Across the world, and in virtually every energy constituency, there is no doubt about the energy future: It will be dominated by solar. Within decades, solar will be the number 1 source of electricity across the globe. And for good reason: It is cheap and plentiful.
But not in the Coalition’s Australia. If its policy wishes comes true, this will not be the capital of solar energy, but rather the land of sweeping coal mines and the Man from Snowy Hydro 2.
There are two remarkable observations that emerge from the 50-page modelling document sent to the state governments ahead of this Friday’s COAG energy ministers meeting in Friday.
The first is that all those arguments against renewable energy are absolute rubbish. The Coalition’s own document makes clear that the very policy it tried to kill, the renewable energy target, will be responsible for nearly all the power bill reductions it is claiming from the National Energy Guarantee.
The second is that this NEG is being designed with one thing in mind: to bring the development of new renewable energy, and large-scale solar in particular, to a stop.
Modelling, schmodelling, you might say. But let’s not forget why we are here and discussing the NEG in the first place.
It’s because the Coalition snubbed the CPRS, scrapped the carbon price, tried to kill the RET, dumped an EIS, refused the CET – all in order to appease the Far Right members of its own parties.
The NEG has been designed for and approved by that very same group of climate deniers, vested interests and technology troglodytes. And it has been designed by the very regulators and consultants that led the campaign against wind and solar, and the RET in particular.
Bizarrely, its own modelling strips away all those arguments against higher levels of renewables, and the more ambitious climate targets, yet that is exactly what this policy is trying to prevent.
The owners of the pipeline of more than 15GW of large-scale solar projects across the country should be mortified, and crossing their fingers that Labor wins the upcoming state elections.
The modelling shows that if demand is at the low end of expectations – as many expect as energy efficiency improves, demand management is rolled out and rooftop solar is increased – then it achieves nothing more in emissions reductions than if there were no policy.
At its most optimistic outcome, it allows for an increase in wind and solar of just 5 per cent over business as usual from 31 per cent to 36 per cent.
But that appears to seriously underestimate the extraordinary amounts of rooftop solar that will inevitably be installed over the coming decade. And it is important to point out that these figures below include rooftop solar.
Even in its most optimistic scenario, it expects large-scale solar to be stopped dead in its tracks – adding nothing for eight years (see table below and at top) under the NEG and a total of little more than 1GW of installations over the decade from 2020 to 2030. The wind industry fares little better.
“The least-cost mix of new investment under the Guarantee is comprised mostly of wind, followed by large-scale solar PV, batteries and mid-merit gas,” it says.
It appears to ignore, in both BAU and the NEG, the case for corporate investment in renewables. Like the Whyalla steelworks, and other big energy users, they are sick and tired of this nonsense and will take matters into their own hands.
The modelling by Frontier Economics assumes – against nearly every other modelling assumption – that wind will be more expensive than solar. Yes, it has finally adjusted some of its absurd costings for renewables, under pressure from the industry. But it dials in yet more absurdities in this latest effort.
This table below illustrates how. Frontier argues that wind and solar would cost over 20 per cent more if there were no policy than if the NEG was in place.
That’s because it argues that without the NEG, financing for wind and solar would face an extra 3 per cent risk premium. That adds more than 20 per cent to the assumed cost of those technologies.
It’s a miraculous assumption for a policy designed for those in denial of basic science and economics, but this quote below gives a clue of where they are coming from, and where they are going:
“Wind plant typically has a lower LCOE than a combined-cycle gas plant, but gas may be more valuable than wind once the relatively lower reliability of wind is taken into account.”
There are further assumptions that underline the modelling. The first is that Snowy Hydro 2 will be built within six years – even though its first feasibility study is not yet complete – and so will crowd out any new renewables and storage, rather than easing the exit of coal.
The second is the assumption below, that in business as usual there is no investment in battery storage at all. The jaw just drops. Perhaps they should read the Finkel report on storage.
There are endless queries about the modelling. Andrew Stock, the ex Origin Energy executive now serving with the Climate Council, summarised his concerns.
Most striking is the assumption by the Coalition’s modellers that the existing fossil fuel fleet will run for another 15 years with no impact on reliability, asset performance.
By 2030, Stock notes, another 10,000MW of coal will be around 50 years old. “If the NEG is meant to drive investment in new capacity before the old closes, this modelling sure doesn’t show it,” he says. “It’s running these assets into the ground.”
Here are some of his other observations:
- The modelling assumes a 5 per cent higher reserve margin for the NEG case than the BAU case. This brings forward more investment to ensure there is more backup, but it is a modelling assumption, not as a result of policy change. 5 per cent extra generation has a big impact on price, but this is not dealt with in sensitivities
- Technology costs and risk premium are dealt with as sensitivity. Not surprising these have little impact as there is minimal new investment in either case. Likewise changes in gas costs for new plant (its OCGT anyway so pricing will have nothing to do with bid pricing.
- The report contemplates emissions reductions from investing in existing coal plant to lower emissions per MWh but this is not modelled. Any coal plant improvements will reduce renewable investment even further. The report notes this could be “a cheaper way” to meet emissions targets rather than new build.
- The regional market power issues from integrated gentailers are not really addressed, but left to the detail. I would think there is a good chance the modelling assumed that all generators bid into the short-term market on a marginal cost basis rather than “strategic bidding”, whereas we see consistently across the NEM, in every region that when gentailers get the chance, they bid strategically, which increases price dramatically. The report relies on economic theory to justify retailer contracting, rather than actual reality. Fortunately SA is awake up to this, but the other states shouldn’t be fooled because NSW and Victoria will be in similarly bad situations. The NEG model will reinforce this market power issue.
- There is no evidence presented that the NEG is either scalable to deeper emissions reductions, or deals with plants closing (or tripping off suddenly in hot weather). It assumes a perfect world, and as we know, with old power stations, it’s anything but perfect!
So, to those who wish to engage with the Coalition to try to help design a policy that is both workable and achieves something, good luck with that.
It might just be easier to point out to the Coalition that their own modelling undermines every objection that they have ever had against higher emissions targets and more renewables. If they were serious about cheap, clean, reliable energy, then they could have a clean energy target in place in no time at all.
This NEG nonsense should be friendless. Remember who you are dealing with – the architects of the mess we are in now –- and why. And do remember Neville Chamberlain and his piece of paper.