South Australia will use a meeting of energy ministers next week to win backing for a multimillion-dollar plan linking the SA power market to the national grid that could prevent a recurrence of wild power price spikes in the state last month.
But energy experts are calling for other cheaper options to be considered first and the move could be opposed by fossil-fuel generators which profit from high prices when renewable power falls short.
SA Energy minister Tom Koutsantonis told The Australian Financial Review that at an urgent meeting of the Council of Australian Governments energy ministers on August 19 he would push for “a truly national electricity market with greater interconnection that would allow clean, renewable energy to be sold into other states to help those states and the nation meet renewable energy targets”.
One of the causes of SA power price spikes was wind generators that supply half the state’s power were becalmed at a time when an existing cable connecting SA with abundant power in Victoria was out of action for an incremental $65 million upgrade.
“In reality what we have in Australia is a series of state-based markets with limited interconnection between them, meaning energy cannot freely be traded between states,” Mr Koutsantonis said.
“Victoria interconnects with three states – NSW, SA and Tasmania – which is why they have the cheapest prices on average. They can access cheap hydroelectricity from NSW and Tasmania and cheap wind power from South Australia. SA, Queensland and Tasmania, on the other hand, only interconnect with one other state each, which limits the markets and the generation these states can tap into.”
Transmission firm Transgrid recently announced plans to build a $500 million interconnection cable from NSW to SA but any proposal would require the Australian Energy Regulator to certify that it represents an efficient way of solving the problem.
Base-load fossil-fuel generators that benefit from local power shortages opposed the recent interconnector upgrade but the AER approved it anyway.
Mark Henley, who is a consumer representative on the consultative AER Consumer Challenge Panel, cautioned that COAG should look at a range of options before building an interconnector. He said this could include increasing competition in the SA power market where AGL owns one very large gas plant. This was exacerbated by the high price of natural gas which makes it uneconomical for two smaller gas plants to operate as a back-up.
Mr Henley said COAG could also consider building more wind power in the west of SA near Ceduna or increased use of battery storage for times when the wind does not blow. “We have to be careful of picking a winner,” Mr Henley said.
Mr Koutsantonis also linked SA’s problems to a tight domestic gas market and said he would urge NSW and Victoria to end effective moratoriums on coal seam gas development.
He said gas, used as a back-up when the wind is not blowing, was “a crucial element in the shift towards a clean-energy economy as a transitional, low-carbon source of generation that can be used in tandem with renewables”.
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