Just before last year’s federal elections, Jay Weatherill, the South Australian premier, was ruminating about what it would take to finally get attention paid to the nation’s looming energy crunch.
Would it be the closure of the brown coal-fired Hazelwood power station, which accounted for a fifth of Victoria’s power and a supplier to SA when the wind didn’t blow? Or perhaps the shutdown of the ageing Portland aluminium smelter – a huge consumer of electricity adjacent to his state?
“It may be those sorts of events that might precipitate that discussion,” Weatherill told Fairfax Media in his parliamentary office in Adelaide.
The Premier wasn’t to know that within months, a series of mishaps would thrust energy – and in particular, his state’s relative dependence on renewable sources such as wind and solar – into the spotlight.
The events included a massive September storm that spawned at least seven tornadoes and knocked out a key transmission line, triggering a “system black” power outage for all of SA. And just days before the tempest, Fairfax revealed Hazelwood’s French owner Engie would close the 1600-megawatt plant by April 2017, news that sent wholesale power prices surging.
Trenches are now being dug for what looms as a political battle that will probably last through 2017.
On one side lie the Turnbull government, fossil fuel suppliers and right-wing pundits, who say the priority has to be affordable and reliable power.
On the other, Labor and the Greens and clean-energy backers who argue ageing coal-fired power stations need to prepare for an orderly if not accelerated exit to meet Australia’s commitments agreed in the Paris climate treaty.
Josh Frydenberg, environment and energy minister, ended holidays early on Thursday to rail against states for curbing unconventional gas exploration, which also feeds into higher electricity prices. That’s especially true in SA where gas provides all the power that’s not from wind or the sun.
He took particular aim at Queensland, where the Labor government under Annastacia Palaszczuk is aiming for a 50 per cent share of renewable by 2030, up from 4.4 per cent in 2015.
“It’s going to dramatically send their prices up,” Frydenberg told Macquarie Radio on Thursday. “It will inevitably lead to a reduction in the amount of coal-fired power.”
Frydenberg’s Labor counterpart, Mark Butler, though, says the Coalition’s energy policy was “being dictated by the hard right of the party with the likes of Tony Abbott and Cory Bernardi”.
“The culture-war element starts to blind people to pretty clear policy,” he says, noting three-quarters of Australia’s fleet of power stations were operating beyond the end of their design life and needed to be replaced.
“The Turnbull government leaves a policy vacuum at the federal level, the states will fill the void,” he says.
Federal Labor remains committed to a 50 per cent renewable share by 2030, he said, noting the Turnbull government has no target beyond 2020 nor is a target among the terms of reference for its 2017 climate policy review. NSW Labor shares the party’s national goal.
For her part, Lily D’Ambrosio, Victoria’s energy minister, batted off criticism that her government’s policies caused Hazelwood to close.
“Victorians expect us to work together to take this action [on an orderly exit of coal-fired power] – but it seems like the Commonwealth is more interested in taking political pot shots,” D’Ambrosio told Fairfax.
“It’s time Josh Frydenberg showed some backbone and stood up to the extreme elements within the Liberal Party by supporting more renewable energy.”
Abbott, as if on cue, weighed into the renewables debate on Saturday, declaring that the Turnbull government’s “first move this year should be to introduce legislation to protect existing renewable generation but to remove all further mandatory use requirements”.
“Despite the reduction that my government secured to the renewable energy target, Australia is still supposed almost to double renewable energy supplies over the next four years,” he wrote in a News column. “If it goes ahead, it will be the death knell for the heavy industries of Whyalla and Port Pirie in South Australia and will almost certainly destroy the aluminium industry everywhere.”
Energy prices rise
What is certain is that energy bills are on the rise – although the causes are highly debated.
The closure of Hazelwood alone is likely to raise annual power bills by $30-$200 during the three years to 2018-19 across the eastern states that make up the National Electricity Market, the Australian Electricity Market Operator said late last year. That amounts to an increase of 2-10 per cent.
For NSW, a typical bill that in 2015-16 was $1403 before GST, will rise 9.8 per cent in 2016-17. This rise will slow to an average 3.9 per cent for the following two years, AEMO predicts.
In Victoria, a typical residential bill in 2015-16 was $1358 before GST, and can be expected to rise 0.7 per cent this year. Market offer prices should rise 8.4 per cent in 2017-18 but drop 1.3 per cent the following year, AEMO said.
Bruce Mountain, an energy economist with CME Australia, says rising energy prices will prompt more people to add solar panels and also batteries as prices continue to tumble – much faster than regulators predict.
Tesla’s new 13.5-kilowatt-hour Powerwall 2, costing about $8800 before installation, already offers a lower battery price than AEMO had predicted for 2040, he says
An average household in Adelaide, where power prices have doubled in the past eight years to be among the highest in Australia, would now be better off with panels and storage.
While panels alone typically slash demand for electricity from the grid by a third, adding a battery will reduce grid purchases by about 95 per cent, he said.
Dylan McConnell, a research fellow at the Melbourne Energy Institute, notes AEMO is predicting 15.5 gigawatts of coal-fired power plants will be shut by 2030. That’s about half of such stations and equivalent to 10 Hazelwoods.
Importantly, AEMO is betting 12GW of new gas-fired power will come on stream “assuming no alternative technologies come to fruition”, Mr McConnell said.
However, the open-cycle gas plants that can provide peaking power to complement variable suppliers such as wind and solar farms “face an existential threat from batteries”, he said.
The problem for gas is made worse by the current high price in Australia as supplies get exported, doubling cost for local consumers as international rather than domestic prices now apply.
“You know the price of wind in 25 years’ time but with gas, you don’t know the price six months out,” Mr McConnell said.
Matthew Warren, chief executive of the Australian Energy Council, which represents major generators and retailers, says it is unlikely Australia will see another coal-fired power station built “unless there are major technological developments”.
“From the industry’s perspective, the key is consistent and integrated, national energy and emission reduction policy,” Warren said.
“This is not about good guys versus bad guys, [but] about reducing emissions at the lowest cost without compromising reliability,” he said.
Without clear signals, investors won’t have the confidence to invest the billions needed to bring new, more efficient capacity online.
Bloomberg New Energy Finance underscored the scale of the challenge even meeting the 2020 Renewable Energy Target of supplying 33,000 gigawatt-hours from clean energy annually from 2020.
Last year, investment in large scale renewables under the RET bounced back from a meagre $US10 million in 2014 and 2015 after the Abbott government’s review of the sector threw it into a panic. In 2016, it recovered to $US1.1 billion ($1.45 billion).
“However it is still well below the $US2.9 billion per annum now needed to satisfy the notional 20 per cent target by 2020,” Bloomberg said.
Greens energy spokesman Adam Bandt says the Coalition will be tempted to stir up fears of rising electricity prices “in the hope that they can repeat 2013”, when Tony Abbott swept to power in part because of the carbon tax issue.
“They’ll try to beat the electricity bill drums but the prices are going up on their watch,” he says.
Tennant Reed, national policy adviser to the Australian Industry Group, doubts the renewable energy issue will become as fraught as the carbon tax debate.
“I don’t think there’s the same degree of political uniformity on renewable energy as there developed on carbon pricing,” Reed said, adding it’s a lot more concrete an issue, especially for those panels on their roofs.
There’s also a wide recognition that it’s an important issue to resolve, not least because renewables will play “a gigantic part of the future energy system”, he said.
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