Manufacturers to suffer under no gas reservation policy

Australian energy policy 101.

  1. Build enormous LNG plants for export only, reserving none of the cheap energy locally? Check
  2. Actively discourage any renewable energy production while heavily subsidising dirty coal power plants? Check
  3. Sell off publicly owned energy utilities to private sector who then gold plate it for excess profit? Check
  4. Household energy bills rising at three times the rate of inflation even as energy production prices and demand for electricity reduce? Check
  5. Create a situation where the world’s cheapest energy sources for local manufacturing are now some of the most expensive? Check

Next level – can’t even get energy to run the dwindling number of factories.

From AAP:

Australian manufacturers are struggling to get a hold of enough gas, Industry Minister Greg Hunt warns.

Manufacturers have warned of a crunch point in supply from mid-2017 to late-2018.

Mr Hunt said he would not speculate on how the supply will be divided between industry and homes.

 

Well done Australia. Your energy policy is a bloody laughing stock of the world.

Keep cracking down on those welfare cheats though – that’s tough work.

Comments

  1. Just like the offshore oil fiasco twenty years ago. Nothing learned because nothing’s changed under the globalised free market system where a nation’s wealth become corporatized, making a couple of big players wealthy who pay fark all tax and the rest of us dirt poor. Speaking of which, the same deal has been done with red dirt in case we haven’t noticed, so it’s not an energy issue but a rape of the country’s resources. We’ve got more in common with Nigeria than we realise. Anyway, as 50,000 car jobs go to the wall we won’t need all these resources, so we can all feel happy about surviving on the services sector. The dumbing down of Australia 101.

    • +1. But who can or will change the current mess? Minister Hunt is nothing but a mouthpiece for his corporate sponsors – not sure whether he is morally bankrupt or simply stupid. Anyway, he is unfit for his role. And the rest of the Libs, Labor and the Greens offer no hope. So all I can suggest is vote for the radical one-issue parties, bring on the inevitable depression and pray that something decent emerges at the other end. What a dismal way to start the year.

      • Agreed Powys. Unfortunately, citizens will have to blow up the place at the ballot box before the political duopoly get the message. Both parties have sold this country’s resources down the river so short of open revolution, the only choice is to keep rolling those safe seats.
        Wayne Swan (I’m no fan by the way) remarked on something he saw a couple of years ago written on a wall in NYC circa 2014 which said “the French aristocracy didn’t see it coming either” which kind of underline the present malaise. Take heart, this is the beginning of the long game. The UK and the US has shown us how to do it.

    • Trying to tax profits is a fool’s game.

      In 2002 I heard that Saudi Arabia allows foreign firms to extract oil and keep 10% of the oil extracted. 90% of the oil goes to the Kingdom and the Kingdom then sells it to the market.

  2. Royale With Cheese

    The gold plating issue seems to have dropped off the radar these past couple of years. It would be interesting to compare the impact of gold plating on electricity pricing now compared to the impact of renewable energy targets which very much is on the radar. Similar comparisons when the carbon tax was around showed that gold-plating was the biggest driver of rising electricity costs.

    • Ex-hydro Australia’s energy from renewables is about 6% of total. Our electricity prices are around 3 times Canada’s, 2.5 times the US and higher than Japan (a huge energy importer). Some European countries have slightly higher prices but they pay a carbon price and they built up huge renewable capacity at a time when prices were still much higher (i.e. before economies of scale kicked in).

      • Factories in Japan pay low prices for electricity while houses pay high prices.

        In Germany houses pay high prices for electricity – not sure about factories.

        The ALP and LNP did not care about factories and thus factories in AUS probably pay the same high prices for electrons as houses.

    • Sydney and Canberra light rail, Melbourne’s tunnel, Adelaide’s new hospital.

      The gold plating now has irridium and platinum inlays.

