • Andrew Woodroffe

        Grid level is cheaper? So? It is at wholesale prices. Power then has to be transported to where it is actually consumed, the other half of retail electricity prices. Behind the meter is dealing with retail prices, much better economics. Think of rooftop solar as supplying electricity WHERE people need it, behind the meter batteries will then allow people to access that electricity WHEN they need it.

  • Ken Fabian

    It’s deeply disappointing that, in spite of the vast empty space for sane energy policy Labor isn’t prepared to develop and commit to some – and take the LNP to task on this issue they are so egregiously bad at. Labor still refuses to show courage and leadership on the one issue where there is a leadership vacuum.

    Let’s be clear that the energy transition is about achieving low emissions because the climate problem is real and serious; that imperative has not gone away. That they can make it appear to be about achieving cheapness with reliability with that low emissions requirement dropped out of the equation – cynically used as the excuse to drop it out – tells me they don’t get the climate problem at all.

    And don’t let the FUD merchants deceive you – gas, in climate stability terms, is not low emissions, it’s high emissions, regardless of how much higher coal is. As an interim option for backup to intermittent renewables it can have a place – and that place should be as the power source that gets switched off first when the sun’s shining and wind blowing, that is expected to move to ever greater periods left turned off, for reduced emissions, in the face of the use of renewables growing (watered and fertilised) as rapidly as possible.

  • Robert Comerford

    If Labor is to get back on the path that swept Kevin Rudd to power then it will just have to accept that it will be out of office for some years until the unintelligent voting public finally get it that the fossil fuel era is destroying us and that we must pay whatever it costs to reverse that trend. Human induced accelerated climate change is an inconvenient truth and the majority of the voting public do not want to know about it.
    Of course the real problem is that we are at plague proportions on this planet.

  • Jane R

    I thought Labor was proposing 50% renewable energy (via an EIS) not 50% emissions reductions (via an EIS) so presumably the baseline would need to be low enough that gas was squeezed out – not high as in this modeling (advantage going gas).

    • Labor is proposing 50% renewables, and proposing to use a policy whose modelling suggests that will not encourage any renewables, even if the emissions reduction target was high at 50% reduction. Bizarrely, the modelling suggests the cheaper way to get there is with a RET mechanism, but that has been rejected by labor.

      • Jane R

        Yes I do wish they had stayed with a RET.