Issue 222, October 2023
So who’s right? Critics like the Herald Sun newspaper, declaring that the east coast electricity system is “hurtling towards blackouts as mammoth renewable energy projects struggle to replace coal generation” or federal Energy Minister Chris Bowen asserting that his government is “acting with pace” in the energy transformation, “acting to ensure the grid is fit for purpose”? As we mooch in to the last quarter of 2023, heavily distracted at the political level by this month’s “Voice” referendum, we are also at the mid-point of the ALP’s current term in national government – and perhaps wondering whether Prime Minister Albanese may be tempted to pursue a new election in 2024. Meanwhile, energy retailers are immersed in a volatile wholesale energy market, a large number of consumers are fretting about their bills, the cost of keeping coal generation open to avoid supply failures is a matter of ongoing debate and the media are speculating about how the NEM in particular will cope with a very hot summer. And then there are all the gas industry issues. The federal government’s plan to have four-fifths of Australian electricity supplied by renewable generation and electricity storage by the arbitrary deadline of 2030 is destined, on present indications, to fall well short – along with its promises of cheaper bills for users. And, therefore, what?
“Energy security is economic security. Energy security is job security. Energy security is national security” – Prime Minister Anthony Albanese in a mid-September conference address.
“Gas will support the grid during low renewable periods. It would not be responsible to just turn the tap off overnight as some would suggest” – Albanese. “Gas-generated power will play a key role in our energy system.”
“Despite the Prime Minister’s promises, the cost of transforming the grid by 2030 is now estimated to be $1,500 billion, not $78 billion” – a Quadrant magazine commentary.
“Australia’s energy transition is under way but accompanied by increasing pain and problems” – leading political commentator Michelle Grattan.
“The federal government’s targets for power bill cuts, emissions reduction and renewables growth are all looking very difficult to deliver” – Tony Wood, Grattan Institute.
“There is a growing gap between reality and Australia’s renewable energy plans” – columnist Jennifer Hewett in the Australian Financial Review. “Governments are running out of practical options to alter the energy mix in time to meet targets without compromising reliability.”
“Each step towards a renewables-based grid gets harder, not easier” – commentator Matthew Warren. ”Maintaining reliability will be critical for governments – which means they should accept they may well be managing end-of-life coal generators for decades. This isn’t about running coal more, but smarter.”
“Concerns are intensifying across the energy sector that the Albanese government’s goal of doubling renewables’ share of the generation mix to 82 per cent by 2030 is slipping out of reach, putting Australia at risk of missing its legislated climate targets” – news report in the Sydney Morning Herald.
“It takes special powers to achieve it but Australian energy policy is a mess across all fronts” – The Australian newspaper in an editorial.
“The (international) green energy boom is facing new headwinds. Falling costs, cheap capital and supportive politicians helped propel a headlong rush in to renewable power. Now fracturing supply chains and higher interest rates are pushing up prices, and testing the resolve of consumers and governments” – a Reuters commentary in late September.
“A plan to turn hydro power-rich Tasmania in to the ‘battery of the nation’ is now hanging by one 750 megawatt undersea cable after spiralling inflation forced the scale back of the project” – Recharge newsletter.
“Bowen protests too much on the nuclear option” – the Australian Financial Review declares in an editorial referring to the federal Energy Minister “flourishing” claims that it would cost taxpayers $387 billion to build 71 SMRs to replace the fleet of coal-fired generators. “No-one suggests that nuclear power could be anything like a one-for-one replacement for coal-fired generation. No-one suggests that governments should build and pay for them. The question is whether flexible, zero-emissions SMRs could provide reliable back-up for intermittent renewable generation (and) if the private sector could make the technology stack up commercially?”
“I don’t believe Chris Bowen has a credible path to get to net zero without the use of nuclear” – federal Opposition leader Peter Dutton.
“Coal power plants are being forced to operate more flexibly and ramp down during daytime to fit in alongside ultra-cheap renewable generation while still being needed to meet the bulk of electricity needs on average through the year” – resources reporter Angela Macdonald-Smith.
The Australian Energy Market Commission, the NEM rule maker, is proposing to raise the wholesale market price ceiling from $16,000 per megawatt hour to $22,800, saying the present level is too low to drive more generation investment in the NEM.
The price cap change, as drafted, would come in to effect in 2027 if the AEMC decides to proceed after consultation this month.
Its modelling indicates the early impact of the change would be a three per cent rise in retail electricity prices in 2028 and a 1.6 per cent drop “in the long term.”
In a statement, federal Energy Minister Chris Bowen declares the change “is about improving reliability and decreasing prices for households and businesses over the long term.”
The commission says its analysis shows that prices in the wholesale market “are currently too low to ensure there is enough generation and battery storage to keep the system reliable.”
It adds that the change “would have no bearing on prices under typical market conditions.”
