How Taylor and Murdoch media distort problems with renewables and gas

Earlier this week we learned from The Guardian that the federal government has established a “myth-busting unit” to address what health minister Greg Hunt calls “plainly ridiculous” misinformation and conspiracy theories surrounding the rollout of the Covid-19 vaccine in Australia.

Good idea. And it occurred to us that maybe the federal government should also create a similar unit focused on climate and energy. But it had better be well-resourced, because it’s going to have to spend a lot of time debunking some of the stuff coming from its own ministers, the back-bench, and of course the Murdoch media.

Since it came to power in 2013, the government’s attack on climate policies and renewables has been relentless, lurching between the outrageous ($100 roasts, the wipe-out of Whyalla, economic collapse) to plausible misinformation, an approach mastered by current energy minister and emissions reduction minister, Angus Taylor.

Take a recent but otherwise unremarkable story in Sydney’s Murdoch media tabloid, the Daily Telegraph – a favourite and uncritical platform for many of Taylor’s pet theories: NSW must increase gas production to combat rise in energy prices.

It is, of course, a familiar theme. That’s the Coalition’s stated policy position. It’s how it justifies it that deserves scrutiny.

Taylor used a couple of events last year when wholesale electricity prices in NSW had soared, including on December 17 when, according to the Daily Telegraph quoting information supplied by Taylor’s department: “NSW spot prices soared to more than $10,000/MWh as renewables struggled following an outage of one of the Liddell coal fired power station’s units, while other states were paying no more than $307.18.”

Taylor said this emphasised the importance of having new gas plants to put “downward pressure on prices,” and if EnergyAustralia and AGL did not go ahead with their own gas projects, then the federal government would have to build its own via its wholly-owned Snowy Hydro.

“This summer has demonstrated the essential role that gas plays in the NSW energy system … in putting downward pressure on prices,” he said.

Renewables struggled? Were they to blame, as the Tele would have us believe?

It’s certainly not how the Australian Energy Regulator, which is required to investigate and report on all price spikes above $5,000/MWh, described the event. Its detailed, 20 page report, doesn’t even mention renewables, other than to note some small variations in rooftop solar which had limited impact, and the inability of some wind and solar to get to market due to network constraints.

There were much bigger and more powerful forces at play that day. The AER points to lightning strikes in the north of the state that restricted the ability to do what coal-dependent NSW often does – import power from Queensland – and the biggest problem, the fact that more than one-third of NSW’s own coal capacity was missing in action.

NSW has 9,700MW of coal-fired capacity, but 2,900MW was not available that day because of planned and unplanned shutdowns that affected two units at Liddell, two units at Bayswater, and one unit at Mt Piper. The AER says 1,330MW of this was unplanned outages.

Then the situation got worse. Another 520MW of coal capacity was lost suddenly at 1.30pm, mostly from another whole unit at Liddell that tripped, and then partial reductions at three different Eraring units.

One coal unit at Bayswater was expected to return to action, but didn’t. And there were further complications – a planned outage on a transmission line had created a “constraint” in the south of the state that locked out a significant amount of capacity, including wind and solar from that region.

And while there had been more than 500MW of imports from Victoria earlier in the day, in fact right up to 1.30pm, low bidding from Snowy and Origin forced flows to go the other way, effectively locking Victoria generators out of the NSW market, just as NSW needed a replacement for the loss of the third Liddell unit that had tripped.

And that’s where the fun began, and the prices began to soar.

All of these events combined to basically take all the “low priced” capacity out of the NSW market, and left the state at the mercy of the local generators.

And they were not merciful. The AER notes that demand was relatively high and, with the absence of competition, some of the demand had to be met by “high priced” (above $5,000/MWh) generation. The source of that high priced generation? Mostly gas, and coal, the very fossil fuel sources we are constantly told are “low cost.”

The AER report makes clear who were the high bidders and the price setters during key intervals – they were all coal and gas plants: The top price setting bids came from Delta Energy’s Vales Point coal-fired power station ($14,288/MWh at 3.45pm); Snowy Hydro’s Colongra gas station ($14,999.99 at both the 3.55pm and 4pm), and Energy Australia’s Tallawarra gas fired power station ($14,998.98 at 4.05pm, 4.15pm and 4.20pm), and finally Snowy Hydro’s Colongra gas ($15,000/MW at 5.40), and EnergyAustralia’s Tallawarra gas ($14,998.89/MWh at 5.45pm).

Does it cost $15,000/MWh to generate electricity from gas or coal? Of course it doesn’t, not even close, that’s just them taking advantage of a market opportunity.

Did gas generators then come in and bid the price down? Of course they did. Once they had set the high prices – even for one 5-minute bidding interval – everyone who can generate then floods the market with suddenly available and suddenly cheaper capacity. That’s because those prices for one 5-minute bidding interval – at or near $15,000/MWh – are smeared across an entire half hour settlement period, and so guarantee windfall returns for all those who manage to get dispatched during that half hour, even as some 5-minute prices suddenly plunge to zero, or even below, as generators trip over each other in the rush to cash in.

It’s been a common market ruse – many would say a rort – for years, and the main reason why fed up customers like the Sun Metals zinc refinery pushed for the change to 5-minute settlement periods, to stop this very abuse. Needless to say, the existing generators fought the change to 5-minute settlements tooth and nail, and succeeded in delaying its introduction for years. It will finally come into effect later this year.

That 5-minute rule will encourage the rollout of big battery storage, and there is plenty on the way in NSW, and it will likely have the same impact on the market as it has in South Australia – breaking apart the gas cartel and helping to hold up the grid. They can’t come soon enough.

So when Taylor says something like this, as quoted in the Daily Telegraph – “This summer has demonstrated the essential role that gas plays in the NSW energy system … in putting downward pressure on prices” – it does kind of grate, and deserves the same sort of scrutiny that the health department is now applying to comments about   vaccines.