  3. Does Mr Hunt have any strategy/views or anything at all ? Other than he can’t speculate on who will lose the most (ie there are no winners)

  4. The LNP is bad for business – its that simple. They are great for foreign multinationals whom they succour favour with for future employment – but local business are scum to them.

    The Fibre NBN would have been an absolute god send.

    • Clearly the LNP need to work on their fundamental axioms. You could help there, David! But please consult your mate (alter-ego?) Kurt Gödel.

  5. Well, when the ALP tried to borrow for a gas network in 1975, the voters crucified them.

    Pigeons/roost.

  6. Agree with all of the above except:

    “3. Sell off publicly owned energy utilities to private sector who then gold plate it for excess profit? Check”

    This should have looked like:
    3. Sell off publicly owned energy utilities to private sector who then run them down for excess profit? Check
    Such utilities get “gold plated” when they are Gov owned because Engineers take Safety and Redundancy in consideration. And still charge the public lower rates.

  7. Well done bogans – you keep voting for the ALP and LNP again and again to your own detriment.

    And well done to SAP for not calling itself AIP (Anti Immigration Party) or SIP (Stop Immigration Party) – did you think more bogans care about deforestation than overcrowding in the trains/schools/hospitals?

  8. Number 3 does not even meet the “government = bad and private = good” agenda. The grid has been sold to a foreign government!

    Explain that one ALP and LNP. So it is ok for government to own the grid as long as it is a foreign government?

    The hypocrisy is astounding.

  9. Reservation can work but will require various State Governments to come to the party on the question of enabling widespread access to gas reserves – perhaps a trade off between ensuring supply to consumers and supply to providers where each stakeholder compromises (and thereby wins)?

  10. OMG – no one here understands the industry. The the posts above are written in total ignorance. Manufacturing relies on coal, not gas… never has. ideally, comment on things people actually know something about!!! Otherwise its only opinion – great for politics, but not this. A complete waste of time.

    Don’t worry, cheap solar will save us (have you seen those costs lately – wow!!!), and the odd wind mill. So the whole thing is a non-issue. Massive power resources coming. Go to bed guys… if you don’t want coal, then your power costs will quadruple. Have a look at Europe, especially Germany.

    And don’t comment on bogus points!

      • Do it yourself. You should know what you are posting about before you publish. Gas and electricity prices are not remotely related in Oz. We don’t have much gas powered generation. Little or not linkages into big markets. Mostly domestic heating.

        In the US, gas kills coal because its so cheap. But they have large infrastructure banks, build four to five decades ago, and 110+ gas fired power station moth balled a decade ago. Then the shale oil revolution came along and transformed the power situation. that is not remotely translatable here in Oz.

        Thats what you are implying above. Without even realising CSG LNG and shale oil have massively different cost curves and cost hurdles. They are not remotely comparable.

      • Whats even worse, for the ignorant posters above, a lot of Australian on shore CSG reserves/resources are not, and will probably never be economic. And one or two of our mega LNG projects are fire-trucked… its a fire trucking massive story, but not in the way you think…

        Kill coal in Oz, you kill manufacturing. H&H is the closest I have seen on the really big issue to hit. And it will ht very soon. A lot of Oz coal generation is coming to the end of its natural life. And none will be allowed to be rebuilt in the current PC/Green environment. Yeah brown coal is dumb, but…

        Thats the real story. But don’t let facts get in the way!

    • The future is unconventional geothermal – can be generated anywhere globally, geothermal gradient dictates how deep… a good comment by AEP for the UK.

      ****

      AEP on Iceland’s volcanic heat may be the perfect solution to Britain’s energy crunch (http://www.telegraph.co.uk/business/2017/01/05/icelands-volcanic-heat-may-perfect-solution-britains-energy/)

      Iceland is the answer to our prayers. The country has a surfeit of cheap electricity from volcanoes and melting glaciers that is either sold for a pittance, or goes to waste.

      The Icelanders would dearly love to sell this power to us at global prices to pay down the banking debts of 2008. Britain would dearly love to buy it from them as our coal plants and ageing nuclear reactors are shut down, with little to replace them beyond the variable winds of the North Sea.

