Frogs on the stove – the failure of privatised power | RenewEconomy

Frogs on the stove – the failure of privatised power

It beggars belief that any government could expect such a vast and heavily subsidised power system as Australia’s to improve or even survive in private hands. We now see the consequences of this misguided folly.


The blame game is on, and the each side of this clearly polarized debate is throwing the baby out with the bathwater. The failure of the electricity supplies in South Australia poses many questions, but there is one answer, give us back our utilities.


As the World’s population evolved from small tribes to community groups, so did the need for essential services. First it was water, then sewerage and, thanks to Thomas Edison electricity. You will have to back to ancient China or Roman times to track the progress of water and sewerage but electricity has a more accurate record. Electricity began as a private enterprise, the technology and then the service had to be sold into a resistive market, frightened of this new magic, the costs and consequences. Only when governments adapted and promoted this new wonder did it thrive and its penetration throughout the West was essentially driven by supply and demand, if a community wanted it they had to make the investment after weighing up the benefits.

In Australia, the communities who purchased this new utility were as small as a town council, as wealth grew in major centres, a disparity emerged between city dwellers and the sparsely populated agricultural regions, causing the government to heavily subsidize the expansion of electricity networks to benefit all of the population, most of which voted in and out these ever expanding governments. No commercial operator would ever make an investment in these huge expanses of assets where positive returns were distant or non-existent.  The beginning of the privatization gamble was in the early eighties, the NSW government went 50/50 on the first four of ten contracted 660MW coal fired generators at Eararing on Lake Macquarie. It wasn’t as attractive as touted and it was then left to the government to complete the other six generators over the next ten years at Bayswater and Mt Piper.

It beggars belief that any government could expect such a vast and heavily subsidized power system as Australia’s to improve or even survive in private hands and what we are seeing now are the consequences of this misguided folly. The establishment of ruling bodies, specifically set up to ensure that private players and government incumbents guarantee supply, coupled with the much touted competitive benefits that never materialized, have ultimately left the National Electricity Network in a dire state. The only way governments can possibly make such a subsidized system attractive to private investors is to remove sovereign risk and/or guarantee compensation should market conditions change, to this end the government has overseen the systematic escalation in pricing of this essential services and the genie is well and truly out of the bottle.

Enter Renewables, when much of this privatization was in full swing, renewables were only emerging, and most investors in fossil generators underestimated the disruption these would have on their virtually guaranteed return on their investment. The situation these investors now find themselves in is that their golden geese have stopped laying on que and, in a desperate attempt to mine for profits they have turned to gas to pump up the bottom line.

The returns from gas are far superior to that of coal and because of the illusion of a competitive market and the quick response of gas, every opportunity to exploit these assets for profit is being taken. Meanwhile no private investment is being considered for new coal fired stations and the operating ones are being run into the ground, and you can’t blame the owners for this.

Where an intelligent government could and should manage coal fired generation and ensure that this is mixed in exact proportions with peaking gas plants, allowing for a seamless progression to renewables, the very thing that can make everything work properly and reliably is being abused, and renewables are getting blamed. Only a few decades ago electricity was almost exclusively from coal fired stations, spinning reserve was required to cope with peaks, hydro and off-peak tariffs complimented this mechanism and it worked under the stewardship of state governments. We now see gas displacing baseload coal generation and the price gouging that goes with it. It seems absolutely absurd that AEMO decided to switch-off up to eighty thousand customers in S.A. citing the cost of generation as a legitimate excuse. Where the privatized nature of the generation mix has, and will continue to maintain and operate only the most profitable of their assets, which is what businesses do, and with AEMO juggling a shrinking number of cheap energy sources and profiteering gas generators there is no other solution for government than to either regain ownership of the generators, networks and even retailers, or at the very least re-enter the generation industry with subsidized coal fired base load which will take this essential gas generation away from base load duties, leaving this valuable resource for supplemental duties for renewables and export. Sovereign risk will then come into play.

Coal must remain the underlying generation source for the N.E.M. in the medium term, without it, gas gougers will continue to distort the electricity market as they are now and prevent the inevitable rise of renewable energy sources, the situation is dire now and there seems no solution from either side of the argument.

It seems the only solution to the current train wreck is for states and even individual communities to “go back to the future” and decouple from this slow motion train wreck!

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  1. Ray Miller 4 years ago

    It will be interesting to see what this time next year will bring and how many dwellings have decoupled from the grid. The cost of doing so is becoming cheaper.

  2. Rod 4 years ago

    Agree, privatising energy and the supposed competitive benefit has been a disaster.
    30 retailers do not mean competition. Just means lots of call centres managing churn.