The Grattan Institute, in a commentary published in September, has urged Australia’s climate and energy ministers to reach collective agreement on maintaining electricity supply reliability.
Grattan energy program director Tony Wood says that “whether it is a NEM-wide capacity mechanism, State-based capacity auctions or simpler arrangements such as strategic capacity reserves is less important than reaching agreement and getting on with it.”
He comments that implementing electricity policy to reduce carbon emissions consistent with net zero will be made harder by the federal government’s need to set a 2035 national target, “most likely before the next election.”
Wood declares: “We know Australia’s got a problem when a cautious, technical energy market operator says imminent and urgent investment is needed or the reliability of the NEM will be at risk.”
He adds that “if the AEMO report wasn’t enough, it was released at a time when the (federal) government’s targets for power bill cuts, emissions reduction and renewables growth are all looking very difficult to deliver.”
The latest energy statistics issued by the federal government shows that the renewables power supply share nation-wide in 2022 reached 88 terawatt hours or 32 per cent of all output, the highest on record.
The government figures include rooftop solar PV, off-grid generation and production by industrial plants.
The Australian Energy Update report says about 19 per cent of all generation occurred outside the main power supply sector, including 10 per cent by the mining and manufacturing sectors and eight per cent from small-scale solar PV.
Coal generation – which held a 68 per cent share a decade ago – dropped to 47 per cent in calendar 2022.
The report notes that metered electricity generation (in which it includes rooftop solar) in the NEM has “remained fairly steady,” sitting between 202 and 207 terawatt since 2016-17. Coal generation contributed 124,057 gigawatt hours of this in 2021-22 versus 24,713 GWh for wind farms and 10,076 GWh for large-scale solar.
It adds that in calendar year 2022 fossil-fuelled generation across Australia was 185,057 GWh out of 273,265 GWh from all sources.
The harder Chris Bowen, and others in his camp, try to give the nuclear debate the back of the hand, the more public sentiment seems to be shifting towards acceptance that, at least, the ban on the technology for use in Australia should be dropped.
In mid-September, the ABC again staged a QandA television debate on the issue, with Bowen and the Coalition energy spokesman, Ted O’Brien, among the debatees. At the end, the program polled viewers on the issue – and 59 per cent of about 11,000 responders supported dropping the ban versus 34 per cent who said “No” and seven per cent who declared themselves unsure. This is a similar outcome to the same question posed on the program in the first half of the year.
As well, an Australian Financial Review readership poll undertaken in September recorded 24 per cent of respondents agreeing “strongly” with removal of the ban and 21 per cent “slightly” while 26 per cent were “neutral” and just 16 per cent disagreed “strongly” (with 13 per cent “slightly”).
Adi Paterson, the former chief executive of the Australian Nuclear Science and Technology Organisation, reacted to the ABC program by urging the federal government to remove the ban and leave State governments, who are responsible for energy policy within their borders, to decide if they want the technology to meet their needs and priorities, adding “nuclear power is a slam dunk for New South Wales and Victoria in my opinion.”
To which former leading businessman Tony Grey added in early October in a newspaper op-ed: “If the energy minister is confident that the costs are too high for small modular reactors to be economic and construction would take too long, what is he worried about? Let the market decide.”
And businessman and climate activist Simon Holmes à Court told the Sydney Morning Herald that “ there is no good reason for Australia’s ongoing nuclear prohibition,” labelling Labor’s and the Greens’ implacable opposition to nuclear energy as “bordering on irrational”.
Meanwhile, the federal government has announced it is planning to make a significant investment in ANSTO which will include the construction of a new nuclear medicine manufacturing facility at the Lucas Heights campus in Sydney’s southern suburbs.
The Australian Competition & Consumer Commission is forecasting that, going in to 2024, there will be sufficient natural has available for the east coast market even as LNG exports rise nine per cent.
However, the Australian Industry Group says the domestic market is “still very tight” and warns of “the potential for things to go wrong” if a number of coal-fired power stations are off-line.
Federal Resources Minister Madeleine King says the latest advice from the ACCC shows the domestic gas outlook for 2024 is improving “thanks to the sustained effort of government and industry to ensure there is sufficient gas supply at reasonable prices to meet domestic demand”.
Meanwhile, petroleum producers, reacting to a “future gas strategy” consultation paper released by the federal government in early October, point out future domestic demand is forecast to outstrip supply on both east and west coasts by early in the 2030s.
Samantha McCulloch, chief executive of Australian Energy Producers (the new name for the Australian Petroleum Production & Exploration Association), says the federal paper is “kick-starting an important process” in planning future gas supply.
She says the paper highlights the need for new investment in sources of gas.
McCulloch adds that the paper recognises “the growing role of gas as a partner to renewables in electricity and as a feedstock for Australian manufacturing and industry” as well as the importance of gas exports to Australia and its international market.