      Advances in high voltage technology make it possible to transmit Iceland’s low-carbon power to the industrial hubs of northern England by underwater cables with an energy leakage of just 5pc, and probably at lower costs per megawatt hour (MWh) than the nuclear power from Hinkley Point. And unlike nuclear, the electricity is ‘dispatchable’.

      “We can turn it on and off in fifteen minutes to half an hour. It is the only battery that is really available today for green energy,” said Hordur Arnarson, head of Iceland’s national utility Landsvirkjun.

      It is hard to imagine a more elegant back-up for the UK’s vast experiment in off-shore wind, the backbone of British electricity by the late 2020s.

      Combined with interconnectors from Holland and France – and soon Norway – it could plug much of the intermittency gap through the dog days of a windless anticyclone. The power can flow both ways: surges in North Sea wind could be stored in Nordic reservoirs.

      Roughly 70pc of Iceland’s electricity comes from hydropower through glacial run-off. This is mostly sold to aluminium smelters for a derisory price. Water washes over the top of the dams for parts of the year because the island has no way of selling the excess energy.

      Hydro could probably provide the UK with one gigawatt of stable baseload, but then there is the tantalising potential of geothermal power from the island’s 350 volcanoes as well.

      The advances in drilling are breath-taking. An Icelandic project backed by the US National Science Foundation is currently boring the deepest hole ever attempted into the fluids of the inner earth at Reykjanes on the Mid-Atlantic Ridge. As of late December it had reached a depth of 4.626 kilometres, approaching temperatures of 500C.

      The team aims to stop just short of the magma, at 200 times atmospheric pressure, where hot rock mixed with sea water releases ‘supercritical steam’ with enormous energy. This is the Holy Grail of geothermal power, if it can be extracted safely in a thermal mining cycle.

      Mr Arnarson said each borehole promises 50 megawatts, ten times the normal geothermal yield. “There are a lot of unanswered questions. We don’t know whether we can manage such force because it has never been done before. But we think it may be possible to build the first plant within four to five years,” he said.

      If it succeeds, the fossil fuel industry may face an even bigger threat to its long-term survival, for this technology could equally be used in the tectonic hotspots of Italy, Kenya, Indonesia, Japan, Mexico, or California, and possibly on a large scale.

      London and Reykjavik having been talking on and off for sixty years about the dream of an 800 mile IceLink cable, the world’s longest marine interconnector dug into the North Atlantic seabed.

      The costs were always prohibitive but the calculus has changed as high voltage direct current (HVDC) comes of age, and the UK Climate Change Act mandates an 80pc cut in CO2 emissions from 1990 levels by mid-century.

      British taxpayers may not have to put up a penny in investment. Private investors have already spotted the prize. Germany’s Siemens is mulling a future bid. Icelandic officials say they have several eligible suitors with deep pockets.

      Britain’s Edi Truell is trying to beat them to the starting line. The flamboyant Duke Street founder, now at Disruptive Capital, never pulled off his rescue of Tata Steel but this venture looks more promising.

      He is eyeing £3.5bn from pension funds and sovereign wealth funds to build a 1.2 gigawatt cable, what he hopes will be the first of a vast 6 gigawatt enterprise.“Foreign investors are beating a path to our door from Singapore, the Middle East, and Canada. They can see a superb project with a 40-50 year return,” he said.

      With buccaneering optimism, Mr Truell thinks the project could be up and running by 2023, long before Hinkley Point. “Our assumption is that we will have to put up all the money. All we want from the Government today is a go-ahead in principle, and we’ll get on with it,” he said.

      The condition is that IceLink has access to the the same contracts for difference (CfD) available to nuclear power and renewables. He thinks costs could come in below £80 per MWh, dropping to into the sixties as further cables deliver economies of scale.

