Issue 76, August 2011


Welcome to the eighth issue for 2011. You are among more than 6,000 readers of this site, which includes the This is Power blog, each month.

The carbon price debate remains top of the agenda, but again it is not the only topic the newsletter covers – this issue includes reports from the annual commercial Energy & Utilities Summit in Sydney. This month’s topics also include a look at China’s electricity development.

Gen-trader redux

The electricity privatisation imbroglio in New South Wales is about to start a re-run, with the independent review of the process initiated by the new O’Farrell government due to produce an interim report at the end of August. A final report is expected in October.

The inquiry led by judge Brian Tamberlin is examining the Keneally government’s $5.3 billion sell-off of parts of the State electricity industry. It began on 23 May.

Premier Barry O’Farrell told a Sydney forum in late July that the inquiry is “not just about getting to the bottom of the deals Labor did, but trying to set a course forward.” He said he would consider electricity privatisation if the inquiry recommended it.

Eraring seeks sale

NSW government-owned Eraring Energy, which supplies 25 per cent of the State’s power and 10 per cent of the east coast market, has told the Tamberlin inquiry that it should be wholly sold.

The bulk of Eraring’s power output was sold to Origin Energy under the Keneally government’s controversial process.

Speaking to a conference in Sydney, Eraring chief executive Peter Jackson said the corporation had told the special commission that selling or leasing its assets would deliver the least risk and best value for taxpayers “and is the preferred option for promoting competitive electricity prices.”

Jackson said the gen-trader model is not optimal for the business. “In an economic sense, the split is not efficient. The best solution would be full privatisation.”

Under the gen-trader deal, he added, Origin Energy undertook carbon price risk, coal supply and price risk, boiler fuel oil supply and price risk and plant heat rate risk (a measure of how much coal is consumed to produce a unit of electricity). The risks retained by Eraring included plant availability, working capital risk, the escalation of costs beyond indices in the sale contract, the risk of retaining and recruiting staff and site remediation costs.

Carbon tax hit

NSW Premier Barry O’Farrell claims that the federal carbon tax will impose power bill rises of between $242 and $300 a year on the State’s average households next financial year.

O’Farrell says NSW Treasury analysis of the proposals also shows that medium-sized small businesses face an increase of between $1,836 and $2,036 under the measure.

He has written to the Prime Minister to point out that the State Treasury’s modelling is at odds with that of Federal Treasury and demanding that the issue be discussed at the next Council of Australian Governments meeting. He says the NSW modelling has been hampered by the Federal Treasury not releasing crucial information on which its claims are based.

O’Farrell claims that public transport fares are facing a 3.6 per cent rise because of the proposed tax because they are not exempt.  In response Climate Change Minister Greg Combet has asserted the increase will be only 0.5 per cent

New South Wales looms large in discussion of the carbon policy impact because of its leading demand role.  The Wollongong-Sydney-Newcastle corridor alone accounts for a third of the energy used on the east coast.

O’Farrell points out that the NSW Treasury forecast is double the impact claimed by the federal government – and he asserts that higher average incomes in Sydney mean that fewer households will benefit from the federal compensation arrangements.

Powering Australia conference

Federal Resources & Energy Minister Martin Ferguson will officially launch the 2011 edition of the Powering Australia yearbook at a conference to be held in Melbourne on 27-28 September.

The Powering Australia conference will feature papers on electricity technologies, energy efficiency services, research and development, skills needs, dynamic pricing, renewable energy, use of gas for generation, the future of black coal and prospects for nuclear power. It will also includes presentations on rising electricity prices, the proposed introduction of dynamic pricing and the rise of fuel poverty as a social issue.

Speakers will include Dr Bryan Hannegan, a vice-president of EPRI, Energetics director Jon Jutsen, AGL Energy’s Tim Nelson, Port Jackson Partners’ Edwin O’Young, Clare Petre, the NSW Energy & Water Ombudsman, Clean Energy Council CEO Matthew Warren, ERAA’s executive director Cameron O’Reilly and Susan Jeanes, CEO of the Australian Geothermal Energy Association.

The conference will be chaired by Keith Orchison.

Full details of the conference can be found at


A price slide

At a time when the federal government is driving towards adding a carbon tax to power prices, Australia has slid two places in an annual review of international tariffs for business.

