Australia’s energy answer is insanely simple

With Judith Sloan making perfect sense and no sense at all:

By the time I was driving home, a series of rolling brownouts (a cute term for electricity being cut off in whole suburbs) was under way.

The chief executive of the Australian Energy Market Operator, Audrey Zibelman, was cheerfully informing us that cutting back 100 megawatts involved about 30,000 households losing power. She didn’t seem particularly concern­ed because there was a possibility that a cold front might hit Melbourne a bit earlier than forecast.

Mind you, it was not just households that lost power. All those small businesses without power were effectively forced to close. And many food outlets simply had to throw out rapidly spoiling foodstuff. Presumably, some staff members lost pay.

…The bottom line is that the objective of affordable and reliable electricity is now further away than ever. The addition of subsidised renewable energy, even in the context of some battery backup, can’t produce reliable power but is likely to drive more dispatchable power sources out of the market before their effective expiry dates are reached. It’s why the federal government’s tender process to underwrite more dispatchable power entering the system is so important.

There is absolutely no surprise in any of this. Intermittent renewables sometimes can’t deliver, hence “intermittent”. Often when it is really hot there is no wind and solar efficiency crashes.

The answer is indeed more “dispatchable” power to kick in at such times of peak demand and constrained supply. The problem is that coal is not dispatchable. It takes days to warm up the boiler.

What we need, what we always planned to need, what every one else uses, and what has allowed the US to shutter massive coal capacity no problem at all, is more gas energy production.

The only reason we don’t have it is we allowed a monstrous cartel to overtake east coast gas reserves. This economic abomination limits gas supply into the local economy and holds prices at uneconomic levels for gas “peakers”, those “dispatchable” power plants that switch on and off in seconds when power price spikes make them money.

So we can’t use them. The Asian price of gas today is roughly $9.50Gj on contract. The export net back price ought to be $7.50Gj but it’s still costing bulk consumers more like $10Gj if they can secure a long term deal at all. Traditional prices were $3-4Gj which is roughly what it still costs in WA thanks to domestic gas reservation. LNG imports by definition can’t fix it given they come in at Asian prices plus a margin.

Judith Sloan is a former director of gas cartel founding member Santos so she doesn’t like to talk about the obvious solution which is gas reservation on the east coast that fixes the price at $5-6Gj. Politicians prefer to fight over the false binary of coal versus renewables as well. The press is a blathering idiot that has seemingly never heard of gas.

Yet the simple truth remains. All we need is a little east coast gas reservation and every Australian energy problem – cost, carbon and capacity – will be resolved instantly at the stroke of a pen.

That we can’t see or do this is some form of deep national insanity.

Comments

  1. Gas price is high, and no one wants to build gas turbine power plants (single cycle or combined cycle gas turbine+steam turbine) on the East Coast anymore, there were numerous proposals, like the Mortlake Vic expansion (conversion from single cycle to combined cycle) Santos Shaw River Vic, Wellington NSW, Bluescope power plant Port Kembla, additional combined cycle units at Braemar in QLD. They are putting their money (with a speculative outlook) in those solar power plants with a extremely short design life 15 -20 yrs as opposed 50yrs for a combined cycle power plant. AGL is putting in a few gas engine plants as a emergency if all fails back up, but they lack the capacity of the gas turbine plants. Gas turbine combined cycle power plants have the ability to replace all the base load coal power plants on the East Coast. The cartel needs to be broken or nationalised.

      • Some of the companies behind these now defunct power plant proposals and the speculative solar plants are also tied up with the gas cartel, Origin and AGL come to mind. The gas turbine power plant proposals all seemed to die off as the Curtis Island construction plans were publicly announced.

      • If people think we are getting security with solar then think again, its highly speculative, the people investing are not in it for the long run, cheap Chinese panels, cheap contractors ( see RCR) very short design life. I feel billions will also be wasted on Snowy Hydro 2.0. The whole business case is built around the high gas price. They received 2 consortium bids and they had to pay for those bids. I will don a yellow vest and start throwing manure if Snowy 2.0 is built without the regulatory AEMO investment test, they bloody want an exemption!

