Coolibah Commentary

Issue 194, June 2021

With this month we will close what has been another turbulent financial year for Australia’s energy sector and enter one in which there will be a federal election, a thought that will do nothing to soothe supplier investor nerves and will leave more than a few on the consumer end, like all major manufacturers, once more on edge. This is also a period when the final work of the Energy Security Board to offer a strategy for the National Energy Market from 2025 will land in ministerial laps. The outcome of May’s Upper Hunter State by-election in New South Wales, and its fall-out for the Labor party, is an example of why energy politics is an enduring worry for politicians s well as other stakeholders. And then, of course, the 2021-22 financial year includes the next UN climate change summit in Glasgow, with activists working flat out to ensure Australia is front-and-centre in that melee – as illustrated by local reaction to the International Energy Agency’s “net-zero plan” report released in May. All in all, looking forward, what could possible go wrong………..


“ The energy transition is happening faster than anyone expected” – Ross Edwards, EnergyAustralia’s head of trading and wholesale energy, speaking at the Australian Energy Week conference in Melbourne at the end of May.

“Australia is experiencing the fastest and technically most challenging energy transition globally” – Alex Wonhas, chief systems design officer, Australian Energy Market Operator, at Energy Week.

“The predicted ‘energy future’ is no longer in the future; it is here and now” – Jon Briskin, head of retail, Origin Energy.

“About 10,000 megawatts of connected or commissioned renewable projects (in the NEM grid) are not catered for by the current transmission grid” – Gordon Wymer, Snowy Hydro chief commercial officer, speaking at the Energy Week conference.

“An unco-ordinated approach (to NEM development) will lead to unco-ordinated investment and higher prices and reliability risks” – federal Energy Minister Angus Taylor, telling the Energy Week audience that the speed and scale of growth in variable renewables is causing “disruption on a level never before seen.”

Managing headwinds

Papers presented at the Australian Energy Week conference in Melbourne in the last week of May served to reinforce the stricture advanced by the Energy Security Board in its post-2025 market design paper, released at the end of April and now open to stakeholder input ahead of its final presentation to federal, State and Territory governments.

“Managed well, Australia will benefit from a secure and reliable energy future,” the ESB paper said. “Managed poorly, our energy future will be less secure, more unreliable and potentially very costly.”

This is pretty well the synthesis of papers presented at Energy Week, with bold views of current developments and future prospects vying with rumblings about the hazards and risks now confronting the east coast market in particular.

Underlying the debate is the general agreement that change affecting the NEM is going faster than almost anyone anticipated. Whether this is good or bad depends on the mindset of stakeholders – with a warning running through Energy Week discussions (bearing in mind that at least a third of participants were doing so via watching proceedings over the Internet because of the latest Melbourne Covid outbreak) that there is now a serious question mark over the future of the NEM because of various jurisdictions increasingly going it alone in pursuit of greater renewable energy.

The situation is “absolutely staggering,” Alex Wonhas, chief system design officer of the Australian Energy Market Operator, told the conference. “Australia is undergoing the fastest transition of any energy system in the world.”

To which Christine Corbett, AGL chief customer officer, added that two years ago “no-one could have anticipated” that the amount of change then apparent was “going to accelerate so much faster” and that “the headwinds we saw on the horizon would be here much faster.”

She said AGL “always believed” customer demand, community expectations and technology advances would direct the pace of the NEM transition “but, over the past 12 months, the rate of change in each of these areas has accelerated.”

A salutary warning for those on the sunny side of the debate came via an Energy Week address by Snowy Hydro chief operating officer Gordon Wymer, who told attendees that the Australian Energy Market Operator’s forecasts for NEM reliability are based on “averages” in which demand is expected to strain supply once in every 10 years. “The thing about loss of load – blackouts – is that it doesn’t happen around averages, it happens when there is system stress and that is hard to model,” Wymer said.

Another caution came from the Clean Energy Council, whose CEO, Kane Thornton, pointed to a CEC survey in which renewables investors identified problems with connection to the grid and “unhelpful government intervention” as the two most significant hurdles to NEM development. “If Australia is to ensure effective management of the energy system transition, confidence needs to be restored in the role of governments to work collaboratively and to focus on clear market signals,” he added.

Big link

Work is likely to begin on the largest interconnector in the NEM before the end of the year, targeting commissioning of EnergyConnect between New South Wales and South Australia by 2023.