On the ladder of 16 countries published by NUS Consulting, reviewing the supply of 1,000 kW with 450 hours use, a typical consumption of a medium-sized factory or a large commercial property, as at 1 June this year, and where the lower you are the better, Australia has shifted up two places to 12th.

NUS Consulting provides the comparisons in US cents per kilowatt hour – and its 2011 report shows that Australia’s charges have risen 15.7 per cent for this category of user over the past year.

At 10.02 cents per kWh, Australia is now more expensive than France (9.61), the US (9.48), South Africa (8.55) and Canada (7.98).

The most expensive on the NUS Consulting list are Italy (19.70), Germany (18.56), Spain, the new poster child for those urging greater renewable energy on us (15.37), Belgium (15.23) and Britain (15.10).
Sitting in the middle of this pack are Austria, the Netherlands, Portugal, Finland, Sweden and Poland, with prices ranging from 14.58 cents to 11.87c.

Most of the countries on the NUS Consulting list have reported substantial power price rises in the past year, with South Africa, where there are severe energy security issues, registering a whopping 27.8 per cent increase, losing it the lowest ranking to Canada. The Canadian federal government has just won an election while eschewing a move towards a carbon tax.

Others with big rises are Germany (24.8 per cent), Britain (24.5 per cent) and Poland (21 per cent).

Australian power prices are estimated by regulators and others here to have risen by 30 per cent in the past three years and are forecast to go up by as much again in the next three years before the carbon tax is factored in.

The International Energy Agency’s 2008 world electricity price list for the OECD, the latest available, has Australian industrial power prices seventh cheapest out of 25 and residential prices fourth cheapest, but the data are well out of date.

Scammers alert

Ergon Energy, which provides distribution services to 97 per cent of Queensland, is warning customers in the State’s north to be aware of scammers working the region trying to sell a “power saving” device and threatening householders with disconnection if they don’t buy it.

The government-owned distributor said the criminals were posing as Ergon Energy agents. They have been offering a bogus $1,200 upgrade to electrical switchboards for $450 cash.

Meanwhile ETSA Utilities in South Australia is offering a $20,000 reward for information leading to the capture of copper thieves following seven sub-station break-ins since May.

Unique LNG position

Federal Resources & Energy Minister Martin Ferguson says Australia is moving in to a unique position among the world’s LNG producers: it is the only country with three production modes – conventional offshore gas with onshore LNG production, offshore floating LNG production and coal seam gas-based production.

Ferguson, visiting Tokyo in mid-July, said he expected Australian LNG exports to top 50 million tonnes a year within five, with agreements to supply 30Mt a year to Japan in play. Last year this country exported 18Mt, with 13Mt going to Japan.

In the pipeline

Federal Climate Change Minister Greg Combet has revealed that the Gillard government is in discussions with the South Australian government about support for construction of 150 kilometre spur line off the Moomba gas delivery system if a new power plant has to be built to replace brown coal generation based on Leigh Creek in the State’s west.
Alinta Energy’s Playford plant is touted for early closure under the federal government’s carbon direct action plan and the SA Government is pushing for Canberra to part-fund a $150 million pipeline to feed a $500 million gas-fired generator to replace Playford.

Sticking to message

Taking advantage of attending the opening of Acciona’s 46MW Gunning wind farm 70 kilometres from Canberra on 20 July, Prime Minister Julia Gillard, speaking to television cameras with wind turbines behind her, managed to get “clean energy future” or “clean energy” 12 times in to eight sentences, a salute to the message directions she and her ministers are receiving from Labor focus groups.

In a radio interview with ABC Riverina, she went on to pledge that 40 per cent of Australia’s power supply in 2050 would be renewable. There are two implications of this promise: based on federal government projections on energy resources for the next two decades, development of renewable energy between 2030 and 2050 will need to be treble what it is expected to be between now and 2030 – and, with a ban on nuclear, 60 per cent of electricity supply would be from fossil fuels.

Power of choice

At the behest of federal, State and Territory ministers, the Australian Energy Market Commission has launched an inquiry in to steps to give consumers options in the way they use electricity. Submissions are due by 26 August with a final report proposed for September next year.

The report’s focus is on the 28 per cent of consumption by residential customers.

