The great divide over Australia's energy future | RenewEconomy

The great divide over Australia’s energy future

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The energy rule-maker’s dystopian view of our immediate energy future underlines the growing divide on the future of renewables. There are those who see them as key to a smarter, cheaper, cleaner and more reliable grid. And other who simply believe it can’t be done.

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It was the head of the biggest electric network operator in the world, China State Grid, that summed up best the challenge of moving to a high renewable energy grid: It is not so much a technical problem, but a cultural one.

In other words, there are those who say it can be done, arguing that it offers a smart, cleaner and ultimately cheaper and more reliable alternative. And there are those who say it can’t be done, and are reluctant to adopt the new technologies and the new ways of managing a complex electricity grid.

In Australia in the past few weeks, we have been getting a clear signal as to which authorities fall into which camp, and the obstacles facing those who want to get on with the job and go with the technology, rather than fight it.

There is, inevitably, the politics, led by the federal Coalition, railing against the “reckless pursuit” of wind and solar and yet, at the same time, drumming up huge ideas for massive pumped hydro schemes, a sure sign that they see more wind and solar as inevitable.

And there is institutional resistance. The Australian Energy Market Commission, which sets market rules, last week released a document which painted a view of Australia’s energy market nearly as dystopian as Donald Trump’s inauguration speech, the one that prompted former president George W Bush to note at the time: “That was some weird shit.”

And so was the AEMC’s. Its full document is a thorough appraisal of the events of 2015/16, but the media release was another thing altogether: painting a dark picture of energy shortages, risky additions of wind and solar, lost inertia, reduced reliability and the threat of blackouts – comments that were readily picked up by the green-baiting Murdoch media.

Ivor Frischknecht, the CEO of the Australian Renewable Energy Agency, has said on several occasions in the last few weeks that it is clear that the technologies exist for transition to a renewables-based electricity grid. It is only old rules and regulations that are getting in the way and preventing it from happening.


It’s a view that is now widely shared. The CSIRO and Energy Networks Australia, in their ground-breaking Network transformation roadmap, speak of the critical important for rules and regulations to catch up with technology, lest the changes and cost reductions in solar, storage, and software becomes so rapid that the industry is unable to catch up.

Their two-years of research found a zero emissions grid could be put in place, based largely around renewables and with a special focus on consumer-owned solar and storage, and save consumers more than a $100 billion by 2050.

That would be at least some recompense to those consumers, who are clearly the biggest losers from the creation of the National Electricity Market two decades ago, and its failure to check the spending of the networks or the pricing power of the gentailers.

The consumers are now paying ridiculous prices from electricity still mostly delivered by now mythical “cheap coal”, and are facing even more rises in coming months.

Yet, as Accenture points out in a separate report, these consumers now have the technologies to be masters of their energy destiny, driven by concerns about sustainability, energy independence and simple economics.

When the cost of solar and storage is likely to be half the cost of grid power, as some networks recognise it will be, the economic modelling behind this grid concoction has a major, major problem, one that rivals the disruption posed by the internet and digital technology.

And because this is a heavily regulated and essential service, the challenge is not just to the incumbents but the regulators and rule makers.

Accenture warns that unless the industry changes quickly, there will be hell to pay in their boardrooms, and consequences everywhere. To do that, they need the rules to be changed, and to be changed quickly.

The Grattan Institute added to those calls on Monday, saying that urgent market reforms and rule changes are needed to ensure reliability of supply. It is hard to find anyone in the industry who disagrees with this statement.

The irony is that it is the AEMC that is charged with making and adjusting these rules, which makes its position on the risks to energy security all the more galling for many, given it has done so little to make the grid fit for purpose, either rejecting new proposals, or kicking them endlessly down the road.

The Australian Energy Market Operator has grown so frustrated with the situation that in its submission to the Finkel Review it asked to be allowed to take responsibility of many of the rule changes itself, so it can rapidly adapt the markets to the changing technologies and dynamics.

This call is likely to be intensified under its new CEO, the reforming Audrey Zibelman, and it was notable that last week AEMO and ARENA teamed up to drive a pilot on the use of demand response, an obvious and relative cheap solution to dealing with peak demand, and a lot cheaper and cleaner than building new peaking generators.

Zibelman knows it will work, because she has seen it operating effectively in markets throughout the world, including the one in the US where she used to manage New York’s radical shift in energy policy.

“There is often skepticism about change,” she told RenewEconomy last week. “This (trial) is a good way to show this technology can work. And when we have done that we can get it into the market and modify the market rules. Technology is changing. We have to look at the market design, to ensure it attracting the right sort of investment.”

