Issue 235, November 2024
As we approach the end of a fevered year for the energy policy debate, with a federal election on the near horizon and a defeat for the ALP in the Queensland poll in the rearview mirror, questions about the state of the “transition” are piling up and the media are accelerating their focus on both the state of play in the marketplace and the outlook for electricity supply, both in terms of reliability and today’s costs, with concerns mounting about what consumers face in the immediate future and the longer term. A new factor in this debate is the start in the past fortnight of an inquiry by a Senate select committee examining the institutional structures, governance and operation of the national power market (the NEM) — which immediately made media headlines over evidence about future electricity costs.
“This seems like a scandal to me that we are spending all this money and all these resources and we're not even calculating probably the most important variable for any Australian in this debate—what will be the price of power they pay at the end of all this?” — Senator Matt Canavan, cross-examining the Energy Market Operator’s top management at a Senate hearing.
“I can’t guarantee power prices will fall” — Daniel Westerman, AEMO chief executive, responding to questions at the Senate hearing.
“The integrated system plan which considers these things — generation, storage and major transmission upgrades — is the lowest cost pathway. It doesn’t refer to whether it’s cheaper or more expensive for the wholesale component” — Westerman.
"The ISP shows that, as coal retires, renewable energy connected with transmission and distribution, firmed with storage and backed up by gas-powered generation, is the lowest cost way to supply electricity to homes and businesses as Australia transitions to a net zero economy” — Westerman addressing the Australian Financial Review climate and energy conference earlier in October.
“Australians were sold a green dream of cheaper energy, but the reality is a nightmare of soaring prices that may never end” — federal Coalition energy spokesman Ted O’Brien.
"After a decade of delay and denial under the Coalition, in less than 30 months we’ve introduced key reforms that have us on track to reach our target of 82 per cent renewables in our electricity grid” — federal Energy Minister Chris Bowen in a forum speech at the end of October.
"Both parties have an obligation to provide their whole-of-system costings and the modelling that underpins their plans. This will enable voters to make an informed choice between two distinct and competing visions for the way forward. The result will decide the shape of our energy policy which, as ever, will be fundamental to Australia’s future prosperity” — Jennie George, former ACTU president and a former Labor MP, in a commentary in The Australian newspaper.
"The government is still striving to meet its 2030 target of a 43 per cent reduction in carbon emissions on 2005 levels, a target which requires renewables to comprise 82 per cent of the energy mix by the end of the decade. They currently comprise 46 per cent” — Phillip Coorey, political editor, the Financial Review.
A new study of the Australian energy transition produced by UK analysts Cornwall Insights, published at the end of October, is bullish about the size of future development – asserting that 150 gigawatts of wind and solar generation plus energy storage capacity investment can be expected between 2025 and 2043 – but warns that “there are a number of hurdles that need to be overcome if the transition is to go smoothly, not least workforce shortages.”
Cornwall say: “Labour constraints limit the rollout of the new technologies (including offshore wind) and the unglamorous but essential network reinforcement projects which Australia needs.”
They add: “We have to be realistic. That said, with robust government policies and well-structured investment frameworks to broaden the technologies on offer in the NEM, the path to a greener future will become clearer and more attainable.”
Part of the realism Cornwall have brought to the issue is to point out that the use of coal-fired power in the NEM could be extended beyond the 2038 timeframe used by AEMO and the federal government “with question marks over whether the necessary capacity can be delivered in time”. They say: “Concerns around workforce shortages and other factors also lead us to project a longer operating life for coal plants as the necessary renewable energy infrastructure will not be built quickly enough to replace lost capacity.”
As well, according to the research group, while AEMO forecasts strong growth in offshore wind, “the sector remains nascent in Australia with project delivery assumptions still untested.”
The Australian Energy Regulator is pointing to “a tale of two halves” for wholesale electricity prices in the NEM during the July to September quarter.
The AER says: “While higher demand in the July and August winter months put upward pressure on prices, milder weather from late August onwards resulted in lower demand and helped to moderate prices in the quarter for some States.”
The quarter, it reports, had 54 “significant high price” periods. AER Board member Jarrod Ball says: “A combination of high demand, low wind and network outages during peak demand periods contributed to this volatility.” Wholesale prices in all regions were higher than the same time last year.
