Issue 226, February 2024
Mid-summer weather madness is plaguing large parts of Australia, with supply lines being felled in numerous areas, rural and urban, and the rough and tumble of the season is far from over. Even so, the politics of power prices will soon again grab headlines as the Australian Energy Regulator delivers its draft 2024 “default market offer” benchmark to take effect on 1 July, capping anew how much retailers can charge households and small businesses – and almost certainly delivering more stress for an embattled federal government over a rash promise made in the last election that its policies would see a $275 fall in costs by 2025. At least the government will be able to point to NEM wholesale power charges falling as 2023 ended, reflecting the increasing role of wind and solar energy in the system mix – but looming over that is the pressures on remaining coal-fired generators from negative NEM prices and the challenges this poses for system security as a whole. Also looming are federal by-elections and the Queensland State election – in which community angst about cost-of-living pressures will be a significant issue.
“The influence of renewables on the market will only grow” – Australian Energy Market Operator chief executive Daniel Westerman. “We are regularly seeing records set for the higher contribution of renewables and lower levels of energy drawn from the grid because of rooftop solar.”
“It is now just over 20 years since John Howard introduced a renewable energy policy which required wind/solar-generated electricity to be incorporated within energy retailers’ total supply. This gave those sources of energy a de facto subsidy. That basic subsidy presently is $50 per megawatt hour for large-scale solar and wind – rather more than the total price of generated energy formerly experienced – and $40 per megawatt hour for rooftop solar” – commentator Alan Moran in The Spectator Australia.
“The government is making sure Australians get access to the cheapest-cost energy they can” – federal Climate Change & Energy Minister Chris Bowen.
“South Australian businesses are paying an annual electricity bill of nearly $8,500, the dearest in the nation” – Energy Consumers Australia.
“Spiralling energy bills are ‘the biggest concern’ for Victorian small businesses” – Melbourne’s Herald Sun reporting a new State opinion poll.
“Small business owners are bracing for more pain – with energy prices set to continue rising by up to 30 percent across the country” -- Jacqueline Crawshaw, acting ECA chief executive.
“Fifty-nine per cent of small businesses are more concerned about paying their electricity bills than they were a year ago” – Crawshaw.
“The (federal) government appears likely to wait until the May budget to finalize energy bill relief, which would repeat last year’s $1.5 billion subsidy for millions of households and set up talks with the States and territories about matching payments” – political commentary in the Sydney Morning Herald.
Federal Climate Change & Energy Minister Chris Bowen says natural gas is “critical to supporting a lower-cost, more renewable grid as ageing coal exits and to support Australian manufacturing.”
His statement came barely a month after he told the CoP28 meeting in Dubai that “all countries must shut down fossil fuels to keep the 1.5 degree target in sight.”
His riposte to critics is to point to the CoP communique saying that “traditional fuels can play a role in the energy transition.” Coming home, he told Australian media that “gas does have a role to play as we get to 82 per cent renewables.”
Bowen participated in mid-January in the federal government’s announcement that it has made a deal with energy majors Esso and Woodside for the Bass Strait joint venture to deliver more than 260 petajoules of gas to the south-eastern market by 2033. This is equal to about 30 months of gas-powered generation needs for the market.
Concern about supply reliability for the region in the rest of the decade has been widely discussed over the past two years – and is seen as being exacerbated by the Victorian government’s continuing hostility to onshore gas exploration in the State.
Bowen and Resources Minister Madeleine King said the new commitments will bring the total volume of gas secured for the area through the government’s controversial market code to 564 PJ.
Bowen adds that this is equivalent to gas supply to power east coast electricity generators for five years.
However, green activists remain critical of support for gas supply.
In reaction to the Bowen/King announcement, the Climate Council called for “more energy in reducing gas demand,” claiming the move was “trying to backfill a level of demand we may not need.” The lobby group adds “there has been a lot of good analysis showing that, if Australia really embraces electrification and energy efficiency, the need for gas will drop very quickly.”
The Australian Workers Union, on the other hand, declared the Esso/Woodside deal “a win for east coast households and manufacturing.”
It added: “If that means opening new gas fields onshore or offshore, the government needs to do it.”
National media highlight that AEMO Services, a NSW agency set up to aid the State’s energy transition, claims in a new report that, at most, about 4,000 megawatts annually of green power can be added to the Australian system out to 2040 – against 6,000MW needed to deliver transition targets.
In a response from Chris Bowen’s office, the government said AEMO Service’s latest modelling does not take in to account its recent policy.
“We know,” Bowen’s spokesman said, “that the capacity investment scheme, the largest investment in energy underwriting ever made in Australian history, puts us on track to meet the needs of households and businesses by unlocking 32,000 MW of energy.”