A critical decision on pursuing the project came at the end of May from TransGrid, which will work with Electranet of South Australia to deliver the $2.28 billion development, after the Australian Energy Regular approved the capital outlay.

TransGrid says it will spend $1.843 billion to construct the line from Wagga Wagga to the SA border.

Electranet’s final investment decision is pending.

The interconnector, described as the most significant investment in high voltage electricity infrastructure of the past 20 years, is crucial to enabling the renewable energy zone proposed by the Berejiklian government for south-west NSW – intended to be home to almost 5,000 megawatts of wind and solar capacity.

TransGrid CEO Paul Italiano has told media that EnergyConnect is “a transformational energy project” that will help accelerate the NEM’s transition to a lower-emissions market.

Energy Networks Australia CEO Andrew Dillon says the “much-needed interconnector has only been made possible by significant investment support from the Clean Energy Finance Corporation, enabling TransGrid to manage financeability issues that threatened its capacity to proceed.”

He adds: “If the regulatory regime was delivering reasonable returns for major projects like this, CEFC support wouldn’t have been necessary.” The arrangement is the largest CEFC has made since being set up by the federal government a decade ago.

The association’s concerns have been underscored by comments from Spark Infrastructure, owners of 15 per cent of TransGrid. CEO Rick Francis has told media he is worried about funding for other transmission projects.

The Clean Energy Council adds that a lack of access to capital funds for transmission investment is “one of the most critical challenges facing the energy system,” declaring that the situation is “stifling generation investment, constraining exiting generation and increasing supply security and reliability risks.”

Clare Savage, AER chair, responds that consumers ultimately pay for big infrastructure projects and it is her organization’s job to ensure that development costs are efficient.

The divide

Kerry Schott, chair of the Energy Security Board, believes that the divide between the jurisdictions responsible for the east coast electricity market is “not quite as deep as people think.”

In a Q&A panel convened by Quest Events as part of its pre-conference promotion of Australian Energy Week, Schott said: “All States and Territories are united in their goal of net-zero (emissions) by 2050 – and this applies across the NEM, although some States are more aspirational in their pathways to get there.”

In an earlier interview, Schott told a Web newsletter: “We’re making progress. I think the fact that we’ve now got this far is testament that some things are working.”

In this interview, she also said: “Everyone needs to be really clear that the commercial viability of coal-fired is under immense threat. Not only are they getting old and less reliable, and near the end of their technical lives, they’re also under increasing commercial pressure.

“These plants are not going to stay around for any number of reasons, but the main one is that they are going to be losing money.”


The national inventory of carbon emissions, in data for the calendar year 2020 released at May’s end, reports they fell 26.1 million tonnes compared with 2019, driven down in part by the impact of the pandemic on transport activity.

The transport reduction contributed 12.1 million tonnes.

However federal Energy Minister Angus Taylor is keen to focus attention on the ongoing rise in renewable energy investment, describing it as “breakneck.”

Electricity generation, he adds, saw emissions drop by 8.7 millions (or 4.9 per cent) in 2020 relative to 2019 and totalled 40.56 million tonnes. (They were almost 54 Mt at their peak in 2008.)

The International Energy Agency, in its May net-zero “pathway” report urged countries like Australia to have zero-emissions electricity supply by 2035.

Overall, Taylor says, emissions in Australia were now at the lowest level since the national inventory was launched with 1990 data.

Taylor says they are now 20.1 per cent below 2005 levels – and “well on their way” to meeting Australia’s 26 to 28 per cent reduction pledged under the Paris agreement.

Over the past two calendar years, he adds, national emissions fell 639 million tonnes – of which 499 million was achieved in 2020.

Australia, with 0.33 per cent of the world’s population, emits 1.2 per cent of global emissions. The latest Lowy Institute climate poll shows that 55 per cent of 3,300 Australian respondents want the federal government’s foremost priority for energy policy to be reducing emissions, eight per cent more than in a similar poll in 2019. By comparison, 32 per cent want the top priority to be chasing the lowest possible energy prices.

Taylor points out that production of exports for global markets generates 39.1 per cent of national emissions – and the value of these exports has increased by $110 billion since 2013.

Clear-thinking call

The Australian Industry Group is calling for “clear thinking and clear messages” about the speed of the power sector’s transition to net zero emissions.