The AEMC, in its issues paper, says there is some evidence that average energy consumption by households may be falling – at least in some States. In NSW, it has fallen five per cent over the five years to 2009-10.

The joker in the power pack remains peak demand. Maximum demand has grown by 3.5 per cent a year on the east coast since 2005 and the AEMC projects that it will rise by a further 2.6 per cent over this decade – compared with a rise in energy demand of 2.1 per cent a year to 2020.

As the commission points out, higher peak demand feeds through to more investment in generation and networks (in addition to the outlays needed to replace ageing assets). The paradox for consumers is that the fixed cost per unit of consumption rise with the growth of the gap between peak and average demand.

The present national electricity price analysis suggests that residential power prices will be 30 per cent higher in 2012-13 than they were in 2009-10. By 2015, says, AEMC electricity bills will represent 2.5 per cent of average household budgets.

SA price hike

Household power bills in South Australia have risen by 10 per cent for 2011-12. The investor-owned company says residential users of 2MWh a year will pay about $65 more a year and those with consumption of 4MWh will pay about $120.  The rises follow the Australian Energy Regulator approving a doubling of investment in the ETSA network.

BlueGen promise

Cermaic Fuel Cells Limited Ceo Brendan Fow says that installing the company’s BlueGen fuel cell generators in only 200,000 Australian homes would could reduce greenhouse gas emissions by a cumulative 5.6 million tonnes by 2020.

Unlike solar panels, gas-fired fuel cells generate power constantly and, says Dow, each standard BlueGen unit can produce about double the average Australian household power needs each year, enabling host homes to sell excess production to the grid.

Dow says that, unlike rooftop solar systems, his company’s units do not need government subsidies or premium feed-in tariffs. “Unlike many large-scale renewable energy projects, the government does not need to underwrite development. Home-owners and businesses will buy the units to generate a commercial payback if retailers pay them a reasonable rate for the electricity – which would be equal to the standard retail rate of about 20 cents per kilowatt hour.”

The federal, State and Territory governments do not mandate a feed-in tariff for fuel cells at present.

The BlueGen technology came out of CSIRO research and the company is now operating in Germany, Britain, Holland, Switzerland, Japan, the US and Italy while struggling to make its mark in Australia.

Half-billion blow

The Australian Energy Regulator has imposed a $564 million cut – a reduction of 39 per cent -- on the budgets of the Victorian distribution businesses for the second stage of their roll-out of smart meters.

The investor-owned businesses had sought approval to recover a further $1.24 billion in costs for the period  2012 to 2015 after receiving approval to spend $1.08 billion for the initial two-year period of the vanguard introduction of smart meters in Australia – but the AER has ruled in a draft determination that they should get only $760 million.

The regulator will make a final decision in October.

The Baillieu government in Victoria, which inherited the roll-out from the Labor government, has called in consultants Deloitte to analyse the program. State Energy Minister Michael O’Brien says a decision on the program’s future will be made when the government receives the Deloitte report.

To date 700,000 meters have been installed in Victorian homes out of a total proposed 2.5 million roll-out. The cost of the roll-out, however, is smeared across all residential bills and currently amounts to an extra $6 per month.

The AER decision has led to a fresh outbreak of negative publicity for the networks – the main tabloid newspaper said the regulator had “stopped a rip-off.”  St Vincent de Paul spokesman Gavin Duffy said the finding was “brilliant” for customers. “It’s good that the AER has knee-capped the distributors.”

Smart meters are seen by the electricity supply industry as a critical element in enabling the seemingly-inexorable rise of peak demand in households to be tackled.

Half-billion spend

Government-owned electricity distrubtor Energex has spent $550 million augmenting the Gold Coast power delivery system in the past five years, but a slow down in demand has seen $67 million in new asset outlays for the area put on hold.

Queensland Energy Minister Stephen Robertson has told State Parliament that domestic energy demand growth continues, but there has been a reduction in growth for industrial and commercial businesses since the global financial crisis began.

The project delay in the area between Burleigh and the NSW border will need to be watched against continuing increases in peak demand.

The sub-region has 100,000 residents – almost a fifth of the Gold Coast population -- and one of the highest penetrations of air-conditioners in Australia, almost three-quarters of homes having at least one cooler and thousands having three or more. Almost half the air-conditioners on the Gold Coast are located there. Its population is forecast to rise to as much as 156,000 people by the middle of the next decade.

