Coolibah Commentary

Issue 210, October 2022

As the sadness of September, with the passing of Queen Elizabeth, fades, October brings the need to re-establish focus on global and local energy issues of major importance. Next month will see the gabfest that is the CoP meetings on climate policy resume (in Egypt this time) but governments, including Australia’s, should have more on their minds in this area of activity as we move towards 2023 than rhetoric and gestures (the hallmark of CoP26 in Glasgow). As a real energy expert, Daniel Yergin, is saying, the so-called transition is proving far more difficult than many have thought. (It is currently made worse, of course, by the madness of Vladimir Putin’s war.) This insouciance is now risking economic setbacks and social and political turmoil. Yergin points to the failure of Germany in particular, and Europe in general, to pay serious heed to the relative immaturity of the variable renewable energy sector while closing down more secure forms of electricity supply and losing sight of the value of reliable gas supply.  Premature relegation of hydrocarbons-based power production without proper understanding of system imposts and supply reliability issues is costing the Europeans and the British dear — literally — and the political implications of this will play out over the rest of the decade. Australia still has time to get a better handle on its own situation, but not much time and the present portents are troubling. The fundamental lesson of global current events is that supply security must underpin change and trying to push the need for a long-term transition in power sources in to this decade must lead to problems in economies like America, Europe and Australia. To quote Yergin again, “it’s one thing to have a powerpoint presentation, it’s another to make this change really happen in the complicated world in which we live.”  He also emphasizes that a basic principle of energy security is diversification — a critical point clearly lost on governments here, federally and in the eastern States in particular. It shouldn’t need saying that putting our future electricity security in one basket is not prudent. In an alarming and risk-filled era, politicians overlook this at their communities’ peril.


“Bad energy policy makes everything worse” – commentary in New York Times.

“Forecast reliability gaps have emerged across NEM regions due to considerable coal and gas plant closures, along with insufficient new generation capacity commitments needed to offset higher electricity use” – Daniel Westerman, AEMO chief executive. “Without further investments, this will reduce generation supply and challenge the transmission network's capability to meet reliability standards and power system security needs."

“In the next decade, Australia will experience our first cluster of coal-generation retirements, at least five power stations totalling 8.3 gigawatts, equal to approximately 14 per cent of the NEM’s total capacity” – Westerman.

“Governments cannot afford to ignore AEMO’s warning about the urgent need to roll out new renewable energy generation to ease the transition away from aging, unreliable and emissions intensive coal and gas” – the Climate Council lobby group’s Greg Bourne.

“The reality is that the electricity market is facing serious risk of energy shortages as we transition from coal to renewables at a rapid rate, even faster than expected” – Brett Redman, CEO, Transgrid. “This is the critical decade for energy. The expansion of our grid is essential to underwrite energy security and mitigate the risk of significant blackouts.”

“Australia will have to invest in renewable energy and carbon capture and storage at unprecedented speed and scale in order for the economy to achieve net zero carbon emissions by 2050” – Reuters news agency reporting on new decarbonization modelling.

“We continue to have a firm view that around the clock dispatchable generation will be necessary for the national electricity market well into the future” – Trevor St Baker, investor in generation and green start-ups.

“We have a strong belief in the criticality and importance of gas in the energy mix” – Origin Energy CEO Frank Calabria after offloading the company’s development stake in the gas-rich Beetaloo basin.

“Origin will still receive up to 36.5 petajoules of gas per year from a successful Beetaloo development” – Australasian Centre for Corporate Responsibility.

Confidence slump

Energy Consumers Australia says there has been an “unprecedented collapse” in community confidence in the east coast electricity market this year.

A survey undertaken for ACA in August has found a nine per cent fall between June 2021 and June this year in consumers’ belief that the NEM is “delivering” for them – and fall from 62 per cent to 53 per cent in the respondents who feel they are getting value for money from the service.

There have been similar falls among gas users.

The latest survey also shows that belief among respondents that they are receiving the information they need to make decisions about energy services has dropped from 57 per cent in July to 51 per cent in August, the lowest it has been since 2018.

The lobby group’s CEO, Lynne Gallagher, says the poll outcome is “truly alarming,” adding that consumers “have very real concerns about the size of their energy bills now and in to the future.”

Picture of market

The Australian Energy Regulator has published its latest NEM wholesale market report for the April to June quarter this year. The regulator says, in its own summary:

• Coal-fired generation was plagued by outages and supply problems. Wind and solar generation were lower than expected while demand was high due to cold winter conditions.

• Gas-powered generation, and some hydro, had to fill the gap, pushing up already elevated gas prices influenced by record international prices.

• Fuel prices and fuel availability emerged as a major issue for coal and gas generators, while hydro power stations were managing water levels and environmental concerns.

• Gas supply was tight with less offers into the southern markets to preserve storage for winter.

