Gas bubble looms as energy ministers baulk at zero emissions target

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Energy ministers hailed progress, but their summit ducked key issues. They refused to embrace the target zero net carbon emissions, while South Australia indicated it favoured an “emissions intensity” scheme to replace the renewable energy target.

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State and federal energy ministers hailed progress they made in their COAG Energy Council summit late last week, but they may have condemned Australia to another great big investment bubble – this time in gas infrastructure.

The meeting of ministers – brought forward by the apparent energy “crisis” in South Australia – resulted in a couple of promising steps that may help contain price surges of the type seen in recent months, but it seems to have ducked action on the critical issues.

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On the plus side, there is the creation of two new gas trading hubs that might improve transparency into a notoriously opaque market, and the potential for a new electricity inter-connector linking NSW and South Australia to be bought forward.

But elsewhere, not a lot of tangible progress was made. The ministers baulked at calls to write zero net carbon emissions into the electricity market goals, despite that being implicit in the Paris climate goals that Australia has signed up to.

And if the energy ministers did avoid turning the meeting into an anti-renewable jihad – as they were lobbied to do and might have been tempted under a previous federal energy minister – they did come face to face with some of the significant barriers to the rapid transition to a low emissions grid that they profess to support.

One such example came from the Australian Energy Market Operator, whose chairman Anthony Marxsen stunned the audience on Friday when he suggested during a presentation that battery storage technology could be up to 20 years away from making a commercial contribution.

Some dismissed this as garbage and a plug for the gas industry. AEMO is 40 per cent owned by industry “players”.

Another is the painfully slow progress from the main policy maker, the Australian Energy Market Commission, which has been dragging out crucial rule changes most people believe are essential to moving to new technologies.

The ministers appear keen to give it a hurry up, and hope that their decision to now meet every few months will help that. “We want it to stop stuffing around,” said one participant, echoing a sentiment that would be warmly received in many sectors of the industry.

Institutional inertia is a major issue. If the market operator is seen as favouring incumbents and the status quo, the AEMC is seen as ponderous, and the Australian Energy Regulator as effectively toothless. That’s why another key item on the agenda was to look at how the AER’s decisions are reviewed, and whether it has been too easy to overturn its decisions – such as those curbing network costs – in the appeals tribunal.

The biggest fear, however, is that Australia is about to embark on billions of dollars of investment in gas infrastructure and associated investment that could quickly become redundant.

This is what environmental groups and others speak of when they responded, almost unanimously, with the view that the meeting had been a lost opportunity.

The fixation with gas appears to take no account of either the falling costs of competing technologies – wind, solar and the various storage and software options – nor of the biggest issue facing South Australia and other markets such as Queensland – a lack of competition.

Gas also does not fit easily into a zero net emission scenario. Australia needs to be accelerating the push into new technologies such as storage and software. Most assessments of how Australia can meet the Paris targets talk of using less gas, not more. This is particularly true of buildings, where the push it too dump gas appliances with electric ones, and accelerate the push to zero carbon electricity.

It also ignores that the central issue is not just the price of gas itself, but the competition in the market. This issue can be partially relieved by the construction of a new interconnector, but the real solution lies in encouraging competing technologies.

It may also lie in toughening up the rules. The regulators appear to have learned nothing, because they were told the same thing a decade ago after price spikes in 2008, soon after AGL took possession of both Torrens Island gas plant in Aouth Australia. A similar warning about market power was brushed aside when AGL bought Macquarie generation in NSW.

But there are clearly disparate views within the states themselves.

Victoria, which aims for 40 per cent renewables by 2025, is reluctant to embrace coal seam gas. South Australia, which is already well past that level (45 per cent) wants the renewable energy target to be replaced with an “emissions intensity” scheme that would reward gas generators as well as renewables.

The ACT is on track to reach 100 per cent renewable generation within four years. The conservative states, NSW, Western Australia and Northern Territory, were virtually mute. The exception was Tasmania, which is facing the reality of climate change, noting the record spring and summer dry that forced its dams to dry up, curtailing its hydro resources, followed by record floods.

 

 

 

 

 

 

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26 Comments
  1. Geoff James 3 years ago

    Tasmania could make some interesting choices. Strategically, it could use Basslink as a source of revenue through clean energy sales, not an energy security measure – this would both encourage self reliance and help the mainland to reach high renewables targets. Tasmania could achieve this, perhaps, by repurposing some of its hydro generators as pumped hydro storage. I’m not sure how much this would cost but it must be worth looking into. Then wind and solar generation could be built up and energy stored when in excess of demand, keeping the dams full, creating reserves to sell into Victorian wholesale market peaks, restoring the 100% renewable power supply that Tasmania used to have.

    • Alistair Spong 3 years ago

      Try telling that to Jacquie Lambie

    • lin 3 years ago

      I can’t believe that all of the hydro schemes in Australia are not being used for this purpose already. If we did, we could increase renewables penetration dramatically, with little additional cost.