The area also has hospitals, nursing homes, schools, shopping centres, an airport and thousands of tourist facilities – and just one sub-station to deliver its power needs.

Energex has prepared a capital works program totalling more than $1.3 billion for south-eastern Queensland for 2011-12. Part of the capex pressure flows from the need to replace aged assets as well as the well-recognised issue of population growth; many of Energex’s assets in the area were constructed during the 1960s and then during the 1980s boom.

Going electric

Only 23 per cent of homes in south-east Queensland had air-conditioning in 1999 and by 2009 number exceeded 72 per cent and almost half of them had two or more coolers.

Data prepared by Energex shows that 98 per cent of SEQ homes had at least one personal computer in 2009 compared with 48 per cent in 1999 – and average homes now have three television sets compared with one per home a decade ago. A quarter of today’s TVs are also high energy users.
Half of modern SEQ homes have a dishwasher against 31 per cent in 1999 and 97 per cent have a microwave owven versus 72 per cent in 1999 and just 30 per cent in 1989.

Go nuclear, engineers told

Merv Linday, president of Engineers Australia, in an editorial in the 80,000-strong peak engineering body’s magazine, says his profession must shoulder some of the blame for the “ignorance” in this country that prevents nuclear power even being considered as an option for electricity supply in a low-carbon environment.

The public debate, he says, is characterised by fear, misinformation, mistrust and a lack of understanding.”

Engineers Australia officially neither supports nor opposes nuclear power. The approved policy says; “There are too many unresolved questions and more informed debate is necessary to establish answers.”

Linday argues: “Engineers don’t abandon technology when a problem is identified; they fix it.”  He says that it has yet to be demonstrated that any renewable option can affordably solve the world’s power demand, especially for baseload energy.

He says most engineers in Australia support nuclear power as a likely future option. “We have the expertise to deliver rationale to the nuclear debate (and) we therefore need to actively participate in it.”

The nuclear power lobby in Australia argues that construction of one 1,600MW reactor each year from 2020 would produce a fleet of 30 by 2050, mainly on the east coast, and generate 50 per cent of the NEM’s requirements without emissions and at cost-effective prices.

Energy & Utility conference

Speaking to the commercial “Energy & Utility Summit” conference in Sydney in late July, Climate Institute chief executive John Connor claimed that a strong green energy program could stimulate 34,000 new jobs across Australia as a result of billions of dollars of investment in non-emitting power projects.

This is some 2,000 more than the institute claimed in earlier publicity could be achieved by 2030 through pursuing about 24,000MW of clean energy – more the double the predicted wind farm development under the renewable energy target.

Just over 19,000 of the jobs are identified as being in the construction area.

Another speaker, Geodynamics CEO Geoff Ward, told the conference that his company’s Cooper Basin project had the ultimate potential to supply up to 6,500MW of baseload power. Ward said Geodynamics hoped to commission at one megawatt pilot plant by the end of 2012.

Looking out to 2020 under the federal renewable energy target, Ward suggested that the scheme would see construction of 6,000MW of wind farms in addition to the 2,000MW already developed and argued that geothermal energy is best positioned to lift the RET output towards its target. He said there was a 2,300MW baseload opportunity for the geothermal sector
Ward welcomed the federal government’s “clean energy future” package as offering substantial support over the short, medium and long term to investment in cost-effective renewable energy supply.

The Clean Energy Council CEO, Matthew Warren, told the forum that boom and bust cycles were now commonplace for the Australian renewable energy sector because of a lack of co-ordinated policy strategies. Large-scale projects had stalled because of an unanticipated impact of small-scale technologies, he said.

“Continued regulatory uncertainty is lethal for the clean energy business,” he added.

Warren said the clean energy industry disagreed with views that grants-based schemes should be abandoned on introduction of a carbon price.

Renewable energy had been under-developed for more than 50 years in Australia, he added, and needed to be allowed to “catch up fast.”

Networks and power bills

The components of residential power bills in the Sydney metropolitan area have changed over a decade as end-user bills have more than doubled, Ausgrid CEO George Maltabarow told the “Energy & Utility Summit” conference.