In a statement in the wake of the federal government’s decision to support a new gas generation plant at Kurri Kurri in New South Wales, AiG chief executive Innes Willox said: “On paper the pace of change is modest, there is no imminent shortage of dispatchable resources and a new gas peaker looks like a licence to lose money. In reality the rapid growth of renewable generation is transforming the power market, coal-fired power stations are likely to retire much faster than once envisaged and gas peakers have much better prospects.”

He added: “Gas peakers, which are cheap to build but expensive to run, look like the best backup solution for rare extended droughts in renewable supply. That insurance role is both limited and vital.”

The AiG wants to see the federal government joining the States and Australia’s major economy peers in a firm 2050 goal to provide a clear pathway for planning by investors and the electricity market operator.

Willox declared: “The energy wars are still with us and, in the fog of war, it is easy to become confused about what is happening. A bit of clarity could produce a lot of calm.”

No more ad-hocery

Federal Energy Minister Angus Taylor used his Australian Energy Week opening address to apparently signal a change of government direction.

“The driving principle,” he told the conference in a virtual presentation, “is to make fit-for-purpose reforms to market design rather than ad hoc interventions made necessary by developments in the past.”

He said the post-2025 NEM design project is “a singular opportunity for governments to work cooperatively to meet the needs of energy consumers.”

He also used the address to warn of “challenges ahead,” saying “the speed and scale at which variable renewables are coming on line is causing disruption on a level we have never seen before.”

Taylor said intermittent generation is causing increasing volatility in the east coast wholesale power market, “making the grid more difficult to manage, creating volatile prices and undermining the retention of less flexible dispatchable capacity,” declaring that “we need balance.”

Fresh from the government decision to underwrite the construction of a gas generator at Kurri Kurri in the Hunter Valley, Taylor said: “We are acting decisively to fill dispatchability gaps in the NEM where necessary.”


In the wake of the catastrophic failure of a unit at the Callide power station in Queensland in late May, causing loss of service to some 470,000 consumers, Paul Broad, CEO of Snowy Hydro, told a Senate estimates committee hearing that the penetration of renewables in to the NEM is “unstoppable” but peaking plants are needed in the market to help manage the risk of such events.

The incident is the most severe in the NEM since the South Australian “black system” of September 2016.

With this as background, Broad told the Senate committee that the firming capacity needed to back up a market dependent on variable renewable energy “is on a scale hard to even comprehend.”

CS Energy, the Queensland government-owned operator of the Callide power station, says it may take a year to have the “destroyed” unit at the centre of the explosion and fire running again. Two other units affected by the blast are expected to be in operation much sooner.

CS Energy CEO Andrew Bills says speculation about the cause of the disaster is “unhelpful” and the event will be subjected to “a very thorough investigation.” He adds that the unit’s maintenance was “up to date” when the blast occurred after a routine overhaul program being completed last year – and a major overhaul undertaken in 2017.

Media speculation has begun that the cost of replacing the destroyed unit, which some estimate to be $200 million, may lead the Palaszczuk government in Queensland opt to close this part of Callide to help its ambitions for the State to have half its electricity coming from renewable energy by 2030.

The affected Callide C operation was commissioned in 2001 and was Australia’s first supercritical coal-fired power plant.

Nuclear views

Is there a sea change emerging in public attitudes to the use of nuclear power in Australia? Opinion poll outcomes suggest this may be the case.

One sign is a recent regional poll organized by New England MHR Barnaby Joyce – which he says returned 36 per cent support for renewable energy among his constituents and 34 per cent in favor of nuclear power.

More substantial is the outcome of the latest poll by the Lowy Institute. It found that nationally, in a survey of Australian attitudes to federal government climate change policies, 47 per cent of respondents favored the removal of the existing legislative ban on the use of nuclear power – with 51 per cent opposed.

The poll revealed one sharp split in attitudes: 61 per cent of male respondents favored removal but 62 per cent of women opposed it.

In Greater Sydney the move was supported by 50 per cent of respondents but in the rest of New South Wales it was opposed by 52 per cent.

In Greater Brisbane the split was 55/43 against and in Greater Melbourne 56/44.

The institute says that in urban Australia overall votes fell 50 per cent to opposition and 48 per cent to support.

The strongest support for nuclear energy in the poll was in the Northern Territory (78 per cent in favor) plus Western Australia (54 per cent in favor) – while the split was 49/47 in favor in South Australia.