• The need to cover high fuel costs, or to ration fuel or water levels, caused participants to offer their capacity at progressively higher prices.

• Record prices triggered protective price caps, multiple market interventions, and a never-before-seen market suspension of the entire NEM.

• High fuel costs are likely to continue as international coal and gas prices remain at historical highs.

• Generation closures, including the impending closure of Liddell power station in April 2023, and tight gas supply conditions, with a domestic gas supply shortfall projected for winter 2023, means that market conditions will remain challenging for some time.

In a commentary on the AEMO report, Brisbane-based consultants Rennie Partners say it “paints a sobering picture of a grid caught out by a confluence of unfavourable events all occurring together, just as its transition to clean energy is gaining momentum.”

And they note in their analysis that “the continued increases in utility-scale renewable output are not yet reducing market prices, primarily because they may not generally be available on a dispatchable basis during high demand periods”.

Step change

Consultant Matt Rennie is warning that a “step change” is needed in Australian electricity networks spending.

In an interview with the ABC in late September, Rennie pointed to two drivers: a move to greatly increase electrification of the economy and responses to the impact of climate change to make power grids more resilient.

“We know these two things are coming,” he said in the ABC interview. “There is no debate about them. The only question is when are they are coming.”

He asserts that energy regulators will need to “shake up their thinking to deal with a once-in-a-century grid transformation.”

The costs can’t be avoided, he adds, but regulators will be challenged to ensure the transition in electricity systems goes ahead while protecting consumers from wasteful spending.

Power nationally

The latest federal government report on national energy statistics shows that coal-fired generation across Australia fell by 25 per cent in 2020-21 from its peak in 2006-07 while gas-fired power production dropped to its lowest level in a decade.

The report says 2020-21 electricity generation countrywide consisted of 106,251 gigawatts from black coal plants, 34,060 GWh from brown coal, 49,783 GWh from gas plants, 4,662 GWh from diesel units, 15,200 GWh from hydro systems, 24,525 GWh from wind farms and 9,638 GWh from large-scale solar operations. Bio-energy plants contributed 3,346 GWh.

Estimated use of rooftop solar power nationally was 18,079 GWh.

Working towards

In a speech to the American Australian Association in New York in late September, federal Energy Minister Chris Bowen declared: “In Australia we’re working towards 82 per cent of our electricity coming from renewable energy by 2030,” pointing to the recent passage of national legislation that requires a 43 per cent reduction in carbon emissions (over 2005 levels) by the end of this decade.

In a later speech in Washington DC, Bowen cited advice on the size of the task ahead under government policy: for Australia to hit the 43 per cent emissions target, saying it would require installing 40 seven-megawatt wind turbines every month through to 2030.

“We should be honest about the size of the task and the possible impediments,” he told the DC audience. “We face a collective endeavour of almost unprecedented scale. We need to mine, move and manufacture immense volumes of material, energy and equipment.”

The year that was

The latest quarterly publication from Graeme Bethune’s EnergyQuest consultancy again shines a light on the large challenge for the NEM of shifting away from hydrocarbon-based generation.

The new EnergyQuarterly reports that electricity sent to the east coast grid in the 12 months to the end of June this year totalled 186,899 gigawatt hours. (This does not include the estimated use of rooftop solar: 17,548 GWh.) Of this, 124,162 GWh was provided by coal-fired plants in Victoria, New South Wales and Queensland – while gas plants contributed 12,827 GWh.

Wind and large solar farms delivered 34,042 GWh with hydro power providing 15,749 GWh.

The coal share of this supply was 7,107 GWh lower than in 2020-21 and the variable renewable power sent to the grid was 5,670 GWh higher than in the previous financial year.

EnergyQuarterly points out that NEM coal-based power production in the second quarter of this year was the lowest for this period in the life of the market, but still accounted for almost 60 per cent of supply.

The larger decline in coal-based generation over the past five years is apparent from the EnergyQuarterly records: in the financial year ending June 2017, coal plants contributed 150,848 GWh to the NEM grid; the 2021-22 outcome is almost 18 per cent lower.

In the two States where black coal generation is dominant, the report for 2021-22 shows that burning the fuel delivered 47,181 GWh of power to the NSW grid (out of 62,490 GWh) and 44,432 GWh to the Queensland system (out of 55,697 GWh sent from State plants).

In Victoria, brown coal generation delivered 32,549 GWh to the State system (out of a total of 43,405 GWh).

In the three States, the leading sub-markets of the NEM, wind and large-scale solar power contributed 25,828 GWh to the grid in the 2021-22 financial year.

Upbeat in Victoria

Ahead of the State election at the end of next month, the Victorian Labor government has published an upbeat report on renewable energy and its pursuit of decarbonization in the electricity sector.

The report says the State is well ahead of its emissions reduction target – achieving a “nation-leading” 30 per cent cuts below 2005 levels by 2020.