Meanwhile, The Australian newspaper quotes Bruce Mountain of the Victoria Energy Policy Centre as being “very pessimistic about Australia even maintaining its current pace of renewable energy build-out.”
Opining that, arguably, the infrastructure landscape has been easier in the past than it will be in the future, Mountain told the newspaper he thinks a 4,000 megawatt per year build-out is “optimistic.” And he also told Sky News that, in order for customers to get better electricity bills. the burden has to be put on taxpayers.
The growing number of Australians sending power back in to the market network is pushing it to the limit, the CSIRO says. The organisation’s energy networks leader, John McKibbin, adds: "With rooftop solar capacity expected to double by 2030, Australia will need to adapt its local power distribution system.”
In a website commentary, he points out that, in the future, those in charge of distributing electricity will have to predict and manage when the local power lines might get too crowded. They will also have to set prices in a way that encourages people to use, generate and store electricity responsively in their own neighbourhoods.
The Australian Energy Market Operator says average distributed photovoltaic power output in the NEM reached a record level in the fourth quarter of 2023, 17 per cent higher than in the same period of 2022 and the highest for any quarter.
The variability of the source is demonstrated by a 44 per cent year-on-year increase in the NEM in October last year compared with seven percent rise in November and NSW and Queensland seeing decreases on 2022 levels.
In December, monthly averages were lower in Victoria and South Australia within a seven per cent NEM-wide increase.
AEMO also reports that Q4 distributed solar capacity in use across the NEM was a record 2,021 MW, up 23 per cent from the same period of 2022 and grid-scale wind and solar capacity rose to 5,168 MW – while black coal-fired generation contributed a new quarterly low of 9,189 MW.
The OpenNEM website shows that, for the rolling 12 months from late January 2023 to almost the end of January 2024, black coal generation contributed 87,229 gigawatt hours to the grid, brown coal units 31,641 GWh, all gas-firing units 10,078 GWh, wind power 27,885 GWh, solar farms 14,841 GWh and hydro power 15,137 GWh.
The impact of extreme heat saw Queensland electricity demand reach record levels in late January, with the market operator preparing to call on emergency reserves.
Peak demand on 22 January reached 11,036 megawatts – 875 MW above the previous record established only three days earlier.
At the peak, rooftop and utility-scale solar power accounted for 47 per cent of demand – Queensland is the first State to pass one million rooftop installations – while the balance was provided by coal-fired generation and gas peaking plants. Queensland also has 1,000 MW of wind capacity but, at most on a still, hot day, the sector was contributing 200 MW.
Meanwhile Cyclone Kirrily, making landfall in north-east Queensland in late January, left tens of thousands of consumers without electricity, mostly in and around Townsville, requiring some 700 Ergon Energy workers to be mobilized to restore the supply system.
The New South Wales Minerals Council reports that an opinion poll it commissioned in three key Sydney federal electorates has shown strong support for the ban on nuclear ban to be lifted.
The council tested opinion in the seats of McMahon (held by Chris Bowen), Wentworth (lost by the Liberals to a Teal in the last federal election) and Bennelong (now held by the ALP). In Bowen’s electorate, 67 percent of respondents supported lifting the ban and 69 percent said yes to the use of nuclear power.
In Bennelong – its Labor MP, Jerome Laxale, has called Australian use of nuclear “a fantasy” – 68 percent supported the end of the ban and 69 percent were for the use of nuclear power.
In Wentworth, currently held by a Teal, Allegra Spender, 68 per cent of respondents supported both propositions.
The council says its poll also showed that “at least four in 10 voters in these key electorates rated the federal government’s performance on energy policy as bad” against three in 10 opting for “good.”
Council CEO Stephen Galilee commented: “Australia is among the top 20 most expensive countries in the world when it comes to paying for electricity. With the cost of living biting across the nation, especially in NSW, people are willing to support technology that will lock in affordable and reliable electricity for the future.”
In an interview, he told Sydney’s Radio 2 GB that: “This is the way of the future and Australia is going to be left behind as long as we have this ridiculous ban in place. It’s time to end the cancel culture on nuclear power in Australia.”
And in an op-ed in Sydney’s Daily Telegraph newspaper, Galilee added: “Times have changed since the nuclear ban was introduced. So has the available technology and the energy market – and public sentiment is clearly changing too.”
By early March energy consumers in the NEM will have an indication of where their electricity bills will head in the 2024-25 financial year, courtesy of the draft findings of the Energy Regulator for energy retailers’ next “default market offer.”
In the meantime the media and the energy commentariat are having a picnic speculating on whether the DMO – the regulated price cap on retailers’ standing offer contracts for consumers who have not shopped around or switched supplier – will go up, down (because of lower wholesale costs) or flatline.