    I also agree Nationalising some assets is starting to make sense.

    However you lost me at Coal base load.
    Here in SA the opportunity for gouging is pretty limited. Roughly between 6pm and 8pm (if the wind isn’t blowing) I think there are smarter ways of smoothing this peak than Coal base load.
    Oh, and the evening peak when ALL of the electric HWS come on at 11:30pm

    • solarguy 4 years ago

      Yep, lost me on coal base load too.The technology that kills gas and coal is CST with storage, it ticks all the boxes and is complementary to PV and Wind and pumped hydro storage. I addition bio gas from sewerage and green waste. There are shit loads of MWH in shit and I shit you not!

      Last night on ABC’s 7.30 Report the SA Premier said that their government will have to matters into their own hands to make sure power supply would be reliable seeing that the Federal government couldn’t. And that is promising for CST to be built in SA. Jay knows that it can and must be done and so do we.

      Now is the time to build storage.

    • Rob Campbell 4 years ago

      Coal is on it’s way out, the problem is that where gas is used as a replacement because it can be ramped up so quickly the market leaves itself ripe for gouging whilst also making these ideal generators unavailable for complimenting intermittent renewables. Here in Queensland we are producing up to two gigawatts in the middle of the day whilst coal fired units are sitting idle. The effect of this is that renewables are being stifled because gas is being abused, a good government would make it either uneconomical or illegal for gas to displace coal whilst we transition to renewables. COAL- BAD but distorting gas is even worse in the medium term from not only a renewables support position, but also capacity not only for industry but also those exports we must have to support our economy and our children’s future. Sadly no government has the balls to plan more than three selfish years ahead.

      • Rod 4 years ago

        I agree short term thinking is hampering this country. Especially in the energy market.
        Imagine if the Snowy scheme was suggested today.
        Qld is a special case in that you still own your generators.
        Here in SA we are now averaging 40% RE and often above 70%. We are also very reliant on the interconnector.
        With such a high level of RE, coal is priced out as has been admitted by the owners of Northern. Ramping of coal is also slower and costly due to higher maintenance. SA (Leigh Creek) coal also had freight costs and was due to run out in the next decade.
        Coal just doesn’t make sense here. Storage does.

        • Rob Campbell 4 years ago

          The problem is that governments have abdicated from the electricity space, Even though Qld owns its generators they are behaving the same as the other private corporations. This means that none are prepared to invest in other than gas at the moment. Ultimately renewables and storage will prevail but it’s not a matter of just say “storage is the answer” because no-one is prepared to invest, and as long as the market is continually distorted by gas, anything other that re-nationalization of power assets, that is government driven change, not market driven, will put the transition be put back on track.

          • Rod 4 years ago

            So the answer is fix the rules. Although AEMO and the regulators have historically been slow moving behemoths, this doesn’t need to continue.
            If storage could take advantage of these peaks it would get investment small and large and very quickly. This is part of the reason FF investment is not happening. They are very aware their current assets are doomed if the rules change. No way they are going to throw any more money down the drain.

          • Rob Campbell 4 years ago

            The biggest issue is that states still have sovereign rights to utilities and that is probably the best way to have it. This NEM club has screwed the whole ball game up. The solution is to break up the NEM and leave AEMO to administer the inter-connectors only. Each state can then do it as they used to and if they want or need to import or export, these assets are there. Otherwise there should be no national governance. You have to remember that the NEM was never a commonwealth creation, the laws are actually domicile in SA and the NER and AEMO are not really federal government departments. Its just a con job done on the governments of the day by some quick talkers who said do this and it will be a fantastic success, I think they then moved on to Cloud Finacial services!

          • Rod 4 years ago

            Totally agree with that.
            I couldn’t believe I heard AEMO blaming Electranet for not telling them about weather forecasts etc. WTF?

      • Rick 4 years ago

        We will never have a cohesive national energy policy until we reform our ‘horse & buggy’ Constitution. The last person to attempt to tackle this was Lionel Bowen in the Hawke government. Our government is fundamentally and systemically broken and where is the leadership for radical change? If we ‘out sourced’ our government to Switzerland or Luxemborg it could not possibly be any worse.

        • stalga 4 years ago

          Do you mean Lionel Bowen tried to create a national energy policy or his drafting of the proposed new constitution?

          Shame there’s not a few Lionel Bowens in parliament.