“Gas is the safety net for our energy system and the key to providing reliable and affordable energy to households and businesses as we transform to net zero,” she declares. “The paper confirms that Australian households and industry will be relying on gas for decades.”
She warns that regulatory uncertainty is a significant issue for AEP member companies. "We need to reduce the current uncertainty and ensure we have regulatory frameworks that can allow robust, timely and efficient processing of 40 projects with environmental approvals pending. “What we’re seeing (at present) is just a lack of clarity, a lack of certainty around the rules of the game when it comes to offshore developments.”
The West Australian government has announced that it will delay closure of its Muja 6 coal-fired generation unit to cover demand in the south-west integrated system over the summer of 2024-25.
The government plans to have all coal plants at Collie closed by the end of the decade but it is now confronted by an Australian Energy Market Operator review of the SWIS that warns of the potential for a shortfall of generation capacity of 945 megawatts by 2025-26.
Energy Minister Bill Johnston says he has “absolutely no doubt” that “a whole range of new wind and solar projects” will be available by then, declaring AEMO has “provided a signal that will unlock this investment.” He adds that paying large power users to reduce consumption in peak periods is also a recourse.
Meanwhile, Prime Minister Anthony Albanese is promising $3 billion in taxpayer funds for WA to support grid augmentation in the SWIS and the Pilbara region. “We need to upgrade the grid so renewables can fit in to it,” he said in Perth.
AEMO says that a decade ago more than 90 per cent of electricity used in WA’s main power grid came from coal and gas but now 34 per cent is met by wind and solar power.
A study by Rystad Energy points out that Western Australia will increasingly need gas-fired power to stabilize the State grid as coal generation is phased out.
The report in to WA domestic gas supply, commissioned by Australian Energy Producers, says up to 350 terajoules of gas a day will be needed by the power sector by 2033 to “avoid a supply crunch” despite 3.9 gigawatts of rooftop solar, 2.2 GW of onshore wind power and 4.7 GW of large solar plants being developed by 2030.
The consultants say gas will stay relevant as coal plants are closed in order to mitigate grid intermittency arising from high renewables penetration.
One critical role for the federal government, and for its energy minister in particular, is to be fully informed of the trade-offs involved in replacing fossil-fuelled technologies with integrated low- and non-emitting sources of electricity, especially in the eastern States, home to the so-called National Energy Market, and also to ensure that the cabinet, the parliament and the community are comprehensively and accurately informed.
Whether the present incumbent, Chris Bowen, has fulfilled this task is, at the very least, open to challenge. His opponents in the Coalition, naturally, say he hasn’t done so. There are a growing number of detractors in the mainstream media who doubt it, too.
He does not help his cause when the modelling on which he claims to rely is not placed in the public arena for full scrutiny.
This did not happen with the now-notorious claims he and the Prime Minister made in the 2022 election campaign that their energy policy was based on strong modelling advice and allowed them to promise lower consumer power bills from major investment in renewable power and its supporting systems — transmission and storage — and it has not happened with his latest outburst about an allegedly eye-watering expense needed to include modern nuclear technology in a future generation mix without coal-burning infrastructure.
With regard to the ’22 election claim, Michelle Grattan, one of the most senior and trusted political commentators in the media, wrote recently that the Albanese/Bowen promise is now unattainable “and in the meantime householders face sky-high power bills with only some benefitting from the government’s relief package.”
Grattan observed that the energy transition will be putting pressure on the federal government on a number of fronts between now and the next election. “The first, and most obvious, is high power bills feeding in to cost of living pressures. Second, localised arguments about (new power) infrastructure will continue. Third, investors will need more reassurance. Fourth, the efficiency of the energy system must be maintained through difficult times.”
Work by the CSIRO, on which Bowen claims his statements are based, has been strongly criticised, not least in a paper for the Energy Policy Institute by David Carland of Australian Resources Development. This paper identified major deficiencies in the CSIRO’s GenCost modelling, and in particular identified major deficiencies and omissions with respect to:
Attempts by CSIRO to brush this aside have not been convincing. The minister and the government have ignored a call for an urgent, in-depth review of the GenCost22 findings and their implications. Indeed, Bowen has doubled down with his latest claims which the Grattan Institute’s Tony Wood has described as “rubbery at best” and The Australian’s Paul Kelly has called “deliberately exaggerated.”
In an op-ed Kelly declares that "public opinion is shifting, realism is invading the debate” and “people are grasping how hard net zero is as a goal”.
Claims last year by politicians, analysts and media commentators that Australia’s long “energy wars” were over have proved hollow. They are still going hot and strong, as recent debate and the comments canvassed here have demonstrated.
To steal a quote from Marvin the Martian, “where’s the kaboom?” Bowen and his leader are risking finding out the hard way on this issue in the months ahead.
Keith Orchison
4 October 2023