    • Why not build a gas power station in WA (which has gas reservation) and a UHVDC transmission line from WA to SA?

      A far better use of money than the 12 diesel submarines.

      • Perth to Adelaide is 2600km. HVDC transmission line losses are about 3% per 1000km. It’s bad, but still better than the alternatives.

      • Because the return on investment for the cost of the line + power station is simply not worth it. Much more profit in not building anything, letting prices spike during shortages and laughing all the way to the bank. Such is a privatised utility.

  2. The answer is indeed more “dispatchable” power to kick in at such times of peak demand and constrained supply.

    Yeah Nah Nah … Residential electricity load has insane Peak-to-Average ratios and this is the root cause of our problem.
    Real solutions need to address the real problem and that is mainly our expectations of the national grid.
    We all expect to be able to suck as much electricity from the straw as is our want whenever we want but with zero obligation to continue using that much electricity. Fulfilling this expectation accounts for at least 1/2 if not 3/4 of our residential electricity bill, so this is where change needs to happen
    If you start to think of PV electricity as free than you’re on the right path towards a solution because your adopting the mindset of How do I effectively use Electricity when it is available rather than how do I create (generate) and distribute electricity to match an unknown demand profile.
    One of these problems is solvable, the other will be an endless source of frustration, so iimho we need to get on with the required long term transformation and deal with the shorter term issues that this action creates.

    • Residential electricity load has insane Peak-to-Average ratios and this is the root cause of our problem.

      Has this changed over the last 50-odd years?

      • Yes absolutely.
        Just 30 years ago Residential Air Conditioning was unusual today it’s unusual for a house to not at least have one Split system and it is these intermittent / discretionary loads that account for much of the systems Absolute Peak demand.
        Daily demand peaks are more about cooking meals and lights and life but it’s these Absolute peaks that set the bar when it comes to designing for the worst case the system state.

      • Mostly the method of supplying electricity has changed. Government owned and run generators have maintaining supply as a priority and have no problem having loss making individual power stations that only operate for peak demand a few times a year.
        Private operators insist on profit, meaning they will only build power stations likely to operate for enough of the time to be profitable. This means new power stations will be unlikely until rather significant power shortages exist for large parts of the year.

      • Good point Bjw…in the bad old days when Engineering determined what expenditure was needed to avoid Black-outs there were no bean counters saying but but but that particular asset would never generate a profit, the profit was system wide and the expense was what was needed to make the system operate reliably. These days every generation and transmission asset has to pass a profit /loss test and many necessary upgrades fail these tests and are therefore not funded but guess what Thermal overloads no nothing of these business cases and the equipment that was going to over heat overheats ….just like the engineering simulation model said it would.

      • Because selling the power grid was such a good idea.

        (If you’re unsure, yes, that is sarcasm)

      • haimona12MEMBER

        Yes, AC is definitely making the peak to average consumption ratio worse, especially for non-solar households.

  3. Hi, the business case for peaking gas is now very weak, even if gas prices were to come down a lot. I gather the proposed new gas peakers in NSW can’t get off-take agreements and hence can’t be financed. Snowy 2.0 will nuke OCGT, while wind and solar mean CCGTs (mid-merit) can’t get their utilisation up high enough. The direct cause of the recent Victorian outages was failures (outages) of so called base load coal fired power stations combined with transmission constraints limiting higher imports (actually existing Snowy – Murray), alongside record temperatures. Exactly the scenario as set out in our 2014 report: https://www.energy.gov.au/publications/implications-extreme-weather-nem

      • haimona12MEMBER

        Yes. It was one of the first reports to emphasise that thermal generators and some transmission are not reliable during heatwaves because their firm capacity decreases during high ambient temperatures. At that point, the number of data points was still relatively small, but we pointed out that as heatwaves became longer and more severe this would become a growing issue. And so it has come to pass.

