Schott: Modelling assumptions change, but result more or less the same

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Schott scolds government for “spitting the dummy” on Clean Energy Target, but defends design of NEG, saying it clear that more renewables have weakened energy system.

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Kerry Schott2

Energy Security Board chair Kerry Schott says the group has taken note of criticisms about its modelling assumptions for the National Energy Guarantee, and dialed in new numbers, particularly on the cost of renewables. But she says the results are largely the same.

Schott admitted that the ESB received much criticism about its assumed costs of wind and solar – “people said, what are you doing” – and has since adopted cost estimates produced by leading researches Bloomberg New Energy Finance.

BNEF sees the bottom end of wind and solar technology costs in Australia at $61/MWh and $78/MWg respectively, far below the original ESB lower end assumptions of $78/MWh and $90/MWh respectively.

But it may not have changed the assumed outcomes that much: Schott said modelling to be presented by the ESB to the COAG energy ministers this week will show the NEG could be slightly cheaper than first thought, but wouldn’t result in much more renewables than first predicted – between 28 and 34 per cent by 2030, effectively producing little new investment over a decade.

That prompted a new analysis on Monday, commissioned by the Climate Council and done by accounting giant EY, that suggested such low levels of wind and solar would cut more than 6,000 jobs from business as usual and 20,000 from a 50 per cent renewable energy scenario.

The ESB defends its modelling by saying it been asked to factor in only a modest 26 per cent reduction in emissions by 2030, and no further reductions after that.

That is not going to satisfy many of the critics of the NEG, including this website, who argue that a share of renewable energy as outlined by the ESB is untenable, particularly given the falling costs of technology, the urgency on climate action, and the new report from chief scientist Alan Finkel on battery storage.

But Schott gave a spirited defence of the NEG in an appearance at the National Energy Efficiency Congress in Melbourne.

Notably, she attacked the politics of energy in Australia, including the federal Coalition whom she said had “spat the dummy” on Finkel’s proposed Clean Energy Target, which led to the NEG proposal.

Secondly, she said she was well aware of the other main criticism, that of a NEG reinforcing the power of the main energy incumbents. She flagged that once the design had been further progressed, she would “lock some traders in a room” and see if they could still game the market.

If they could, they would make further changes to the rules.

She also flagged the ESB’s intention to do further modeling based on longer term climate targets, more in keeping with the Finkel Review.

To do that, however, the ESB needs to get approval from the COAG energy minister’s meeting to do more work and preparations.

That, despite the vocal opposition of states such as South Australia, seems likely. Queensland is unable to vote, Victoria’s energy minister Lily D’Ambrosio indicated at the conference that her state was willing to learn more, Tasmania and NSW are likely to side with Canberra, and WA and the Northern Territory are not affected because they are not included in the NEG.

“The one (Finkel) recommendation that didn’t get adopted by COAG, because the Commonwealth government spat the dummy on it – was the Clean Energy Target,” Schott said.

“So it is very important that COAG allows us to do more work on the NEG – because I think it is one way we will finally get the policy in place that has the flexibility to be able to serve all the COAG governments.”

Despite Schott’s comments, there remains deep suspicion about whether the NEG can be designed in such a way that could allow for much higher emissions or higher renewable energy targets – either by the states or a new government in Canberra – without penalising renewables and effectively protecting existing coal generators.

The Finkel report on battery storage was notable in its claims – similar to those of the CSIRO and the Energy Networks Australia study of last year – that even having wind and solar providing 50 per cent of generation (far beyond that contemplated by the ESB) would have a minimal impact on security and reliability and could easily be met by existing technologies, including household solar and storage.

Schott, however, offered a different view:

“There is no doubt that the electricity system is less robust in a security sense than it used to be when we had mostly coal,” she told the conference.

“As coal plants have retired… they have been replaced by renewable energy …. that is good for emissions, but not so good for inertia in the system.”

Many would question at what point that has occurred. The major outages experienced in the last year – in South Australia and Queensland – have been caused either by severe systems or failures and unavailability of fossil fuel plant in the heat.

This remains the biggest risk. One unit at Loy Yang A , the biggest generator in Victoria, is off-line and there are questions about whether it will be back online in time for summer.

Schott said, however, that the amount of reliability and security would be decided and administered by the Australian Energy Market Operator, and this would be adapted to individual regions.

The question remains, however, is to what extent the need for reliability will be sandbagged and gold plated – just as the networks succeeded in doing when the big investment in air conditioners was seen to be a threat to power supplies.

Since then, power demand, including the peaks, have actually fallen – thanks mostly to the unexpected uptake of solar PV, and coincidentally by the huge jump in prices that the network investment imposed on consumers.

On the modeling assumptions, Schott explained:

“We … spoke to industry about the cost of renewables. What we’ve gone with, they very much closer to Bloomberg than what some other people use.”

But she said that the result are “not that different … the price reduction is a little more than we anticipated (but) .the power mix doesn’t change all that much.”

She explained that because the ESB anticipated no further closures of coal-fired generation after Liddell, and no change to the government’s emissions targets.

This though, highlights the fears of many – that the NEG will fail to drive new investment in renewables, and is merely designed to keep the right wing of the Coalition happy, or to defend coal, as SA energy minister Tom Koutsantonis suggests.

Schott said that the reliability and emissions obligations will still allow for higher emissions targets in different jurisdictions.

“I think it will have enough flexibility – not for everyone to agree to, that would be too much in current climate – but we hope to get the go ahead to do more work – report back in April …and make sure we have got nothing wrong by July.”

