October 7, 2016
Australia

$41bn blow from green power push

David Crowe, Political correspondent | The Australian | October 7, 2016 | www.theaustralian.com.au

Households are exposed to a $41 billion capital cost for state government promises to embrace renewable energy, according to new federal analysis that raises the stakes in a political clash over energy security at a meeting of ministers today.

The new estimate sharpens debate over the race to build more wind farms and solar power stations, amid a ferocious dispute over the role of renewable generators in last week’s statewide blackout across South Australia.

The Queensland and Victorian governments would need to build the equivalent of 4800 wind turbines to meet their renewable energy targets under the scenario, which contradicts state claims the extra cost would amount to only “cents per week” for consumers.

Federal Energy Minister Josh Frydenberg will today press the states to rethink their renewable targets at a meeting in Melbourne that will hear from regulators and scientists on ways to protect the national energy grid from a repeat of last week’s outage.

Putting premiers on notice to explain how they can fund their renewable targets, the federal Department of Environment and Energy estimates the states would need to build an extra 37,000 gigawatt hours of renewables by 2030 to deliver on their promises.

The capital cost of the extra renewable capacity would be least $14bn in Victoria and $27bn in Queensland, making up a total of $41bn, according to the preliminary estimate prepared in Canberra.

Mr Frydenberg told The Australian families needed to know how their state governments would “keep the lights on” when making the shift to renewable energy, saying they should accept the national target instead. “If the states are going to adopt these aggressive renewable energy targets, it’s incumbent upon them to explain how energy security will not be compromised and who is going to pay for it?” he said.

“Victorians for years have enjoyed some of the lowest energy prices across the country, which has created jobs, investment and growth. But now Victorians, like other Labor states, are being threatened with higher prices to fund ill-considered renewable energy targets where there is no practical and realistic road map to get there.”

The preliminary estimate from Mr Frydenberg’s department is based on data from the Australian Energy Market Operator and concludes that NSW, South Australia and Tasmania would not need any more generation to meet their targets.

Malcolm Turnbull and Mr Frydenberg have committed to a national renewable target of 33,000 gigawatt hours – or 23.5 per cent of the country’s electricity generation – from renewable sources by 2020, roughly doubling the energy from those sources last year.

Renewable targets have been notoriously difficult to cost, with ACIL Allen Consulting last year estimating it could require $65bn to reach Bill Shorten’s national target of 50 per cent by 2050, only to concede later it was a “back of the envelope” calculation.

The ACT government estimates householders will pay $286 a year to reach its target of 100 per cent renewables by 2020, but Victorian Energy Minister Lily D’Ambrosio said in June that consumers would pay only “cents per week” for that state’s additional target.

Green energy advocates insist the cost of building wind turbines will fall and rooftop solar panels will keep being installed to bring down capital costs, while sometimes criticising standard economic assumptions that all capital costs are passed on to households and business customers.

The outage across South Australia last week has focused attention on energy security and intensified the dispute over the costs and risks from speed with which the states are shifting to renewable energy. The first AEMO analysis of the blackout found it was due to a storm that caused short-circuits along three major transmission lines, which were followed by a collapse in output from six wind farms and an overload of the interconnector supplying power from Victoria.

Mr Frydenberg is gaining strong support from NSW counterpart Anthony Roberts. “If jurisdictions go it alone on energy policy, they must recognise the potential impacts, which range from security of supply to the increased cost of supplying electricity, which may also impact other states and territories,” he said. “That’s why NSW believes we must take a national approach and ensure we have a smooth transition to renewable energy.”

Tasmania Energy Minister Matthew Groom warned against a retreat from a transition to renewable energy but urged a national approach on achieving the goal.

Experts counter Canberra’s attacks on states such as Victoria and Queensland by arguing that the Prime Minister has signed up to the Paris agreement on carbon emission reductions without revealing new measures, or extra finance for the government’s Direct Action policy, to reach the target.

Frontier Economics chief Danny Price, an analyst of carbon pricing schemes, said: “In that vacuum, the states are going ahead with policies they think are needed to reach the Paris agreement, and I’ve got some sympathy for that.

“The longer the Turnbull government delays action, the more valid those state arguments look.”

Victorian Premier Daniel Andrews is promising to deliver 40 per cent of power from renewables by 2025; Queensland Premier Annastacia Palaszczuk has set a target of 50 per cent by 2030.

South Australian Premier Jay Weatherill conceded yesterday his 50 per cent renewable target was “aspirational” and the practical work was done by federal government policy.

Wind power was supplying half of South Australia’s electricity in the hours before last week’s storm. While the six wind farms stopped generating after the storm brought down power lines, the state’s gas-fired power sources kept going.

The agenda for today’s meeting, seen by The Australian last night, includes a presentation by AEMO officials on the South Australian blackout as well as a briefing by AusNet chief executive Nino Ficca on the standards of the nation’s transmission infrastructure, given the critical part played by transmission faults in last week’s storm.

CSIRO officials will tell ministers of the latest developments in battery storage, while the Australian Energy Market Commission will brief on energy security, and outline the challenges of implementing differing state and federal targets for renewable energy.