Meanwhile, in a submission to the House of Representatives standing committee on environment and energy, which is conducting a new inquiry in to dispatchable energy generation and storage capacity needs, the Australian Nuclear Association has argued that establishing a framework now for introducing nuclear energy would enable reactors to be able to produce dispatchable supply from the 2030s.

It wants the legislative prohibitions removed to enable the technology to be considered on its merits for use in Australia.

The association argues: “Decarbonizing Australia’s electricity system will need an optimum economic mix of low-carbon technologies to work together. Because of their intrinsic variability, the overall system costs of adding large amounts of wind and solar are larger than the sum of their individual plant level costs.”

In another submission from ANLEC R&D, managing director Noel Simento tells the committee that the latest total systems cost modelling of the NEM shows the market in low emissions mode is most vulnerable in winter, not summer, in a grid dominated by variable renewable energy.

He adds that modelling indicates the economic penalty for a sub-optimal power generation fleet is about $20 billion a year for the net-zero by 2050 target.

“This cost penalty will be incurred if firm and dispatchable low emissions power generation technologies (eg fossil fuels plus CCS and/or nuclear) are not available to the NEM in 2050.”

Gas target

Frank Tudor, managing director of Jemena, is urging consideration of a renewable gas target, emulating the RET, to encourage the development in Australia of hydrogen and biomethane industries.

Speaking at Australian Energy Week, Tudor argued that decarbonizing the existing gas infrastructure will unnecessary construction of more for alternative technologies. “In the short term,” he added, “this will make the transition to a low-carbon future seamless.

Jemena believes a renewable gas target would enable up to nine petajoules of zero-carbon gas to be distributed in to its NSW distribution network by 2030.

Tudor added that pursuing this path would give confidence to the manufacturing sector, allowing it to continue operating while its supply chains are decarbonized.

Next 15 years

Matt Rennie, who has departed global consultants EY to set up a Queensland-based firm, Rennie Partners, offering advice for companies navigating the net-zero transition, says the next 15 years will be “a period of profound commercial risk and opportunity” for companies using and producing carbon.

Writing in a trade magazine, Rennie, who led EY’s energy advisory business for the past 10 years, says navigation of the transition will involve changes in almost every facet of their corporate structure and approach.

For utilities, Rennie adds, a low-carbon future will involve changes at all ends of supply chain. “The generation mix will alter, transmission architecture will change, distribution systems will become bi-directional, connected and integrated with new enabling and adjacent technology and retailing will become partnering.”

He says: “The question of who will win and who will lose is the exam question of the next three years.”

Last word

I suppose there must be people who came away from late May’s Australian Energy Week conference feeling upbeat about the energy scene, but I wasn’t one of them.

The conference, forced in to hiatus last year by the pandemic, took place this year in the shadow of the latest Covid crisis enveloping Melbourne.

The first two days attracted some 170 participants plus about 80 following proceedings via the Internet – but the last day (as another lockdown hung over Victoria) saw just a dozen physically in the energy policy forum I was chairing (with, organizers Quest Events tell me, another 80 attending virtually).

Despite the problems of dealing with Covid, the conference was an interesting exercise, and, in the light of what I had heard over the first two days, I was moved to pose to one of the two Q&A panels I moderated a rather jagged question: “What is the worst thing that can happen here?” – referring to the energy scene, of course, not the Covid threat.

The panel made up of serious, experienced players offered some interesting responses in an overall discussion that was animated and wide-ranging.

My own view is the “worst thing” would be a failure to manage electricity and gas supply efficiently in the “transition” leading to serious undermining of the national economy. This is a prospect that cannot be dismissed.

How potent is this particular risk? My opinion is that much of what has happened over the past decade, and is happening now, should not lead to a view that sunlit uplands lie in comfortable reach.

The critical points are whether southern States’ gas supply will be secure and affordable in the decade ahead and whether the NEM will be fit for purpose.

The debate over whether the east coast power grid is currently functioning efficiently in response to market forces – I am not Robinson Crusoe in suggesting that it isn’t – and whether the twists and turns of the “transition,” so many of them the product of political intervention in reaction to the perceived mood of the electorate, will enable it to become so during the decade ahead continues to rumble on.

In a break at Australian Energy Week in Melbourne’s cavernous Convention Centre, one of the attendees said to me: “Is it even possible to keep customers and investors satisfied with this NEM model that was created in a different era?”

Perhaps that is the most critical question.

Keith Orchison

1 June 2021