Back in 2001, he said, the average bill for a household consuming seven megawatt hours a year was $720 and the essential components were networks 47 per cent, generation 40 per cent and retail 13 per cent. In 2006 the cost had risen to $950, with generation contributing 49 per cent, networks 39 per cent and retail 12 per cent. In this period prices increased by 22 per cent real (inflation-adjusted) due to wholesale energy increases.

This year, he said, the average bill was $1,600, with generation 33 per cent, carbon abatement costss 10 per cent, retail seven per cent and networks 50 per cent. “Between 2006 and 2011 prices increased by 59 per cent in real terms, largely due to the transmission and distribution cost increases and to the new costs of green schemes.”

Maltabarow says Ausgrid believes end-user prices will rise by 10 per cent each year from now until 2015-16. This, he argues, will be driven largely by generation because of the costs of gas for power stations, the replacement of plant built in the 1970s and the introduction of new, low-carbon plants.
Fifteen per cent of an estimated 65 to 75 per cent increase in end-user bills, he said, would comes from higher network charges.

Look long-term

Policymakers and regulators need to look to the long-run efficiency of electricity network systems, not short-term expediency, Transgrid CEO Peter McIntyre told the “Energy & Utility Summit” conference.

Reacting to the Australian Energy Regulator calling for a revised set of rules and criticism that network service providers are “gold-plating” their systems, McIntyre said the current regulatory framework was the result of extensive development by government over 15 years.  Stability is essential to investor confidence, he added, “but the reviews keep coming.”

He said regulators should not second-guess business needs. Their decisions needed to be made on the basis of getting incentives right, sound information and “clear, rational guiding principles.”

The risk of regulatory error needed to be managed, he added, and the regulators must be accountable for their actions.

Down in the Valley

Located a 70 minute drive from the outskirts of Melbourne, home to 75,000 people with a large vested interest in electricity supply, Victoria’s Latrobe Valley is now officially ground zero for the Gillard government decarbonisation policy: it is here that the bulk of coal-burning generation clsoures will occur this decade – and it is here that investor-owned generators with substantial debts are most exposed to the impact of a carbon price on lender attitudes.

Eighty-five per cent of Victoria’s electricity supply is located in the Valley and 20 per cent of employment in Latrobe City, the municipality, is directly or indirectly reliant on the coal mining and power generation industries.
The area has still to fully recover from the impact of the 1990s Victorian privatisation process which saw power station employment and related jobs slashed by 8,000 – and, say locals, widespread depression problems in the community and some suicides.

One of the disappointments for the Latrobe City council is that the Gillard government ignored the Garnaut review recommendation that $1 billion be allocated to assist the regions most impacted by the policy. The amount has been slashed to $200 million.

The Electrical Trades Union, whose Latrobe Valley stewards drew media attention in mid-July by opposing the carbon tax, is calling on the federal government to produced a “detailed jobs proposal” for the region and calling for the Latrobe Valley to be made a manufacturing hub for renewable energy, a most unlikely prospect.

The union says that closure of Hazelwood power station, one of two in the Valley expected to be shut down over time under the carbon plan, would cost 800 direct jobs and “indirect job losses would run in to the thousands.”
The ETU declared itself “disappointed” after a meeting with Climate Change Minister Greg Combet because he had no clear plan for job-replacement in the Valley in the wake of power station closures.

No promises

Alinta Energy, owners of the Playford power station at Port Augusta, South Australia, high on the list for closure under the federal carbon plan, says that it cannot make a commitment to build a replacement gas-fired plant at the town.

Alinta chief executive Jeff Dimery says location of a replacement plant has not been decided. He points out that, while Port Augusta has the advantage of existing electricity infrastructure, a gas pipeline would have to be built to link Cooper Basin supplies to the site.

The South Australian government says it has an assurance from Alinta that the nearby Northern power station will remain open when Playford shuts down. SA Energy Minister Michael O’Brien says he expects that there will be a “seamless transition” from coal to gas to maintain the State’s energy security.

Wind warning

The British National Grid has started to pay owners of 5,000MW of wind farms to switch off their turbines because of inability to math their energy output with existing demands in real time.  Consultants KPMG say this first happened in summer 2010 when Scottish Power was paid 180 pounds per megawatt hour to shut down two farms.