  2. Geoff 3 years ago

    The industry realises the fact that renewables and base load grid are two different animals. One is 24/7/365 and able to supply (up to) 100% of electricity if and when required. The other………

    • Mike Dill 3 years ago

      Storage will eat the lunch of the base load generators. Storage will take the peaks away first, so there is no peak gouging, and then fill the gaps over time.

      Unfortunately SA is caught out without teh storage and is having some difficulties. I expect the problem to go away in two or three years as more storage comes on-line.

      • Daniel 3 years ago

        With our household, installing PV/Storage has taken away our evening peak in winter – by getting us past dinner. Additionally, I’d say the battery will be big enough to be stand alone for the rest of the year that doesn’t need heating. In this way, individual families can have an impact too. People have started talking about the duck curve of technology uptake and individual families need begin. Perhaps governments come into play later in the duck curve.

        • Mike Dill 3 years ago

          Congrats for getting there already, I will be putting in batteries by the end of the year if the prices go the way I think they will.

          • Daniel 3 years ago

            I just went for individual batteries so I can see and organise them and there’s already drop in lithium replacements on the market – coming down in price. Avoiding complex integrated storage solutions, enables me to judge the kWh worth installing when each battery bank needs replacing. I’ll also recycle tired batteries into smaller buildings. Three people currently live, work, study here, so it was worth getting a few batteries now, mainly to get off the export/import merry-go-round of diminishing returns and have a UPS. I think families living working at a home office would do well moving ahead soonish with new generation batteries. I jumped in with old ones because I don’t think changing them need be a hassle.

          • Daniel 3 years ago

            I’m presently working on the assumption of oversizing PV for summer and undersizing batteries for winter, as PV is cheap, batteries are reducing in price rapidly and I’m connected to a grid when it works. I’m interested in understanding how each element of the PV/storage can most expediently pay itself back.

          • Daniel 3 years ago

            The major thing I think demonstrated with the case study above is the battery SOC only varied a few % over the power outage from 9am – 3pm. The batteries went into the outage at 9am at 96% and finished at 3pm at 94%. Even in the worst conditions in winter, the SOC doesn’t vary much. It lost 2% when cooking scrambled eggs for lunch and cooking chicken soup ready for dinner. Therefore for people studying or working at home, the battery has few demands placed upon it if they merely wish to escape the export/import merry-go-round by self consuming their own power during the solar day. I think this is the cheapest way to use a few batteries to pay for themselves quickly. Small business and industry could do the same. Little financial benefit in applications needing large battery banks. Small battery banks can get the best bill reduction for money spent I reckon. Harnessing the solar day and reducing the evening peak seems the best way that many could get started.

    • marcus 3 years ago

      you do realize 24/7/365 is 7 years? 1 year is 24/365 or 24/7/52.

    • nakedChimp 3 years ago

      The incumbents realize that there is no racketeering with renewables, thus they want to hold onto status quo for as long as possible.

      I really hope you don’t have kids.

      • Daniel 3 years ago

        Hi nakedChimp, I ended up having to get the more expensive multistrand wire from the autoelect, as part of the install was a meterbox cabinet with a swinging door. Crimpers worked well. Thanks.

      • Daniel 3 years ago

        Multistrand 50mm2 from autoelect for swinging door. Batteries, Inverter, Controller inside. Don’t think I’d do this again. Made a small space inside work though too much work.

      • Daniel 3 years ago

        Heh mate, post some of your work. Lets not worry about all this utility level BS. Too much inertia and hegemony.

    • Daniel 3 years ago

      No, base load power is the small continuous loads throughout the day and night, drawn by things such as lights, fridges, computers, routers and telephones. PV/Storage can easily accommodate for base load power. What it can’t easily accommodate is the peak demand of heating in winter.

  3. David Rossiter 3 years ago

    Shame that no tangible advancement was made on net zero emissions being adopted as a market goal at the meeting. On current actions and the trajectory of our emissions reductions we should reach the end of our carbon budget in 2032 just sixteen years from now.
    At that point we will have to either decide to stick to our commitment at Paris on the 2 degree target and turn off all emissions, or run the gauntlet with our trading partners and potential sanctions on our economy for exceeding our emissions budget – and in sixteen years time that problem of global warming will be much more front and centre to world thinking than it is now.
    As perhaps a more palatable transitional approach to talking about net zero emissions as a goal let me float the idea of running the existing NEM bidding process with a bid stack that is dispatched according to the carbon content of the bidders proposals. No carbon charges would be made on any party but the bid stack would be modified for dispatch purposes only by notionally ascribing a carbon cost to each bid. For example a bid that contained a carbon emission of say 0.5t/MWh would have a lesser carbon cost added to that bid relative to one that contained say a 1.0t/MWh carbon emission. And if anyone is horrified by the concept of a cost for carbon what better price to use than that derived by this government at the third ERF auction of $14 per tonne. At least this might start some thinking on this issue.