Again, the devil will be in the detail. If there is to be a sleight of hand, it is hoped it will be designed to fool the right wing nut jobs who have forced policy makers to consider the NEG in the first place, and not to throttle the emergence of renewables.

Schott offered this: “I have not been put into this position because of my knowledge of the electricity industry, but because I am usually able to work problems out.”

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21 Comments
  1. Chris Fraser 2 years ago

    If you like working out problems you might wish to start with efforts the Coalition has put in to increase the dead hand of bureaucracy, setting up meaningless expert panels and achievement of meaningless requirements in order to keep burning coal. It really is time to get out of the way.

    • Joe 2 years ago

      The COALition will be getting out the way fairly soon I think. A Labor win in the Bennelong by election is the domino.

      • Hettie 2 years ago

        Yep.
        And it’s clear enough that Schott is talking partisan schitt.
        Not that I am in any way partisan myself.
        LOL

        • mick 2 years ago

          gday mate question does coag vote to a quora or 100% support to move on a decision? cheers

          • Hettie 2 years ago

            I just asked Dr Google.
            COAG decision making is supposed to be by consensus.
            From me:-
            The relevant minister from the Cth, each State and Territory should be there, so quorum not applicable
            Typically the Cth threatens withdrawal of funding if States don’t do what they are told, but with NSW now the only Coalition State Gov’t, and Qld set to block the Adani loan Tumbril and Fraudenberg will be pushing coal uphill, especially given Loy Yang and Yallourn have both had units fall over in the last few days, which kinda schootts a hole in the idea that coal is reliable.
            And Chile has renewable power priced at 1c per kwh.
            I am no fan of the notion that the market is *always right* but this time…

          • mick 2 years ago

            yep ive seen that with howard ie funds for roads if states drop booze limit from .08 to.05 (agree) heres hoping eastern states recognise this for the garbage it is, regards

          • solarguy 2 years ago

            And when these plants don’t do the business this summer, guess what energy type will be blamed!

          • Giles 2 years ago

            it moves on “consensus”, so as i mentioned in the story, given position of nsw, tasmania, victoria, etc, basically it is a done deal – that is, the states will approve more work to be done and to be considered at a later date. the concern then is that it becomes a fait accompli. devil in detail etc

          • mick 2 years ago

            yep at the risk of being shallow i was after a second opinion sorry mate

  2. mick 2 years ago

    called out on an 8 page brain fart still making no sense i hope the eastern states back up sa to ditch it

  3. Ray Miller 2 years ago

    I still question the ability of ESB to do ‘independent’ modelling whoever they are using is still at odds with all the other expert groups. I know a number of the groups under the umbrella of ESB crunching the numbers are still playing a lot of catch-up as they all were asleep at the wheel and unlikely to be up to speed for years if at all. Finkel’s modelling is likely to be an order of magnitude more accurate.
    Still how can ESB work without the end customers who pay all the bills being a majority on the ESB?
    I think Dr Schott needs to answer that question first.

    • Hettie 2 years ago

      Um, the ESB is dedicated to screwing the consumers.
      It is working very well at that task.

  4. Alastair Leith 2 years ago

    Secondly, she said she was well aware of the other main criticism, that of a NEG reinforcing the power of the main energy incumbents. She flagged that once the design had been further progressed, she would “lock some traders in a room” and see if they could still game the market.

    If they could, they would make further changes to the rules.

    ESB would need to be paying these traders a lot of money for them to hand over *all* the vulnerabilities they detect. And how about emergent behaviors (complex systems often have emergent characteristics) they failed (or neglected) to foresee?

    • Rikaishi Rikashi 2 years ago

      Also important to note that what she’s basically saying here is:

      “trust us”.

      Sure. About as far as I can kick them.

    • BushAxe 2 years ago

      Yep, any trader with half a brain would sell their knowledge of rorting the NEG to the industry and make a killing.

  5. Alastair Leith 2 years ago

    Schott offered this: “I have not been put into this position because of my knowledge of the electricity industry, but because I am usually able to work problems out.”

    Said the expert on privatisation.

  6. Rikaishi Rikashi 2 years ago

    “the ESB anticipated no further closures of coal-fired generation after Liddell”

    That’s pretty damning right here. Those plants are nearing their end of life and need to be shut down. Their operation imposes unnecessary costs to the climate and public health. Which mean unnecessary misery on our populace.

    Their initial investors have been paid and in any sane world everyone would be happy, but their current operators want more and have paid the coalition to give it to them.

  7. solarguy 2 years ago

    It won’t matter how cheap renewables are as Schott has clearly stated, RE will be throttled, as are the wishes of the Right wing, Liberal party nut jobs.

    She has been given her orders, save coal and gas at all costs and damn cheap, clean power.

    Why did Schott take the job? surely it wasn’t the fat salary.

    • solarguy 2 years ago

      This NEG thing needs to be schott to schitt.

    • Alastair Leith 2 years ago

      Same reason Schott sat on the board of NBN Co I expect. Who with any conscience could have presided over Turnbull’s gutting of the NBN while spending even more taxpayer money and bringing in Telstra with a huge windfall profit on aging copper?

      • solarguy 2 years ago

        You have hit the nail right on the head, ” NO CONSCIENCE” but happy to take the money for being the Pit bull of the coal industry.

        Have you noticed that Audrey has been awfully quiet of late. Is that because the Libs have found a way to disarm her, by putting her on the board. Could Audrey resign from the board or would that compromise her position with AEMO?

        I would love to know what she is thinking about these scheming bastards.

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