Issue 232, August 2024
A month in to the new financial year and, rather depressingly, nothing being said or done offers encouragement that Australians are any further out of the energy morass than they were a year ago. Now at most some 10 months from the next federal election, with facts and fictions flying (to quote a senior journalist), we are hearing repetitious arguments over energy issues with discordant bells and shrill whistles that don’t offer consumers large or small any real grounds for confidence about where electricity and gas supply and costs are headed. The strong sense of uncertainty will not have been eased by the Australian Energy Regulator declaring at the end of July that the southern region “remains susceptible” to electricity demand and supply shocks for the rest of winter and by ongoing warnings about a southern States’ gas problem later this decade.
“Our argument is you need renewables, you need a lot of gas and you need nuclear into the mid-2030s to 2040s” – federal Opposition leader Peter Dutton.
“Nuclear is unsuitable and risky for Australia to pursue before a mature global market exists” – federal Energy Minister Chris Bowen.
“Our electricity market is so dysfunctional there are almost no good options available to us” – engineer Ben Beattie. “A state-owned nuclear power company is the best shot we have at a low-cost, secure energy future.”
“Peter Dutton’s nuclear policy announcement and the Albanese government’s response to it are dominating the news, but no one has asked the obvious questions” – David Pearl, former federal Treasury assistant secretary, in The Spectator magazine.
“If, as seems to be clear, no comprehensive costings were ever prepared for the government’s renewables-only plan to reduce carbon dioxide emissions, why weren’t these undertaken in the policy development process? And if, judging by their hysterical reaction to the idea of nuclear energy, ministers appear completely uninformed about this alternative to wind and solar, what advice have they been getting from their public servants on this issue?” – David Pearl.
“Planning for our energy future needs to be evidence-based, transparent and founded in wide consultation” – Australian Industry Group and 17 other organisations in a joint statement.
“All options should be allowed to compete on a level playing field if there is even a small chance that nuclear power could fill the reliability gap in a 100 percent clean energy system” – Ken Baldwin, professor, Australian National University. “This is a strong argument – currently favoured by public opinion – for removing Australia’s legislated ban on nuclear power so the nation can evaluate the best option without one hand tied behind its back.”
“The federal government’s capacity investment scheme is designed to deliver investment in its renewable energy targets, but specifically excludes funding for gas generation. This means gas generation, as the only technology available now that can solve the firming problem, is the only technology without government support” – Richard Wrightson, managing director, Delta Electricity.
“AEMO does not hold the view that one form of energy is ‘good’ and another ‘bad’. Our engineers and economists are focused on finding the least-cost path to reliable and affordable energy for Australian consumers” – Daniel Westerman, CEO, Australian Energy Market Operator.
“Even on the most optimistic outlook, nuclear won’t be ready in time for the exit of coal-fired power stations” – Westerman. “Any delays in rolling out renewables will likely lead to higher costs and interrupted grid supply.”
“Today in nearly every modern nation the queue is forming to build the next generation of nuclear” – Adi Paterson, nuclear expert, former ANSTO chief executive. “It’s safe, it’s reliable, it can live with renewables.”
“AEMO should be completely restructured and brought back in to the real world” – Paterson.
The Australian Energy Council, the peak lobbying body for electricity and gas businesses in the competitive markets, says lack of an adequate energy workforce is “a potential obstacle on the national road to net zero.”
AEC points to independent analysis suggesting the number of energy sector workers critical to meeting Australia’s current policy may need to be 17,400 higher by the end of this decade and 37,600 higher by 2050. The modelling suggests that the sector is projected to face shortfalls of more than 14,000 electricians by 2030.
“Additionally,” AEC notes in a website commentary published in late July, “nearly all building and engineering trades critical to the construction and maintenance phases of renewable energy generation are also likely to experience supply gaps.
“Significant gaps in architectural, building and surveying technicians, metal fitters and machinists, structural steel and welding trade workers as well as chemicals, gas, petroleum and power station plant operators will emerge.”
By 2030, the association says, Australia is expected to require an additional 85,000 workers to support the construction, operation and maintenance of renewable energy infrastructure.
The AEC calls for “an effective, whole-of-government approach” to be taken to the energy transition. “There are currently a raft of government strategies addressing the transition – with all of them impacting the workforce.”
Without action to mitigate the workforce issue, it declares, “the challenge of transitioning becomes a far greater task.”
The association’s comments follow a Cornwall Insight report in April asserting that “sluggish progress” in launching new energy projects, “partly due to shortages in the skilled workforce,” were “poised to push Australian electricity prices higher until 2030.”
The Australian Energy Regulator, in its new quarterly report released towards the end of July, says wholesale power prices in the NEM rose sharply in the April/June period as cold weather lifted consumer demand, reaching their highest levels since the “crisis” of 2022.