  4. Brad Sherman 3 years ago

    I wonder what AEMO’s Marxsen thinks about the recent commitment by the state of Massachusetts to “to set appropriate targets for electric companies to procure viable and cost-effective energy storage systems to be achieved by January 1, 2020.” It is so frustrating to see influential people hold back Australia. We are going to end up importing all this kit from overseas rather than exporting it, I fear.

  5. Les Johnston 3 years ago

    Pumping financial resources into gas infrastructure ends up costing the public who access gas infrastructure. Consumers exiting gas will be the beneficiaries. However, the diversion of scarce investment capital into short term infrastructure is a wasted opportunity. Leadership for the future is a scarce commodity.

    • Geoff 3 years ago

      You are absolutely right Les. The current fools running the electricity sector need to be replaced with a younger more tech savvy crowd. Gas has no future. $1b has already been wiped off the Santos LNG plant in Gladstone for example.

  6. Geoff 3 years ago

    “The conservative states, NSW, Western Australia and Northern Territory, were virtually mute.” Interesting statement, especially for NSW. Just heard yesterday that casino mike wants to open up CSG in NSW with the Sydney basin as being a potential target. There goes our water supply. At least house prices will come down…

  7. lin 3 years ago

    These guys don’t seem to get the urgency of the task at hand. Arctic ice currently sits at 2 SD below the 1980-2010 minimum mean with one month of melt still to go. Three hottest years on record in a row. Doubling of sea level rise within the past couple of decades. Record-breaking fires, floods and droughts almost daily news. Catastrophic collapse of marine ecosystems around the globe. At least another degree of warming built in due to inertia in the system.
    The question they need to be asking is how much can we do and how fast can we do it, not how little can we do, and how can we best protect our donors profit margins.

  8. Nick Thiwerspoon 3 years ago

    Batteries will take 20 years to make a commercial contribution? Nonsense.

    Tesla has made public the battery prices for the Powerpack. ( https://www.tesla.com/powerpack/design?redirect=no#/ ). On my calcs (DOD 50%, 3500 cycles) LCOE is US $27/MWh not much above the top end of gas peaking ($16.5 to $21.8/MWh) ( https://www.lazard.com/media/2390/lazards-levelized-cost-of-energy-analysis-90.pdf)

    But batteries are superior to gas peaking: instantaneous response to grid fluctuations, 100% green; modular (so can be at production or consumption end and distributed across the grid); compact (much smaller footprint), costs known upfront (no fluctuating gas price). And battery costs have fallen 70% over the last 18 months! Now even if the rate of decline goes back to the previous pattern (+-15% per annum from 2002 to 2014) in 2 years the Powerpack will cost just $19 per MWh. This will be completely competitive with gas peaking, without even considering the other advantages of batteries.

    20 years? More like 2 or 3.

  9. Daniel 3 years ago

    CASE STUDY: $7600 PV/Storage currently standing alone in 9am – 3pm Grid Power Outage.
    The reason there is an apparent “energy crisis” in SA is Ministers are looking exclusively at the macro level and not thinking about the micro level of individual households and businesses.

    Right at this moment 542 households in my NSW country town have a Planned Power Outage. I’m able to write this post to you, by being powered by this $7600 solar/storage system. The current system specs are:
    one 1.5kW PV array
    9.6kWh Lead Acid battery bank
    2500W nominal (6000W peak) Victron inverter/charger

    SACRIFICES:
    For a small modest priced PV/storage system to “stand alone” with the grid down on this cold, cloudy, rainy, winters day, we have had to sacrifice the following power use:
    No reverse cycle Air Cond. Heating,
    Turned off the water pump for the irrigation,
    No oven during the day (we often bake on sunny days to use excess electricity),
    No washing machine use,
    Solar Hot Water Temp just adequate (no electric booster use)
    Have needed to run kitchen appliances above 2kW consecutively, as a result of the grid not being available to top up the peak power of the inverter/charger.

    WINS:
    The solar system is providing an Uninteruptible Power Supply (UPS) for the following basic needs:
    Fridges,
    LED lights,
    3x Computers, NBN router and WiFi, Landline telephone and mobiles,
    Kettle (for tea and coffee etc), Toaster, Microwave, Induction Cooktop (consecutively).

    SUMMARY:
    It’s 3pm and we’re still running completely on solar power, the batteries are on 94% and we’ve cooked scrambled eggs for lunch, have already cooked the evening meal and the main grid is still off. In practice, with energy efficient appliances, a small solar system can power the basics in “stand alone” configuration in winter. PV/Storage seems pretty good. Ministers could encourage their citizens to reduce their peak power consumption from the grid, by household by household, business by business, one by one getting the benefits of a UPS with PV/Storage. Lights ON!!! Standing Alone!!!

    Essential Energy have another Planned Power Outage from 845am – 3pm next week.

  10. Daniel 3 years ago

    Focusing upon utility level transformation is trying to pull the cart before the horse.

  11. Daniel 3 years ago

    Analysis of hegemony in government and government institutions

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