The giant Hazelwood brown coal generator shut down the last of its 8 units at 4pm yesterday, the latest and the most powerful symbol of the vast and rapid change in our energy system.
Conservatives and the fossil fuel lobby might have wanted to describe the closure of the western world’s most polluting power plant as a futile act, given the attempts by the Trump government to jump back into last century’s technology and ignore climate science.
But just one day after Hazelwood closed, a new $1 billion solar PV and battery storage plant was being unveiled for South Australia, with its proponents insisting that construction would begin later this year.
On top of that, the former boss of Hazelwood, Tony Concannon, had announced that the combination of solar and storage was already cheaper than baseload gas plants, and would therefore be cheaper than any new coal generators too.
And if that wasn’t enough, the owner of the South Australia electricity network was predicting that the cost to households of solar and storage would fall to just 15c/kWh within 5 to 10 years, less than half the cost of grid-based electricity.
This is where the myth of “cheap coal” finally unravels. Coal dominates Australia’s electricity generation, still accounting for around 70 per cent of total generation, yet consumers pay a ridiculously high price for their electricity, because if they are not being screwed by generators and retail margins, they are paying huge “transport” costs to the networks.
It was ironic to note that the last price earned by Hazelwood on Wednesday was $148/MWh in its last 30 minute period. At the same time, in wind-dominated South Australia, the price was minus $45/MWh.
To be sure, these prices are deceptive. In reality, the price of electricity in Australia is set by neither coal nor by wind or solar, but by gas.
And right now gas is expensive, and the oligopoly that runs the fossil fuel generators are free to massage, or manipulate, prices as they see fit – although that power diminishes when there is more wind and solar, and will be vastly reduced with the advent of large-scale storage.
The whole concept of our energy systems, as chief scientist Alan Finkel points out, is in the midst of change. Where once the perfect grid was seen as centralised and dominated by huge generators – and the Coalition and The Australian might still believe this to be so – the future is entirely different.
Audrey Zibelman, the progressive new CEO of the Australian Energy Market Operator, says the future will be “decentralised”, based around local generation, and it will be quicker, smarter, cleaner, cheaper, and more reliable than the current set-up.
Hazelwood’s owners, Engie, also see a future where half of all demand is met by electricity sourced from homes and businesses, mostly with solar and storage. And they see the future of large-scale generation will also be in solar, which is why they tendered for proposals earlier this year.
Indeed, solar projects are popping up everywhere. Concannon, the former head of Hazelwood – once a staunch critic of Australia’s renewable energy target – has switched camps, heading up a large-scale solar company and plans 300MW of solar, possibly with storage, in South Australia.
He’s not the only one, with Lyon Solar’s announcement and Zen Energy and others, including Adani and DPP Energy, all planning major solar projects in South Australia.
In Queensland, the push to solar is even more rapid. One major energy user, Sun Metals, is building its own 116MW solar plant because the cost of electricity in a grid almost entirely dependent on coal and gas is too expensive.
Meanwhile, the incumbents have got other things to think about, particularly SAPN’s prediction that the cost to households and business of solar and storage will be around 15c/kWh within a few years.
Think about what that means. That is cheaper than just the transport cost of delivering electricity down the poles and wires.
Few in the industry doubt that we are shifting rapidly to a faster, cleaner, smarter and cheaper energy system. The imponderable is that no one knows what the business model looks like.
Networks are convinced that they will remain essential, because someone has to connect the homes, business, and communities. But they, too, are worried that things will move so fast that consumers – having been badly treated by utilities in the past decade – will simply take matters into their own hands.
If SAPN’s forecast are right, they will have an overwhelming economic incentive to do so. To deal with that, it is hard to see how networks will avoid any other action than to write off the value of their networks so they can compete.
The outlook for traditional gentailers, is more bleak. The cosy oligopoly that dominated supply, and accounted for virtually all demand, is starting to unravel.
Actually, the closure of Hazelwood might reinforce their pricing power for a short term, hence the current surge in wholesale electricity prices. But as these new solar farms and wind farms come on-line, after the three year delay caused by the Abbott government, that pricing power will rapidly diminish.
And it will further diminish if new rules are introduced – as expected – that will level the playing field for battery storage. Right now, they are being resisted by the incumbents and the lawyers and economists who hold so dearly to the original design of the National Electricity Market.
But there can be no doubt that the NEM has failed. The land of abundant coal, abundant gas, abundant wind, and abundant solar has just about the highest electricity prices in the western world – a scandal that gradually unfolded as the rule makers clung grimly to their economic theories, and the regulators were either unwilling, or didn’t have the powers, to stop the predatory behaviour of the incumbents.
The events in South Australia finally brought that to a head. While the conservatives and the mainstream media have focused on software settings on a dozen wind farms – proof, they say, that renewable energy doesn’t, and won’t, work – the reality is that it’s a sign of a failed system.
The market operator was bound by process; unable, it seems, to react. Remarkably, it says that even with hindsight it probably would not have done anything different.
It didn’t know about the settings on the wind farms, and has admitted that it doesn’t know much about the settings of the country’s coal and gas plants.
Almost airbrushed from history has been the performance of the gas-fired generators in that blackout. The wind industry, and a few other independent engineers, suggest that they didn’t play their role because the settings of the deadbands on their governors were relaxed.
AEMO will only admit that the gas generators were “too slow” to respond, but its 260 page report goes no deeper than that.
The final straw was the heatwave in South Australia and the forced outages when one big gas generator sat idle. A few weeks later, the failure of two of the biggest gas generators took the state within a whisker (an extra 20MW of demand on the interconnector would have seen it trip) of another system black. In NSW, where two coal units and another two gas generators failed, the state also came close to losing power.
The Finkel Review will not, as the conservatives hope, recommend the sort of fantasy dance back into the last century that Donald Trump is trying to achieve in the US. Already, the conservatives sense this and are beginning to attack.
“What would he know,” they say, “he’s only an electrical engineer and the chief scientist.”
And the tribal politics won’t help either. The Greens appear to be the only ones who “get” what is happening, and don’t have vested interests in business and unions to protect. The final report into the Senate inquiry into the retirement of coal-fired power stations split three ways. Only the Greens seemed to understand the need for an orderly transition.
Indeed, denial is the last refuge of the incumbents and the ideologues. Technology marches on, and because it is so readily available to consumers, so will they. This is not about ideology any more. It is about simple economics. The rest is just detail, and politics.