The government points to June 2022 data of 3,446 megawatts of installed rooftop solar capacity and 1,243 MW of large solar with almost 2,000 MW of solar and wind farm capacity under construction.

According to the latest EnergyQuarterly report, Victorian plants in the second quarter of this year sent 8,090 GWh of brown coal-fired electricity to the market grid along with 875 GWh from gas units.

The system also received 2,332 GWh from wind farms, 255 GWh from solar farms and 894 GWh of hydro power. Estimated use of rooftop solar power for the quarter was 562 GWh.

During the period Victorian generation exported 979 GWh to NSW and 197 GWh to South Australia while importing 197 GWh of hydro power from Tasmania.

More wind

The Queensland government has announced expenditure of $776 million of taxpayer funds through its Stanwell Corporation to build a 500 megawatt wind farm near Kingaroy.

Premier Annastacia Palaszczuk says “it’s investments like this that will ensure we deliver on net zero ambitions and our promise to make Queensland a global renewable energy superpower.”

She says there are 50 renewable energy projects now committed for development or in operation across the State.

Offshore wind

Lawyers Clayton Utz, in a new review of renewable energy developments, say wind farms offshore Australia are “set to lead the energy transition,” pointing to 25 announcements of projects under consideration.

The firm notes that more than 2,000 megawatts of the mooted developments would be sited within 100 kilometres of existing onshore power substations.

Turning up heat

The environmental movement has seized on the latest Australian Energy Market Operator commentary to urge governments to “deliver renewable energy and transmission projects as fast as possible.”

AEMO CEO Daniel Westerman is pointing to “at least 8,300 megawatts” of coal-fired generation closures in the next decade – 14 per cent of the NEM’s present plant capacity – and warning that, without adequate investment, South Australia, Victoria and New South Wales face “reliability gaps” between next year and 2026.

Westerman says: “The best way we can lower energy costs is to get more of the cheapest form of energy into the system, and for that we need three things urgently: more generation, more firming and more transmission.”

The Climate Council lobby group has responded by saying governments “can’t afford to ignore AEMO’s warnings” and declares that “now is the time to focus on speeding up the clean energy and transmission projects that are ready to go.”

The market operator’s new commentary has also fuelled concern from the Energy Users Association of Australia, a lobby group for large business consumers. CEO Andrew Richards told media in September the AEMO report underlines that the NEM transition is “going to be hard, expensive and full of risk.”

He added: “Consumers could be in for a bumpy ride so we need governments, peak regulatory bodies and the energy industry itself to step up and stay focussed on achieving net zero at least cost, not at any cost, while also maintaining system strength and reliability.”

Energy Networks Australia, representing transmission businesses, has chimed in to call for “fast-tracking critical projects across the east coast.”

One of its largest member companies, Transgrid, is warning that “delays in delivering transmission projects could lead to higher costs for power users and stall an urgent switch to renewable energy.” CEO Brett Redman says that consumer risks will continue until “we have a strong, flexible electricity network capable of safely delivering high volumes of renewable energy.”

Nuclear prospect

The possibility that Australia could access competitively-priced nuclear power before 2030 – providing the legislated ban on the technology can be lifted – has brightened, according to Mark Ho, Australian Nuclear Association president.

Ho, who is also a specialist manager at the Australian Nuclear Science & Technology Organisation, said in a media interview that the recent approval by the US government of small modular reactors for commercial use was an important development.

Earlier, in evidence to a Senate committee, Ho said Australia “could not afford to ignore the potential of nuclear power to reduce carbon emissions.” He added that “Australia must be able to use all low-carbon technologies, including nuclear power, to create a future energy mix that satisfies the energy trilemma of affordability, reliability and low-carbon sustainability.” 

Contradicting CSIRO

The Energy Policy Institute is strongly challenging CSIRO’s claims that wind and large solar power are the cheapest new generation technologies for Australia – and is calling for an urgent, in-depth review of the organisation’s GenCost22 findings.

In a paper published at the end of September, EPIA argues that there are “major deficiencies and omissions” in the CSIRO modelling, which is being widely cited by the media and politicians.

The EPIA paper has been written by David Carland, executive director of Australian Resources Development, a company that provides advice on energy and resources project structuring, financing and development.

It says: “Based on GenCost22, CSIRO’s major conclusion is ‘... that wind and solar are the cheapest source of electricity generation and storage in Australia, even when considering additional integration costs arising due to the variable output of renewables, such as energy storage and transmission.’ Based on this conclusion, policy makers could easily assume that the transition to low-carbon energy will lower the cost to consumers of a reliable electricity supply.”

But, Carland says, “there are a number of major unresolved issues over the estimated costs of integrating VRE technologies with the other non-renewable technologies in Australia’s future power system.”