Given the earmarking by the British government of 112 billion pounds for new renewable energy development, say KPMG, it is critically important to ensure that this does not become a common occurrence.
They warn that failure to deal with the issue could lead to the ironic situation of more dependence on coal and gas plant, “clearly not the intention of the government’s green transition plan.”

KPMG also warn that, faced with a 60,000MW peak demand level and inevitable delays in the new nuclear build, the falling behind schedule of the roll-out of renewables threatens “serious problems” in security of supply.

Robust order book

Areva, the world’s largest atomic reactor manufacturer, says it has 43 billion euros worth of orders on its book in 2011, only 2.5 per cent less than at the end of last year and before the Fukushima crisis.

The company predicts that global nuclear capacity in 2030 will be 584,000MW, an 11 per cent reduction from its pre-Fukushima forecasts but 54 per cent higher than the fuel’s market share today. This scenario takes in closure of plants with capacity of 258,000MW – with the prospect that 159,000MW of this could be refurbished and relicensed – and 304,000MW of new development.

The China (and India) syndrome

China’s energy activities sometimes appear to be the biggest straw man in the rolling maul that is Australia carbon tax debate.

Those opposed to what the Gillard government plans argue that abatement achieved here will not do anything to avert global warming because China’s emissions – and those of other developing nations and the US – will continue to rise, while those seeking to bolster the government’s activities point to some of the world’s largest investments in renewable energy in China.

In a blistering condemnation of the government’s carbon sales pitch, noted Queensland academic and political commentator Ross Fitzgerald wrote in The Australian on 30 July: “Gillard continues to infer that China is reducing its emissions in order to support her claim that Australia needs to act so as not to be left behind. The Prime Minister makes these statements fully aware they are simply untrue.”

Recent overseas reviews of Asian power drive home the “behemoth” impact of China and India, when their electricity plans are taken together.
While both China and India are strong in hydro and wind power development, the latest review by international consultants Frost & Sullivan delivers this key message: the two countries accounted for 43.8 per cent of global coal-fired generation last year and, on present investment proposals, will account for 57 per cent in 2030.

Even with major expansions of their nuclear and renewables generation, the consultants point out, coal will still account for 34 per cent of their (greatly expanded) electricity production in 2030. China’s dependence on coal-fired power is forecast to trend down from 73 per cent today to 67 per cent by the end of the decade.

However, China’s national carbon emissions are forecast to rise from 7.5 billion tonnes annually now to at least 9.7 billion tonnes a year in 2030, allowing for stringent pursuit of its abatement policies.

Environmentalists, however, are appalled that a major part of the Chinese plan is to pursue massive extra use of hydro-power to supplant coal. There are also international implications for the major Mekong and Brahmaputra rivers if the plans go ahead.

This decade’s hydro plans alone total 140,000MW of new capacity – equal to seven new Three Gorges projects producing enough electricity to power France. Longer-term plans would see China double its hydro capacity to 450,000MW – nine times Australia’s total power capacity – by 2030.

In recognition of its continuing large-scale use of coal, China appears to be signalling a heightened interest in carbon capture and sequestration.

Sinologists have seized on a change in emphasis by the Climate Change Minister Xie Zhenhua, who told a Beijing meeting on 27 July that the government supports “jieneng jiantan” – energy efficiency and carbon reduction – after having used “jieneng jianpah” (energy efficiency and pollution reduction) in the past.

Xie said the government is studying CCS closely.


I have mixed feelings about the Greens having pushed the federal government  via the multi-party (but not Coalition) climate change committee to engage the Australian Energy Market Operator in an investigation of 100 per cent renewable electricity supply.

On the one side, AEMO, which manages the east coast market delivering wholesale power to 19 million customers, has more than enough serious work on its hands. On the other, having a professional, independent organisation debunk the 100 per cent green power push – as it surely will – is a good thing.

AEMO at least does not need reminding that electricity policy must align economic, social and development goals with environmental ones – and that security of cost-effective, reliable supply is the paramount objective.

As I write this, KPMG has released a review of the British electricity supply system warning that the huge outlay in renewable energy combined with delays in delivering new nuclear power is likely to see UK electricity and gas bills almost quadrupling in 10 years, “effectively moving many households in to fuel poverty.”