The regulator says “the combined impact of cold snaps, planned and unforeseen network outages combined with (market) rebidding and lower solar and wind farm output pushed prices higher than this time last year.” It notes wind farm output in the market fell 20 per cent while reduced rainfall in southern areas saw hydro generation drop 18 per cent.
Gas-fired generation rose 16 per cent in the quarter and coal plant contributions went up seven per cent, using more Queensland production.
The AER warns that “southern areas of Australia remain susceptible to demand and supply shocks for the rest of winter.”
The regulator anticipates an increase in new generation in the NEM during the 2024-25 financial year but reports just one wind farm (of 201 megawatts) being commissioned in the June quarter.
Federal Energy Minister Chris Bowen seized on the report to highlight that “already we are seeing batteries doing about twice as much heavy lifting in the quarter as in the same time last year.”
Meanwhile, the Australian Pipelines & Gas Association says the “renewables drought” demonstrates the need for reliable generation back-up, urging the inclusion of gas-powered supply in the federal capacity investment scheme.
Reacting to the situation, Energy Users of Australia, the association for large corporate consumers, has declared “it is almost impossible to schedule maintenance (in the NEM) without causing significant market impact.”
CEO Andrew Richards says: “This will become a bigger problem as more centralized generation is withdrawn and more decentralized power is installed.”
Richards adds: “It seems that in the very near future, no matter what piece of the transmission system you de-energize for maintenance, you will impact thousands of megawatts of generation capacity.
“The practical, physical and technical challenges are mounting up and it is clear that much more work is needed (and probably money spent) if we are to reach a net zero system. It is unhelpful to ignore this or wish it away.”
In Australia, as in other large modern economies, the impact of data sector energy needs on power supply is rising to the top of media commentary.
In late July, the University of NSW’s Dylan McConnell said the prospect of rising data centre demand is “a bit concerning and surprising” and had not been fully captured by traditional forecasts.
He cited a report that, in Sydney alone, the data centre load, now 724 megawatts, requires 200 MW of current construction and 1,000 MW in various stages of planning.
“If you add that up, it’s two Tomagos worth of electricity demand,” he told a newspaper. The Tomago aluminium smelter neighbouring Newcastle is the largest power user in New South Wales.
In another media interview, Tom Allen, a UBS investment bank analyst, said “we think current government forecasts are significantly underestimating this load growth in demand.”
Allen commented that data centres now account for almost a quarter of large industrial power demand in Australia. UBS forecasts this load will rise by 16 per cent a year out to 2030 – and could require an additional generation capacity of 3,300 to 5,000 megawatts at the decade’s end.
Speaking to the Clean Energy Council’s “summit” conference in Sydney, the Australian Energy Market Operator’s CEO said NEM demand for electricity is set to almost double by 2050 as homes and businesses in the market increasingly electrify their heating and transport as well as industrial processes.
This means winter peak demand will outstrip current summer peaks.
Daniel Westerman told the forum that the result, in AEMO modelling, is NEM generation capacity having to reach almost 300 gigawatts by 2050 – up from 60 GW at present.
In the market operator’s current “integrated system plan,” he said, the generation mix by the middle of the century is expected to see onshore wind power at 60 GW (up from 12 GW today), grid-scale solar at 58 GW (compared with less than 10 GW today) and gas-powered generation (currently 11.5 GW) reaching 15 GW – with almost 13 GW of new plant needed to take account of the retirement of existing units.
As well, Westerman said, “rooftop solar panels, with a current capacity of 21 GW, are likely to provide a massive 86GW, complemented by 44 GW of battery capacity.”
One of the major present problems, he noted, is that the rooftop devices “are mostly uncontrolled and unco-ordinated, which left unchecked can cause issues in bulk power supply with system stability and resilience.”
He added that the other major element of the operator’s ISP is transmission. “In total out to 2050, the projects identified are forecast to cost $16 billion – and are expected not only to repay their construction costs but to save consumers a further $18.5 billion in avoided costs.”
The federal government is engaged in furiously juggling its natural gas policy to seek to ensure domestic supply is propped up while warding off attacks from the Greens and other environmentalists, who oppose any new sources being exploited.
In an announcement late in July Resources Minister Madeleine King awarded new exploration permits for fields offshore Western Australia, Victoria and Tasmania – while banning new seismic searches in them. She also gave permission for pursuit of carbon capture and storage of emissions from the fields, a step opposed by green activists.
King stressed that the permit approvals do not automatically ensure future gasfield development, pointing to the need for safety and environmental approvals and more community consultation.
She rejected demands from the Australian Conservation Foundation that the government should instead direct gas from current export contracts for use within Australia. “Australian gas, exported as LNG, is playing a significant role in decarbonizing the Asia-Pacific,” she declared. “We know our trade partners project strong demand for gas and metallurgical coal over coming decades and we must respond.”