          • Rick 4 years ago

            Agreed. COAG is merely a band aid on a supurating wound that has been infected by discredited and unrepresentative political parties. The beginning of a solution is a ‘Brexit style’ referendum to transfer the powers and personnel of the States to the Commonwealth together with constitutional recognition and regulation of representative local government to rid it of the perpetual stench of Tamanny Hall. The existing sanctions against conspiratorial voting practices also require tightening with severe sanctions for transgressors.

  3. ekard 4 years ago

    stop it with the frogs / stove – a stupid metaphor – as it’s false ….

    • Rod 4 years ago

      That wiki article is a bit inconclusive. Older studies say if heated very slowly they die.
      None of the newer studies replicated the rate of heating of those.
      A lot of testimonies from “experts” but not many actual modern experiments.
      Sounds like a job for myth busters but not very PC these days.
      And maybe use a cane toad coz frogs are getting scarce.

    • Barri Mundee 4 years ago

      Let’s ask the frogs and see if they croak!

  4. Phil 4 years ago

    I don’t mind if someone wants to start an argument but getting a few facts right is a good place to start. Instead this is full of factual errors.

  5. Phil 4 years ago

    I don’t mind if someone wants to start an argument but getting a few facts right is a good place to start. Instead this is full of factual errors.

    • Rob Campbell 4 years ago

      Which you intend to provide details??

  6. Peter F 4 years ago

    Your comments about gas and profiteering and the absolute failure of privatisation are all correct. However trying to change the rules to fix the gas/coal share will be an enormous barney and nothing will happen for 2-3 years.

    In the same 2-3 years SA could become a net electricity exporter for about $500m

    A revolutionary approach would be for the SA government
    1. Offer a subsidy of $200/kWhr of capacity for grid accessible storage declining by 10% per year for residential and small commercial (1.e. $2,000 for a Zcell, $2,800 for a Powerwall II.
    2. Offer a subsidy of $100/kWr for grid controlled loads. i.e ripple or internet controlled heating, cooling, pool pumps etc.
    3. Call tenders for 200MW of on grid storage at substations or generators, installed over 3 years. In the UK they just did that and achieved a price of $160m, about 1/3rd the mooted cost of a suitable interconnector.
    4. Build a government owned reciprocating engine CHP plants with total generation capacity of about 250-300MW in all appropriate government controlled sites. On hot days reciprocating engines use a little over half the gas that a open cycle gas plant uses and at non peak times the plant can provide spinning reserves for renewables and ramp up and down from 5%-100% in 2-3 minutes. vs 25-30 minutes for gas turbines
    5. Install as much solar as is practical on all government owned buildings combined with 200-300MW/1-1.2GWhr storage. They could probably install 500-700MW of solar over 3 years.
    At peak demand the system can provide 650-900MW of electricity and completely slash the gas generator driven peaks. On a windy day, there would be no need for gas peakers and if the CC plants installed storage to spread the load they could operate more efficiently and sell much more power over the year, because they could start early to top up the batteries, run with the batteries at peak load (and peak prices) and then run beyond the peak partially recharging the storage

    • Rob Campbell 4 years ago

      Yep, this is the sort of thinking we need, the problem is that the commonwealth has now got its fingers in the pie, political grandstanding is displacing logic.

    • Jonathan Prendergast 4 years ago

      I agree policies like this are what we need. Or the networks and AEMO to open up frequency and spinning reserve markets to batteries in some way like you suggest.

      Just a note with reciprocating engines, based on my experience, is that are not that flexible. They can turn on pretty quickly, but like to operate above 70% load. But any such engines running of biogas should be incentivised to have gas storage, and operate only at high demand or low wind supply times, rather than more constant operation that they normally do to get payback on capital.

      • Peter F 4 years ago

        Modern reciprocating engines will run quite well at 20% load and can load up by 10% or more per second. Have a look at Wartsila or GE stationary power. Large plants can have 10 or more engines with only one running at low load. While it ramps up no 2 starts then no 3 etc. 20% of 1 engine is 2% of total capacity to 100% of total capacity in seven minutes

    • Barri Mundee 4 years ago

      I really like those proposals but we need to ask if the SA government can realistically fund such payments on its own without raising taxes ?

      In contrast the federal government could do this easily as its not revenue constrained and creates money by the act of spending whereas federal taxes do not fund spending but serve to control overall demand. We have an under-performing economy that requires more deficit spending to close the gap between current circumstances and capacity.

      The debt and deficit hysteria is akin to the BS we have been fed in relation to renewables.

  7. trackdaze 4 years ago

    In a sense this article has got it so right and got it so wrong.

    Privatisation hasn’t gone far enough.

    Make, store and use your own power!
    Ps.and sell the excess

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