And the paper claims that the faults in CSIRO’s work include “significant underestimation of the cost of integrating, or firming, VRE technologies to achieve a reliable system.”

Carland says his findings indicate that the cost of Australia moving to a predominantly renewables power system has been “materially underestimated.”

Target support

The Australian Energy Council, representing large suppliers, has thrown its “wholehearted support” behind the Albanese government’s legislated target of net zero emissions by 2050.

In a statement, AEC chief executive Sarah McNamara says the lobby group also supports “well-considered interim targets” on the path to mid-century.

McNamara adds that Australia achieving 43 per cent emissions reduction by 2030 requires sectors other than electricity supply to “begin their decarbonisation journey this decade.”

She says the electricity sector has reduced its emissions by 24.6 per cent since 2009.

Gas debate rolls on

The national argument about the future of natural gas development took more turns in the past month, notably because of a decision by one of the largest domestic suppliers, Origin Energy, to sell its stake in the controversial Beetaloo basin developments in the Northern Territory.

Nonetheless, Origin CEO Frank Calabria emphasizes that gas “remains a core part of our business” while talking up the company’s intentions to “grow cleaner energy and customer solutions (while) delivering reliable energy through the transition.”

The decision reverses an April company announcement that it planned to push on with drilling in the Beetaloo basin, 500 kilometres south-east of Darwin, which has been described as one of the largest untapped onshore gas prospects globally but is a magnet for anti-fossil fuel activism and still years from being in production.

Tony Wood, energy program director at the Grattan Institute, says the Origin decision “could be a sign of the gradually declining role of gas in Australia” – adding “however, if your measure is shutting down the fossil fuel industry, I wouldn’t be celebrating quite yet.”

Meanwhile Samantha McCulloch, new CEO of the Australian Petroleum Production & Exploration Association, a role she has shifted from the International Energy Agency to take up, says Beetaloo remains “a huge economic and energy security opportunity for the Northern Territory and Australia that could generate billions of dollars of revenue for governments in the next two decades.”

McCulloch adds that, without more natural gas development, Australia will risk both energy security and its decarbonisation targets. Gas, she says, is a reliable alternative to coal-fired generation and is “critical to firming renewable energy.”

Earlier, APPEA described the Victorian position of relying heavily on coal-fired electricity supply while having minimal onshore gas production because of a decade of development bans as “untenable.”

Last word

The twists and turns in the national discussion on a role for nuclear energy in Australia’s decarbonized future electricity supply are interesting, sometimes annoying (when those with closed minds on the topic mouth their well-worn mantras) and sometimes puzzling.

One in the latter bracket came up in September in an hour-long talk on an Australian Academy of Technology & Engineering webinar on “Getting serious about getting to zero” by former chief scientist Alan Finkel, who is now the special adviser to the federal government on low-emissions technology.

For a start Finkel didn’t give a mention to nuclear power in his long talk that ranged across the options of renewables, pumped hydro and storage, ammonia and, of course, hydrogen. In question time he was challenged “what about nuclear?” and got media headlines by responding dismissively.

He said, in short, that the technology suffers from no local “social licence” for it and being “too costly” – apart from being legislated against, reportedly adding: “Realistically, by the time you change the legislation, start investing, build the work force, find the right technology and go through all the regulatory hurdles… it’s hard to see any nuclear in Australia in less than 20 years"

Cue the media headline “Finkel shoots down nuclear option.”

What I find curious is that it is only a bit under 12 months since Finkel in a newspaper interview backed calls for a national debate about nuclear power, which he described as “stunningly good” for emissions-free energy generation. This followed another forum talk in which he said Australia should “use all the tools or resources available to us” to pursue net zero by 2050. He also described solar and wind as “resource-intensive and complex to use,” adding that they are “not nearly as electrically well-behaved as hydroelectricity and nuclear.”

What’s changed in 12 months, other than news from overseas promoting the take-up of small modular reactors and a Putin-caused European energy debacle?

My reaction is to ask why Australia would want to shut itself off from technology that in the nearish future could be important to pursuing net zero at the least cost and with the maximum prospect of energy supply security — handicapping this country at a time when other nations, including our competitors, will be taking it up?

The issue is not building a nuclear plant here tomorrow – it is that we should not cling to a thoroughly outmoded, politically-driven decision to legislate nuclear bans a long time ago.

As for the “social licence” aspect, Australia’s young people are indicating in increasing numbers that they are not opposed to the use here of nuclear energy while, for low-rent political gain in marginal seats, at least some of our political leaders continue to shy away from allowing us to take future advantage of important developments in the technology and engineering involved.

By the way, the agreement between Australia and the UK on low-emissions technologies specifically talks of co-operation on research and development of, among things, small modular reactors. This falls within the remit of the Australian special advisor on low emissions technologies.

Keith Orchison
28 September 2022