King’s announcement was criticized by industry, too. Nikki Martin, CEO of Energeo Alliance, the global trade association for the energy geoscience industry, said the restriction on seismic surveying in new permit areas is “bizarre” and “another turn in a spiral of mixed signals over whether Australia intends to continue to have a viable natural gas industry.”
Martin said the organisation strongly opposed the step, which “is short-sighted and ill-informed.”
Samantha McCulloch, CEO of Energy Producers Australia, comments that, “while the urgent need for investment in new gas supply finally seems to be sinking in with governments,” policymakers need to address the impact on investors of “years of intervention, increased red tape and glacial approval processes.”
She says the new limits on seismic surveys are “an unnecessary concession to activist groups.”
McCulloch adds that, if the Albanese government is serious about addressing the “looming energy crisis,” it needs to “back evidence over ideology.”
The background to the government decision is a warning from regulatory bodies and the market operator that Australian east coast gas demand may fall short of supply as early as 2027. The ACCC says that “supply challenges” could persist in to the mid-2030s.
King says gas is critical for the energy transition her government is seeking to manage – adding that it will be a diminishing proportion of the domestic energy mix by 2050.
A new report from the Australian Academy of Technological Sciences & Engineering – which asserts that “the nascent state of small modular nuclear reactors globally” means that the technology may not be available until “the late 2040s” – has come under attack from advocates for the nuclear ban being lifted in this country.
ATSE president Katherine Woodthorpe has told media that, from a technology and engineering perspective, “SMRs could form part of the future energy mix for Australia” – but “there is considerable uncertainty around their commercial viability.”
Overall, she claims, “the associated time-scales, expense, skills gap, legal and regulatory barriers and social acceptance of nuclear power means the technology is high risk when compared to existing energy options.”
Responding, Tony Irwin, technical director of SMR Nuclear Technology, says that ATSE should have had the report peer-reviewed before publication, asserting it contains “many errors.”
In a Sky News interview, Irwin added that it is “disappointing” ATSE produced the report without engaging expert advice. “The whole of their time scales are wrong,” he said.
Former ANSTO chief executive Adi Paterson, who is a fellow of the academy, dismissed the report as “unhelpful.”
In an acerbic commentary in The Spectator Australia magazine towards the end of July, David Pearl, a former senior public servant in the federal Treasury, raises the issue of just what advice the Albanese government has been receiving from its bureaucracy with respect to future energy supply and ambitious decarbonization policy?
(There are two quotes from the article earlier in this month’s newsletter.)
The points he raises are ones on which I have ruminated often in recent years – and not just with respect to the current administration’s frolics in the energy fields.
My dealings with the public service, federal, State and Territory, covered a long period before I moved (more or less) in to retirement – running from the early 1970s through to the first decade of this century and spanning the manufacturing, forestry, petroleum and electricity sectors.
In that time, of course, I encountered some real duds in the bureaucracy, as in other parts of life and certainly in business as well as policymaking, but also a large number of serious, hardworking and sometimes quite brave public servants who challenged those from outside seeking things from government and, not infrequently, those in politics pushing their own barrows. This was mostly done in private, not in the media columns, but was nonetheless often accompanied by trenchant cross-examination of the barrow-pushers.
One of the most senior of these public servants during my time working in Canberra labelled more than a few of those with whom he had to deal “the meretricious players.”
Looking around from my nook in retirement, I think I can spy lots of new model “meretricious players” peddling their wares in current times, a fair number of them in and around the energy and climate change areas.
This is why I read Pearl’s piece with interest and appreciation, seeing in his cross op-ed some of the things that also give me the irrits.
Are there official briefings alerting ministers to the costs and risks of today’s “transition” policies, Pearl asks – and answers “depressingly, almost certainly no.”
He goes on: “It is not only public policy 101 but a basic requirement for rational action that we accept there will always be different ways to achieve a given objective.
“The job of the public service is to identify all possible alternatives, assess the costs, benefits, risks and implementation challenges of each one – and recommend a preferred option.
“The government, of course, is not bound to accept this advice – but, if it is comprehensive, well-grounded and responsible, ministers will be able to take an informed decision. They will not be flying blind.”
Alarmingly, I think, Pearl asserts that, in the area of climate change, these elements of policy-advising best practice are now routinely ignored – and have been since early this century.
He also opines that the renewables transition is looming as a “national quagmire” for Australia. More positively, he says it is not too late to reconsider the present direction.
In an earlier commentary in The Spectator, Pearl called for an independent “critical spotlight” to be played on the issues thrown up by the current energy policies.
“Of course,” he added, “the renewable industrial complex, which reaches deep in to the bureaucracy, the corporate world, the media and our academic institutions, can be relied on to bitterly oppose such an exercise. For them, this form of sunlight would not be the best form of disinfectant.”
Keith Orchison
31 July 2024