      Iceland’s Askja Energy thinks £100 is more realistic. But even that roughly matches the indexed strike price for Hinkley, with the critical difference that the IceLink power can be dialled up and down to complement renewables.

      David Cameron set up a joint task force with the Icelandic authorities last year in a flurry of enthusiasm. Andrea Leadsom, then energy minister, was so captivated by the idea that she asked only half in jest why we could not have four IceLink cables, and solve our intermittency problems once and for all.

      Brexit has sapped momentum, though you might have thought that deeper ties to an Atlantic friend outside the EU should be an urgent priority. Iceland has since lost its government. Everything has been on hold since the Panama Papers felled the last prime minister, and the Pirate Party shook up the old order in October’s elections.

      Not all Icelanders relish the idea of becoming Britain’s offshore power plant. Ecologists deplore drilling holes into the bowels of the earth, and they do not want the spoliation of Vatnajökull and their pristine highlands with more plants and transmission lines. “Iceland is not at all an endless source of green power,” said Askja Energy.

      The trade unions have the opposite objection. Whole communities live off the three aluminium smelters that gobble up 75pc of Iceland’s power. Alcoa, Rio Tinto, and Century all have long-term contracts in any case. “No politician can shut down a plant just like that,” said one official.

      The project must be nursed through the fiercely independent Althingi, the world’s oldest parliament. One thing can console us at least: the islanders seem to have forgiven Britain for invoking anti-terror legislation against them over the IceSave affair at the worst moment of the 2008 crisis, a shabby way to treat a Nato ally in dire straits.

      Iceland’s central bank governor later showed me the document listing his institution alongside Al Qaeda on the terror list. The result of London’s financial warfare was to greatly complicate the import of basic food and supplies through those terrifying winter weeks. “It was 18th Century gunboat diplomacy,” he said.

      We are friends again now. This time we may need the Icelanders even more than they need us.

      • Thankyou for the constructive input RT, although we could do without the condescending preaching tone.

        I’m talking about total energy policy here, the point being that for Australia to have a viable manufacturing industry, it needs to have a competitive edge in terms of input costs. And that is where public investment in energy infrastructure through low user cost (i.e solar or gas or geothermal – I’m still watching developments there) can flow through to greater potential for those industries to compete in Asia.

        That requires a top down approach harmonising all energy sources, production, export sales, household use – the lot, leaving reservation policies on the table instead of trying to extract resources and sell as much as quickly as possible.

        No, I dont know the specifics – Im looking at this from a macro point of view in terms of policy and HnH is better qualified on the subject for sure, but I have more of an authoritarian bent on how this can be achieved instead of magic wand waving to let the market and especially corporate Australia alone to fix it.

        Have a good weekend, thanks again.

  11. “MG – no one here understands the industry. The the posts above are written in total ignorance. Manufacturing relies on coal, not gas… never has.”

    Are you sure?

    “Natural gas is both a source of energy and an essential raw material for manufacturing.

    Almost one-third of the gas consumed in Australia is used by manufacturers.

    Manufacturing in Australia is a $100 billion industry directly employing 890,000 people.

    About 225,000 people work in manufacturing sectors that rely heavily on gas; another 500,000 people work in related industries that do business with these manufacturers.

    The main industrial uses of natural gas and gas-derived products are producing:

    non-ferrous metals (e.g. aluminium, copper, zinc, tin)
    chemicals and polymers (e.g. fertilisers, antifreeze)
    non-metallic mineral products (e.g. glass, ceramics, cement, bricks)
    plastic packaging for foods and beverages.
    Gas is also needed in food preparation and processing, fermentation and brewing.”

    Yeah I know, industry propaganda – but it does appear that gas is much more necessary to industry than merely a source of electricity generation. It’s a vital raw material for many processes.

