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.”