One commentator, Gavin Dufty, head of policy and research at St Vincent de Paul Society, told the Australian Financial Review in mid-January that he expects the marker will stay unchanged for 2024-25 after retail tariffs rose by almost 40 per cent over the past two years.
Dufty pointed to “updrafts that could offset plunging NEM (wholesale) prices” – including reduced retail competition after some supplier closures, higher outlays on new transmission infrastructure (a key part of the “transition”) and increases in the costs of capital for energy developers.
“Don’t start popping champagne corks; I reckon (the DMO) is going to flatline,” he advised users through the Financial Review.
In a report released in mid-January, St Vincent de Paul Society called for “a major shake-up” of green scheme costs and tariffs in the NEM, declaring both gas and power costs “rocketed on average” in 2023.
It highlighted the quick rise in green scheme costs via government efforts to boost the uptake of clean energy. These now account for between nine and 12 per cent of typical household bills and are highest in Victoria, costing a customer using 6,000 kilowatt hours of electricity a year an extra $188. Dufty says recovery of the cost of government subsidies is central to the problem -- “They are typically moved on to consumption charges for all customers.”
He notes that investors in rooftop solar power could evade much of these costs but points out that many households, especially poor and tenanted ones, do not have the ability to pursue this option.
Vinnies is calling for a debate on how green scheme costs are passed on to consumers, warning “the problem can only get worse” as households that can afford the outlay pursue solar and other green scheme options.
Brendan French, CEO of Energy Consumers Australia, adds that it is “imperative” green scheme costs be distributed as fairly and efficiently as possible. He says retail competition is decreasing in the eastern seaboard’s NEM and “many consumers are paying double what they were 12 years ago.”
A recent commentary in The Guardian newspaper sums up a headache for Australian governments and many “cut carbon or bust” boosters.
The paper said the recent decision by the federal Environment Minister Tanya Plibersek to block the development of a “renewable energy terminal” at port of Hastings in the Western Port wetland east of Melbourne brought “into stark focus the increasing tension between two commitments of all Australia’s governments – solving the biodiversity crisis and the climate crisis.”
The Guardian went on to reflect that “moves to protect biodiversity almost always help slow climate breakdown and allow for adaptation to inevitable changes, but renewable energy developments are fast becoming the exception.”
It went on: “To be the renewable superpower Australia hopes to be, the spatial impact of the associated infrastructure could be more than five per cent of the entire continent, threatening and extensively fragmenting ecosystems. Ironically, in some States, solar farms could soon be the biggest destroyers of native vegetation. Wind farms have long been known to threaten flying animals, especially migratory and large species – including our own orange-bellied parrot, one of the most endangered species on the planet; the iconic brolga; and flying foxes that are essential for pollination and seed dispersal.
“Associated infrastructure (roads, power lines) plus new mines for critical minerals will increase habitat loss and fragmentation.”
The ministerial decision that brought about this handwringing was based on the view that dredging and drilling to build a146 hectare offshore wind farm base “would cause irreparable harm to threatened sea creatures, plants and ecosystems in Western Port bay and could not be avoided even with international best practice.”
This is a serious blow to the Victorian government’s plan for offshore wind to play the key role in meeting the State’s aim for 95 per cent renewable energy in its grid by 2035 and net-zero emissions by 2045. The ALP State government wants 2,000 megawatts of offshore wind farm capacity in operation by 2032 and 9,000 MW by 2040, with all its coal-fired generation closed.
Not being able to proceed with the wind farms will impact more than Victoria; it could crash through Chris Bowen’s much-touted “transition” plan as well.
Bowen says the federal government remains committed to the development of an offshore wind industry in Australia, “We are committed to getting more renewable energy in Australia, we’re particularly committed to Australia seizing the opportunities of offshore wind, which is energy rich and jobs rich, will create thousands of jobs in Australia regions, but it has to be done properly and carefully,” he told journalists after Plibersek’s decision caused a stir.
However, as The Guardian points out, the environmental impact issue related to renewable energy affects a lot more than Western Port bay. With Plibersek’s ruling, a door opens for challenges onshore and offshore for wind farm projects.
It certainly gives legs to the argument mounted by former Greens leader Bob Brown, who is angered by projects in his native Tasmania, that “better planning and environmental regulation are needed to ensure the nation’s wind rush does not have perverse outcomes.”
“Wind power is an essential part of the answer to global warming,” Brown says,”but at the moment we have a free-for-all and, whenever that happens, there are reckless casualties.”
As that frog called Kermit says, it’s not easy being green.
Keith Orchison
29 January 2024