Meanwhile the Energy Market Operator notes that greenhouse gas emissions in the NEM have risen for the third quarter in a row.
The Energy Market Operator reports that 45.6 gigawatts of renewable capacity — wind and solar generation and energy storage — is currently in the process of working towards development in the NEM.
In its latest quarterly publication, AEMO says this is a 36 per cent increase on the situation at the end of the third quarter of 2023, adding that 79 per cent of current projects are in their early development stage.
The operator’s executive general manager (reform delivery) Violette Mouchaileh says 10 projects totalling 3.5 gigawatts of solar farms, wind farms and batter storage were connected to the NEM grid in the third quarter of this year.
AEMO adds that the largest renewables growth in the quarter was in rooftop solar.
It says the share of renewable power generated in to the NEM in the quarter was 39.3 per cent (up from 38.9 per cent in the same period of 2023) — with hydro power providing 8.6 per cent.
The largest contributor to the grid in the quarter was black coal generation (40.6 per cent) with brown coal plants delivering 15.6 per cent and gas units 4.8 per cent.
Ryan Stokes, chief executive of the Seven Group Holdings, has declared that an energy system in Australia powered wholly by renewable energy is “a pipedream” and so is belief that it can replace coal and gas-fired electricity sources without huge cost.
He says he believes renewables “will play a big part in the future energy mix — but it is not a panacea."
Stokes told a business breakfast in Perth in late October that it is time in Australia for consideration of nuclear power as a clean energy source, suggesting community opposition to siting nuclear plants could be alleviated by providing local users with free energy.
The Australian Financial Review reports that Stokes told the forum that "the nation’s appetite for a mature discussion about nuclear energy had developed over the past two decades, pointing to how State governments have embraced the opportunity to harbour AUKUS nuclear submarines”.
His comments have been welcomed by Cristina Talacko, CEO of the Coalition for Conservation, an environmental charity supporting a diverse energy mix in Australia, as “giving hope for a sensible, balanced solution for the future.” It is time, she said, for more business and community leaders to speak out for “clear-headed thinking and pragmatic solutions."
At a House of Representatives inquiry into the Coalition’s energy policy initiated by the federal government, the Department of Climate Change & Energy asserted a “10-to-15 year time frame” would be needed to introduce nuclear power in to the NEM once the existing legislative ban on its use is lifted.
The Tasmanian Chamber of Commerce & Industry says the State is in “an energy crisis” as Hydro Tasmania scales back hydro power generation during the island’s lowest rainfall period since 1984.
The chamber’s CEO, Michael Bailey, points to the last wind farm being opened in Tasmania in 2020 and says further developments are being held up by a “complex” regulatory system.
The ALP opposition has asserted that Tasmania is now the hardest place to build a wind farm in Australia.
Hydro Tasmania has acknowledged that the State’s supply of renewable energy has slumped to 79 per cent.
The gas-powered Tamar Valley power station, which was brought on line in June, has accounted for 5 per cent of the state's energy needs this year — the highest level since 2017.
The Basslink interconnector to the mainland has been crucial to the State’s supply, with a sixth of energy consumption coming from imports of electricity via the undersea cable.
The Clean Energy Council declares there is a “growing problem” with retirement of rooftop solar panels in Australia.
In a website commentary, the lobby group says: “The early retirement of solar panels is forecast to create nearly 8.1 gigawatts of fully serviceable solar panels at risk of disposal over the next 10 years. That is just under the equivalent of all systems installed in Australia between 2021 and 2023 (8.9 GW). This indicates the need for innovative solutions to lengthen the operational lifespan of Australia’s solar panels.”
The CEC adds: “While solar panels are designed to have a 30-year lifespan, the average operational time is 15 years. This is due to a range of factors including the common practice of removing and replacing entire systems, incentives favouring installation of a new system over the repair of an existing one and the shorter lifespan (10-15 years) of solar inverters.”
It says: “As the rooftop solar sector grows, and efficiency improves, often customers are replacing solar systems on their properties or businesses with more advanced or efficient systems, meaning many solar panels are entering the waste stream much earlier than they need to.
“There is currently no program in place in Australia to regulate the resale and re-installation of second-hand solar panels. Before the backlog of end-of-life and reusable panels grows to an insurmountable size, action needs to be taken.”
As the Australian government prepares to participate in the latest UN climate change convention in mid-November, it remains coy on what 2035 emissions reduction target it will pursue.
