Victoria Coalition’s bizarre plan to support coal and “24/7” power does not add up

The Victorian Coalition sure knows how to differentiate itself. While the incumbent Labor government pledges a transition to 50 per cent renewables, the Coalition has unveiled plans to extend the life of existing coal generators and underwrite the construction of a new 500MW power plant, to create a new source of “24/7” electricity for the state.

The energy policy, unveiled via Murdoch media and later through press releases, comes less than two weeks before the state poll, and seeks to ape the move by the federal Coalition to underwrite new “base-load” power, even though no major energy institution thinks that this is a good idea.

Shadow energy minister David Southwick says he will tender for at least 500MW of new capacity to supply government services – it roughly equates to the demand of the state’s train network and hospitals and other facilities – and will allow the market to best determine the mode of generation.

Like their federal counterparts, the Coalition tender claims to be “technology” agnostic, in that the winning bid could include hydro, wind, solar, gas or coal or any combination; “provided that it is new capacity and is available to supply electricity 24/7.”

This could include coal, it says – “if a coal-fired power station best meets the terms of the tender.” It also intends to lift the state’s brown coal royalty to ensure that the Yallourn brown coal generator continues operating well into the 2030s.

But the policy – which was released alongside a Q&A and independent modelling from Frontier Economics – makes little sense. And the seriously heroic assumptions: namely that the new capacity, alongside the extension existing coal, would effectively slash the state’s electricity prices by half, also don’t bear up to scrutiny.

“The sustained reduction in wholesale price that results from keeping (EnergyAustralia’s coal plant) Yallourn operational for its design life to 2032 and the commissioning of 500MW of dispatchable generation capacity can be directly translated into savings for consumers,” the Frontier report says.

“Over the period from 2020 to 2030 households with high levels of consumption can expect an annual savings of $645 on average. Households with above average consumption can expect annual average savings of about $355, while households with average consumption can expect savings or around $215.

“Small businesses can expect to save $860 p.a. while double the savings would be expected by a business double that size, that is, $1,720 p.a,” the modelling says.

As you can see in the above chart, Frontier models the cost of electricity from 2020-2030 based on two scenarios: without Yallourn; and with Yallourn and new 500MW of dispatchable capacity.

This is interesting, because the modelling and the cost savings to consumers assume that Yallourn will close in 2020, which it can’t do because of the new rule finalised just last week by the AEMC, which requires coal plant operators to give a minimum of three years’ notice of any plans to permanently close a NEM generating facility.

It also assumes that the new 500MW of 24/7 capacity is completed by 2021 – which is another heroic assumption given the lead times involved in the types of technology that could deliver 24/7 power.

(Batteries might be quick to build, but as the recent report on dispatchable generation concluded, they are best suited for shorter time frames and meeting peak demand, which the market operator has identified as its major concern, not the supply of power at three in the morning).

The modelling appears to give no account to the upgraded transmission facilities planned by AEMO, or the major pumped hydro projects planned by both the Tasmania “battery of the nation” project, or the Snowy 2.0 pumped hydro scheme. And no account for emissions.

There also appears to be confusion about the type of power the LNP wants to source, with the documents calling for both a 24/7 power station and a dispatchable generator. As Mark Diesendorf explained here in August, the two are not the same.

Baseload power stations, while theoretically able to run 24/7, are inflexible, as the Clean Energy Council notes in its submission against the federal government plans for its own “base-load” power source.

“They can take from several hours to a whole day to go from cold to full power. Even when hot, they cannot easily and economically vary their outputs rapidly to meet the peaks in demand,” Diesendorf says.

“A dispatchable power station is one that can supply power on demand. To do this, it must be controllable to the extent that it can respond promptly and flexibly to sudden changes in supply and demand, both unexpected and predictable.

“Dispatchable power stations play a major role in balancing supply and demand. This balance is essential for maintaining the fixed frequency of alternating current and for avoiding blackouts. All dispatchable power stations incorporate some form of storage, whether it be electrical, thermal, mechanical or chemical (i.e. a stored fuel).”

The energy Q&A document also confirms that a Liberal Nationals government would scrap Labor’s VRET, while working with AEMO to create a reliability standard to ensure Yallourn keeps operating until its expected closure in 2032.

And as Environment Victoria notes, it would also scrap Victoria’s solar homes scheme, making it harder for households to get their electricity bills under control.

And, while claiming to be “fuel agnostic” and subsidy averse, a Liberal Nationals government would freeze the brown coal royalty until at least 2030, to give existing power station owners “certainty.”

“Most bizarrely, though, the modelling banks electricity price reductions that are achieved by Victoria’s renewable energy target despite the fact that the Liberals plan to scrap that target,” said Environment Victoria CEO Mark Wakeham in emailed comments to RE.

“Without the VRET price reductions, the Liberals plan could well cost households and business more than they are currently paying.

“The Frontier modelling also fails to estimate the cost of keeping Yallourn operating until 2032 and contracting for 500MW of new supply. Both of these costs are likely to be passed on to electricity consumers. This looks like a very expensive and polluting plan,” Wakeham said.

“Mr Guy is trying to run a scare campaign telling Victorians that power stations are on the brink of closure to justify scrapping renewable energy investment and propping up a new coal or gas plant. Tony Abbott would be proud of such a polluting plan.”

The documents also said a LNP Coalition government would lift the ban on onshore conventional gas, increase local content requirements for renewable generators, and consider proposals by the private sector to supplement the new 500MW power station.

An energy policy spokesperson confirmed to RE that any external costs of building new coal or gas capacity, such as costs to society of environmental and health impacts, would not be factored in to the cost of the new plant.

But is did note that other key criteria in deciding the winning bid would include location, energy security, proximity to existing network infrastructure and “environmental considerations.”