It just so happens that demand response has been one of many initiatives presented to the AEMC (way back in 2012) that were rejected or delayed, with the rule maker arguing that there was sufficient demand response in the system. Clearly not, given the enforced load shedding that occurred across the country last summer.

But demand response is just another example of the number of initiatives that the incumbent fossil fuel industry has managed to have killed or shrunk: think carbon pricing, high renewable energy targets, energy efficiency, emission limits and other mechanisms.

All could have made the market more efficient and delivered savings to consumers. The latest of these is the proposed shift to 5-minute settlements, a change widely acknowledged as crucial to level the playing field for battery storage, and remove the pricing power ruthlessly exploited by the coal and gas generators.

Like many of the other proposals, it will likely crimp the bottom line of the incumbents. So they are fighting it, keen to push the argument that any impact on their profit margins could have an impact on reliability and supply.

The equivocation over whether we have the tools to manage the energy transition appears to gripped the South Australian government too, whose state is surging past 50 per cent wind and solar and may find itself with two thirds of its demand coming from these two variable sources by the end of next year.

This is perhaps not surprising given the power interruptions of the last year, and the state election that looms next March. The bitter irony is that these events had sweet F.A. to do with the nature of renewables, but of the way the grid has been managed.

The major event cited in the AEMC report was a blackout in South Australia in November 2015, caused by a network fault during repairs to the interconnector to Victoria, and made significantly worse because of how a gas generator responded to frequency and voltage changes.

As the AEMC panel noted, the Torrens B gas generator was expected to reduce output to manage the frequency changes, but did the opposite.

The problem is being blamed on the governor response mechanisms for such plants, an issue raised by numerous analysts and which may be widespread across the country. It adds to concern about the reliability of gas and coal generators that are failing in the heat and at critical junctures in the market.

It might make you wonder why the AEMC and apparently the S.A. government is appearing to put all its eggs in the basket of gas generators, as it appears to have done by insisting only something called “real inertia”, delivered by large spinning turbines, should qualify for its proposed energy security target, at the expense of battery storage.

The draft proposal has stunned the industry. As a report from the CEC highlighted last week, the delivery of inertia can take multiple forms. Citing the same incident in South Australia in November, 2015, Tom Butler wrote:

“Those who advocate for the status quo because of the inertia provided by synchronous generators should be aware that these technologies are far from perfect.

“For example, they can become unstable at low power output. And there is simply no information available on how effectively these generators can respond to fast rates of change of frequency if they started operating before 2007.”

red flag twoIt reminds you of the transition from horse and cart to the automobile. For a while, all cars were required to have a human walk in front of them, waving a red flag, until someone woke up to the folly of the idea.

The hope is that the Finkel Review – due in just over two weeks – might convince more people that we can do without the waving of red flags. The change is upon us and it’s all OK. We just need our regulators and our politicians to catch up.







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  1. GlennM 3 years ago

    So who exactly are these morons ? Is it about time to name and shame them, or at least with names we can see where they are hiding their assets and investments ?

    • john 3 years ago

      The worst exploiters of the 30 minute price rebid situation are those who can say they had a problem and had to go off line and then suddenly rebid.
      Give you a link shortly from here renew economy.
      Just look at the high figures in the graph over $13000 mwh bids.

    • MikeH 3 years ago

      This article is about gas but it gives you an idea of the incestuous nature of government, energy regulators, energy agencies, energy lobbyists and the energy industry in Australia.

      John Pierce, the current head of the AEMC was a pro privatisation head of NSW Treasury until 2008. He was then Secretary of the Federal Department of Resources, Energy and Tourism under the Labor rat and former Federal Resources Minister Martin Ferguson who is now chairman the Australian Petroleum Production and Exploration Association (APPEA) Advisory Board and also director of another oil company

  2. john 3 years ago

    Without a doubt a more distributed RE generator situation will result in a more resilient power supply situation.
    However saying that there has to be sufficient to meet every situation.
    Until sufficient storage is put in place in many many places it will be impossible to do away with some type of FF generator chugging away somewhere in the background.
    Considering the huge amount of sunshine this land is given is it not about time we used it to best advantage?
    The 5 minute rule I would expect once there is a move to remove the 30 minute bid process suddenly in 1 minute a rebid is made to game the price just as has been done so effectively previously.
    The solution i ask?
    Without a large amount of storage, which will come eventually, I think the incumbents will make hay while the sun shines and the wind blows or in this case they wish it would not.