    Look I’ll be honest, I know bugger all about the issue. But living in a heavy industrial region, I have regularly heard that gas is crucial for many industries for uses other than burning it for power generation.
    http://www.appea.com.au/oil-gas-explained/benefits/gas-and-manufacturing/

  12. Got a mate that works at one of the aluminium smelters here in Gladstone, I’ll ask him what he knows. I don’t think the smelter rely on gas for power generation – the QLD government flogged some % share of the local coal-fired generator to the company that owns the smelter, from memory at least.

  13. “Australian manufacturers are struggling to get a hold of enough gas, Industry Minister Greg Hunt warns.

    Manufacturers have warned of a crunch point in supply from mid-2017 to late-2018.

    Mr Hunt said he would not speculate on how the supply will be divided between industry and homes.”

    No probs, we’ll just let gas-dependent manufacturing industries shut with the loss of large numbers of jobs and technical know-how while allowing a cartel to export the stuff hand over fist and then import everything back from abroad. After all, it’s the Australian way.

    • I’m new to this energy saga. Can you explain please why local LNG producers ‘have to’ export their LNG and not sell it to the highest bidder here? When I read through these various threads all I see is a heap of contradiction and confusion over this energy issue.

      Thanks in advance.

      • Gday Dominic. Have to be the first to admit that I don’t really know, someone here will surely understand the dynamics of the gas contract system. I guess it’s probably that we now have a gas mega-exporter (the combined three Gladstone plants but others as well) who have entered into huge long-term overseas supply contracts. They need to fulfill their contractual obligations first and foremost and if that ends up meaning less left for locals then so be it. These are multinational companies – they would not have the slightest concern about the fate of local industries and domestic households unless it somehow affected them. Local gas-dependent industries certainly seem to be voicing concern that gas will be diverted to ensure huge export contracts are fulfilled, forcing up the price they will have to pay. Our manufacturers appear to have recently gained a little bit of traction from a falling dollar – a hike in the price of a crucial input like gas might nullify that and send them backt o square one?

        It just seems to me that we Aussies have it in our heads that the one and only approach to doing anything is to absolutely whore ourselves out, regardless of how pathetic the results. We jubilantly bent over to allow a huge foreign-owned cartel to dominate a valuable and non-renewable resource, provide only meagre benefits to the country and now possibly destroy more jobs than it has actually created. Why we just keep on doing this seems difficult to fathom.

  14. The appea link mentions three major plants in Gladstone dependent on gas – the two alumina refineries and the smelter. But there are others as well. I worked at this depressing place http://www.orica.com/Locations/Asia-Pacific/Australia/Yarwun/Operations#.WHAs8vl96Uk for a month or so after leaving high school. The plant produces half-a-million tonnes of ammonium nitrate per-annum, for which gas is required. There are also other ammonium nitrate producers in the region.

    Imagine being one of half a dozen or so gas-dependant heavy industries in Gladstone facing a supply crunch (assuming it happens) and looking out across the harbour and right there is one of the main sources of the problem – three shiny big plants hoovering up the gas and flogging it offshore for minimal benefit to the country.

    • Thanks Lef-tee. I appreciate you response (above). I just find the whole thing a bit mind-boggling. I’ll get there eventually — read as much as possible and piece it all together.

      • Cheers Dominic.

        Like I said, I’m not a bastion of great knowledge on this (or any other) subject but it does seem to me that this is an important issue.

        One poster pilloried the author of this article – I think he’s probably right that manufacturing in Australia gets most of it’s energy supply from generation sources other than gas-fired electricity turbines so gas is probably not relevant to manufacturing as an electricity source……but he also appears to have overlooked or not been aware of the fact that gas is a crucial raw material input for a large slab of our manufacturers. Agriculture and mining are dependant on gas-derived products such as fertilizers and explosives and wide array of chemical production, metal ore refining, plastic and paper production and even regular building products appear to depend on gas. It’s far more important to Australian industry than simply a source of fuel for generating electricity.

        I think in the event of a crunch, the big boys like the alumina refineries and smelters would probably be able to negotiate a reasonable deal – but what about all the smaller-but-still-important industries that can’t do without gas?