The consultants comment: “We all agree that these (abatement) goals must be achieved, but no-one has asked the question:is the current ‘green transition’ scenario economically possible?”

Here in Australia, the real job of planning a more diverse, cleaner, secure and reliable generation system for the period between now and 2030 with a lower environmental footprint requires leaving perceptions of power Nirvana to the fringe-dwellers.

One of the small army camped in Nirvana – calling himself  “Anton” – posted a response to a sensible commentary on prospects for nuclear energy on the ABC’s The Drum website the other day wanting us to know that he is “really impressed” with the $1.2 billion Chinchilla solar farm project  that is going to be subsidised to the tune of $464 million by federal taxpayers and still more by those living in Queenland as their government adds another $75 million.

“Anton” would like to see a huge Chinchilla-style solar farm replace the NSW Eraring power station – which provides a tenth of east coast electricity. “We will only need 34 of these plants to replace Eraring,” he wrote, “and, at an all-up cost of $31 billion, that’s not too difficult.

To appreciate how truly mad this proposition is, you need to know that you can build 15,000MW of nuclear power for about $40 billion – Eraring has 2,640MW capacity – or about 20,000MW of baseload gas plant.

But “Anton” is far from alone – and one wonders if some like him have the Prime Minister’s attention?

Their bible is the Zero Carbon Australia proposal, which argues that converting the national (east coast plus Western Australia plus Northern Territory) power system to renewables can be achieved for $370 billion, including spending $90 billion on the transmission system.

A critique of the proposal undertaken when it was published last year by Martin Nicholson and Peter Lang retorts that it significantly underestimates the cost, the capabilities of new renewable technologies and the time scale.

They claim that a capital cost of more than $1,700 billion is more realistic and it could be a lot higher.

They assert that wholseale electricity costs would be about 10 times the current values at $500 per megawatt hour, not the $120/MWh claimed.

In understanding this point, you need to bear in mind that the wholesale price makes up half the final user bill – so what the green plan would deliver is electricity about three to four times more expensive than it was in 2008 before one takes in to account the impact of the concept on network charges.

With the carbon price added to the current renewable energy target and rising network costs, we are at present en route to 2015 end-user bills being about double what they were in 2008. And we know how Australians feel about this.

One of the big flaws Nicholson and Lang see is that the green proposal under-estimates the back-up generation capacity needed for wind and solar by more than 60,000 megawatts – which is higher than the total national capacity today.

They also point out that the magic bullet in the go-with-green concept is a belief that Australians demand for power can be clawed back by almost half.

As well, of course, the Zero Carbon concept eschews anything to do with such naughty ideas as large-scale use of nuclear power or widespread conversion of household power systems to using gas-fired fuel cells. Perish the thought.

The Zero Carbon people, by the way, were arguing a year ago that we could achieve this huge make-over by 2020. 

The Greens since have been pushing the idea that 2040 might be a bit more realistic, starting, argues their NSW wing, with closing down Liddell power station, a key part of the New South Wales power system, and replacing it with solar farms.

As NSW is en route to seeing its system energy needs rise from about 78,000 gigawatt hours a year today to about 91,000 GWh in 2020, with substantial issues to be faced about whether to use coal or gas to build the next baseload tranche to meet the supply gap, the idea of junking an existing large generator for a new age solar system may not appeal too much to the electorate (which found little appeal in the Greens last March as they hurled the ALP from office).

Lost in translation here is the level of carbon price that would be needed to drive this miraculous transformation of our electricity system.

As I understand the modelling that’s around in Australia at the moment, just to deliver Ross Garnaut’s mooted target of a 25 per cent cut (below 2000 levels) in emissions by 2020 and 80 per cent by 2050 would require an opening carbon price around $50 per tonne (double the price that is causing Gillard so much trouble), moving towards $100 a tonne by 2030 and north of $200 a tonne by mid-century.

This concept would see the coal sector in its present form thrown out of the mix by 2030 – and it is way south of what the multi-party committee wants AEMO to consider.

Which raises the question of how the Prime Minister can simultaneously give her nod to having the great green make-over officially investigated and travel to the Hunter Valley and other coal regions to assure the locals that they have nothing to fear?

It also raises the question anew of just how far the Prime Minister feels the need to bend her knee to Bob Brown & Co to cling to office?

Keith Orchison
1 August 2011

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