    • trackdaze 3 years ago

      The good and bad news is the price gouging at the wholesale level makes battery storage viable now.

      • Alastair Leith 3 years ago

        Even without the gouging the tripling of wholesale gas price has down them in. BZE predicted as much when launching the Buildings Plan.

    • Gary Rowbottom 3 years ago

      So I say again, this is why I like solar thermal with storage – lots for storage, lots of jobs, and whether you take your inertia real or synthetic, CST provides inertia of the real type which err… works regardless whether it is considered the best sort. If the SA Government does the smart thing in its energy provider tender we will all be able to see (after construction) how it performs, and measure empirically the boost to the economy.

  3. Alex Hromas 3 years ago

    The red flag rule applied only in Britain. In Europe there were no similar restrictions with the result that France, Germany and Italy built up very large and innovative vehicle manufacturers with innovative ideas like differential gears, Renault, twin clutch gear boxes, Peugeot and double rear wheels for heavy vehicles Michelin to quote a few.
    In the early 1900’s Britain had to scramble to catch up. The current lot of muddleheaded thinking form the federal government will leave us with the British problem when we could be world leaders in this technology

    • Carlagwheeler 3 years ago

      If you were looking for a way to earn some extra income every week… Look no more!!!! Here is a great opportunity for everyone to make $95/per hour by working in your free time on your computer from home… I’ve been doing this for 6 months now and last month i’ve earned my first five-figure paycheck ever!!!! Learn more about it on following link

  4. Marathon-Youth 3 years ago

    When it comes to solar energy the average Chinese should be energy independent and only rely on the national grid if there is an emergency or if the supply created by an individual fails to meet his demand.

  5. David Hurburgh 3 years ago

    These guys just don’t get it.

    The reason that power prices are high in Oz is that subsidized renewables ( with RETs etc) , with zero-opcost wind and PV, is that they are penetrating the grid to such a degree, that essential thermal generator back-up with their critical, grid-supporting attributes of inertia and synchronicity are being displaced.

    Since these thermal generators are now running part-time (sub-optimally and uneconomically for thermal plants) when the wind/sun isn’t blowing/shining, and being on standby spinning away to give Frequency and Ancillary Services (FCAS) , they become very expensive to run …. hence the high power cost.

    • Alastair Leith 3 years ago

      You do realise that several models of real grids modelling high penetrations of wind power with type four turbines that have primary frequency response technology make for a more resilient grid than the existing largely fossil grids don’t you? In Texas and other places this technology is required of wind farms, and in future SA or the AEMO has decided it will be required, a bit late on the scene but it’s possible and without sacrificing too much headroom on the generation side too. It’s more cost effective than burning coal or gas to provide primary response.

      In addition batteries and PHES can provide FCSA and backup at less cost than coal and gas now. Hence why RE makes grids cheaper to operate in the long run.

    • Joe 3 years ago

      David my man…and of course the Fossil Fuel Industry receives absolutely zero subsidy in Australia. Please tell us how many $Billions subsidy they ‘don’t receive’. In return we get from the Fossil Fuellers a quick march into an environment. that we all depend upon to survive, that is increasingly unsustainable. It is a bit rich blaming power prices on RE when RE only provides about 16% of our electricity. I know where I want my “subsidy money” being spent, on a planet Earth that I can live on.

  6. Cartoonmick 3 years ago

    Hi Giles, the debacle in SA highlighted the ridiculous state our energy supplies have reached, and all due to our political masters inability to do the right thing for all Australians.
    Many cartoons have been created on climate change and renewable energy over the last year or so, mainly inspired by our pollies actions and comments.
    I’ve done a few and I’ve also ventured into some “toonimotion” (my new word).

    Three cartoons are here …..

    A couple of short toonimotions are on my YouTube channel …….

    This 30 second toonimotion takes us from the past (Tony Abbott) to the future ……

    This 45 second toonimotion was inspired by Jay Weatherill when he ambushed Josh Frydenberg in that SA garage, and the subsequent political thought bubbles which followed in the days after. It has sound, for which I apologise. Proof that cartoonists can’t (shouldn’t) sing…………


  7. MaxG 3 years ago

    Qld still has the law (never reformed / abolished) which requires the red flag in front of a horse 🙂 — so predating the car flag :))

  8. Alastair Leith 3 years ago

    Endless supply of red flags under Coalition MP beds unfortunately 🙂 And quite a few ALP beds too it must be said.

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