Climate & Energy Minister Chris Bowen told a Australian Financial Review conference in October that discussions within the federal government are “still embryonic” and there may not be an announcement before the next national election, due in May at the latest. He said he is still in the process of “swapping notes” with international ministers ahead of the CoP meeting to be held in Azerbaijan this month. He has indicated other countries might not make commitments until the second half of 2025.
The government had signalled earlier that a 2035 target would be announced next February.
AFR political editor Phillip Coorey comments that “given the contribution of high energy prices towards the cost of living, the target will be politically sensitive and ripe for a scare campaign.”
The newspaper reports that the government may aim for a target of between 65 and 75 per cent below 2005 levels – current policy for 2030 is a target of 43 per cent by 2030 – and the federal opposition is arguing that the present aim of making renewable energy in electricity supply reach 82 per cent by the decade’s end is unreachable. The Coalition has already made clear that ,while committed to net zero by 2050, it would not make any interim commitments ahead of the election.
Bowen has rubbished calls by the Greens national leader, Adam Bandt, for Australian emissions cuts to be more than doubled by 2030.
“Whatever is set must be both ambitious and achievable,” he says. “There’s no point having a 100 per cent target by 2035 if you’ve got no idea how you’re going to do it.”
What the last weeks of 2024 will bring on our energy front remains open to speculation — and a post-election 2025 national scene requires a better crystal ball than I anticipate getting for Christmas.
The interplay of politics and actual events — for example what impact will the summer's weather have on electricity supply in the NEM and Western Australia’s regional market based on Perth and therefore on consumer prices and thus on voter attitudes — is a real issue for which no pundit or pollie has an answer right now, no matter what they may say.
How the media will play what develops is a factor, too.
One example of the latter role will be seen in mid-November when Sky News broadcasts a documentary produced by Chris Uhlmann to “lift the lid on the pursuit of net zero,” to quote its publicity.
The program is "set to explore the impact of the Albanese government's commitment to achieving 82 per cent renewable electricity by 2030 and net-zero emissions by 2050,” the promotion declares. "Comprised of interviews with local and international experts, the documentary takes a forensic look at who will pay the price for the energy transition and how much the cost may really be.
"People should be told the truth,” Uhlmann has told Sky News' Peta Credlin in a late-October interview. "The pledge of all of this was that if we put more renewable energy on the grid, more wind and solar, that would bring down the price of power and that it would be cheaper.
“That's a complete myth and what we do in this investigation is not to talk to activists and not to talk to politicians. We talk to the people who run electricity systems, not just here but around the world, to see what the real story is when you deploy wind and solar at scale.”
If the actual program lives up to its hype, this could be a seminal contribution to what has been a very messy discussion in the past 12-18 months.
Uhlmann told Credlin that the complex way renewable energy is priced means it was difficult for many in the community — I’d say most — to understand what they were being sold under the Albanese government's approach to net-zero.
"The reason that people need to know some detail about this is the only place where wind and solar, when it's generating, could cut the cost of your bill is in the wholesale price of electricity," he said. "So when they generate, they generate very cheaply. The problem is they don't generate very often and in the wholesale market for electricity the price is not set by the lowest of generation, it's set by the highest cost of generation."
Uhlmann claims that what people are being told about future energy costings is "far from the truth" of what they will see as the renewables approach continues.
This program is capable of being a hot potato for the federal government and its fellow-travelling State governments, perhaps only for the next few weeks (as summer holidays distract the community) but possibly on in to early 2025 — and then there will be the issue of what the opinion polls are showing as the real run-up to the next federal Budget and the election takes front of stage.
Some context for this is how much confusion there is in the community about the “transition.”
As evidence, look at an Essential Report poll (for The Guardian newspaper) published in mid-September.
It showed that just eight per cent of respondents knew how far along Australia is in the renewable energy shift, with 56 per cent under-estimating, and a further 20 per cent saying they didn't know.
Another poll I have seen reported found that, since 2022, cost of living concerns about the energy transition have risen ten per cent, concerns about the affordability of energy bills has increased seven per cent while concerns about the reliability of energy supply has risen 11 per cent.
This is fertile ground for the public debate Uhlmann is seeking to inspire.
How it all plays out remains to be seen in the months ahead.
Keith Orchison
1 November 2024