The Coalition government’s central political message that an increase in renewable energy will inevitably make the electricity system less reliable has been thoroughly debunked by a report from the prominent think tank, the Grattan Institute, which says such ideas are both wrong and dangerous.
“The idea is wrong because almost all outages are caused by problems in transporting electricity, and have nothing to do with whether the power was generated from new renewables or old coal or some other technology,” it says in its newly released report “Keep Calm and Carry On”.
“And it’s dangerous because if politicians over-react to public concern and rush to intervene in the market, electricity bills could rise even higher.
And, it continues: “There is no reason to panic about wind and solar growing as a proportion of our power supply, nor for Australia to abandon its international commitments to reduce greenhouse gas emissions.”
The timing of the report – from a think tank that has hitherto largely sought to straddle both sides of the energy debate – is particularly important given the upcoming election campaigns in NSW (late March), and federally (poll by mid May).
The federal Coalition government continues to describe higher renewable energy and emission targets as “reckless”, and “economy wrecking” and energy minister Angus Taylor is making heavy (and to most views counter-productive) interventions in the market, and is proposing to invest billions to underwrite new “24/7” power generation.
One of the report’s lead authors, Tony Wood, questions why the government would seek to underwrite “24/7” power to solve a problem that is only likely to emerge for a few hours a year.
And he highlights South Australia – whose state-wide blackout” in 2016 intensified the campaign against “intermittents” and the dangers of what happens when the “sun don’t shine” and the “wind don’t blow” as an example.
“But they haven’t recognised that the electricity market operator has since changed management practices to better suit the changing shape of the energy system, and a combination of regulatory obligations and market mechanisms are being applied to support grid stability as the system continues to evolve.”
This, Wood noted, involved a combination of demand management, battery storage, and – for the first time in the recent heat-wave that hit South Australia in late January – the use of the emergency back-up generators installed by the previous Labor government frustrated by the market failures that left at least one major gas generators not operating in the 2017 load-shedding incidents.
Some people in South Australia did lose power in that heatwave, but it was the result of network failures, responsible for 97 per cent of all outages over the past 10 years, and it would be prohibitively expensive – and ultimately futile – to try to prevent all these outages.
Already, the report notes, the NSW and Queensland governments spent $16 billion more than was needed on distribution networks over a decade, largely in response to widespread blackouts in 2004 in what was then a coal-dominated grid. )It also takes note of the widespread load shedding in 2009, again in a coal-dominated grid with little or no renewables).
But this massive investment achieved only very small improvements in reliability. This conclusion echoes many other findings about the unnecessary gold plating of the industry.
A lack of generation capacity – even with the events in Victoria in January (when 200,000 homes lost power for short periods of time) – amounted to just 0.1 per cent of all outages over the past decade. (see graph above)
Victoria is facing tight supply-demand scenarios because the Hazelwood generator closed with just six months notice, too short a time frame to build replacement capacity, and it followed an investment drought engineered by the federal government and its attempts to scrap the RET.
AEMO says the risk of shortfall will ease as new capacity, particularly renewables but also storage and other dispatchable generation, is added to the grid,
Grattan says the way to prevent more of these outages is to encourage more investment, and governments can do this by creating a stable policy framework to reduce greenhouse gas emissions and ensure that retailers have enough supply.
“What Australia needs now is not panic and politicking, but cool-headed policy responses to manage electricity reliability without unnecessarily adding to consumer bills,” the report says.
“Increased renewable generation does create challenges for managing the power system. But if we keep calm and carry on, these challenges can be met without more big price increases for households and businesses.”
And what about the argument against wind and solar and the focus on their “intermittent” nature.
“This simplistic critique has a simple answer: run something else,” the report says. “That something is a ‘dispatchable’ generator that can increase or reduce its output as required.
But the way to get that investment is to achieve something the government has failed to achieve over the last five years – develop a coherent emissions and energy policy.
Grattan prefers a carbon price, but says an emissions intensity scheme, a clean energy target or an emissions obligation will do. Grattan also supports the reliability obligation, have short term emergency supplies in place, developing demand response and boosting transmission -in short, much of the intent of AEMO’s Integrated System Plan.
It does not support government intervention, capacity payments or capacity markets, which are being put forward by some of the major generators as a means to support coal and gas generators (despite the enormous profits they have been pocketing), or requiring – as the Finkel Review had suggested – of requiring all new generation to have back-up.