    • Pity the report failed to address Residential demand side leveling opportunities.
      There’s a lot that could be done if you include time shifted Air-conditioning demand with Thermal storage and demand side control of loads like Pool pumps. these strategies are especially good at reducing the absolute demand Peaks and can probably be implemented cheaper than the NEM upgrades needed to deal with not implementing demand side control.

      • haimona12MEMBER

        Hi, absolutely agree. In our report, there is just a brief mention on page 38-39 (section 5.4.9) under the heading Demand side participation. Remember at that point the AEMC was doing it’s DSP project so the client reasonably didn’t want our report to overlap with AEMC. We’ve been working on DSP for more than a decade but it is largely a wasted opportunity due to the utter failure of smart meters plus cost reflective pricing. The smart meter roll out was a disaster and cost reflective pricing is a fail because it fails to account for the enormous spare network capacity.

      • Yeah I was never a fan of Smart meters and variable pricing because it was such a political non-starter, the minute that some little old lady got a $300 monthly electricity bill that gig would be up with 7:30 reports etc.
        But that still leaves us dealing with ways to manage demand that reduce emerging systemic effects like duck-back-curve.
        I know plenty of people that have PV installed on their roof (receiving default FIT ) and have Pools and Off-peak water heaters. When I look at their electricity usage over a week long period I find that they’re mostly heating their water with off-peak (they shower in the evenings) and they run at least some portion of their Pool pump on off-peak . Ideas that made sense before cheap PV are garbage now yet PV installers and electricians / plumbers are typically not taking the time to address these changes by configuring these loads to optimally use available power. Heck most plumbers don’t even understand what it is that you’re suggesting they should do.
        Somewhere in this space there’s a need for a real good Residential Demand side control module/method. personally this is the function that I believe should have been done with smart meters. The industry Focus on variable Pricing was a complete failure in this respect.

    • So ultimately the problem is insufficient generation capacity for peak demand. Did you investigate why we no longer have sufficient capacity for peak demand, and any role privatisation played in that?

      • Privatisation and population. We keep importing power users.

        Another reason for a population policy. Our water and electricity grids can not keep up. These are more important than roads and schools.

      • I sure wish MB would take the time to understand why no one in the Power generation side of the business cares as much about the issue of gas peaking generators as MB seems to,
        That might just be an ah-ha moment, not with standing all the conflicts of interest there are good business reasons why that side of the business is commercially unattractive, it’s one of these situations where you can’t legislate to force businesses to do something that’s not in their own interest (and expect them to pay for it)

      • haimona12MEMBER

        It basically doesn’t make economic sense to build a power system that never has outages. The NEM already operates to and within a very high reliability threshold. At some point, building more capacity doesn’t improve power security because a lot of people can no longer afford to pay – security also embeds a concept of affordability.

      • That is the whole problem in a nutshell. What makes economic sense for the privatised operators is to not invest in any new capacity, watch the prices paid to themselves skyrocket and profit all the way to the bank. Take all the profit the private operators are making and use it to build a better network in public hands and a more reliable network is a perfectly reasonable requirement of the population. Unreliable power is a third world problem, not a first world one.

    • “Snowy 2.0 will nuke OCGT” – Only if Snowy 2.0 is forced to undergo the AEMO investment test
      The Italian contractor has still not given them a final lump sum price. Word on the street and its $4 billion excluding the transmission line.
      They still haven’t worked out where the workforce will come from with major transport tunnel projects in Sydney and Melbourne happening at the same time as Snowy Hydro 2.0.

      • haimona12MEMBER

        Yes, agree, Snowy 2.0 only makes sense if the regulated transmission gets up. BTW, I’m certainly not asserting Snowy 2.0 is a rational investment. Its shareholder is very influential and has a very good credit rating (for now).

  4. The electricity was cut off at my place on Friday in the heat, but I didn’t know about it. My solar panels and battery got through the whole thing providing 6 kW between them to keep the aircon going. I have a single powerwall 2 battery and 5 kW of panels.

    • So you’re completely off-grid? or do you have some sort of isolation switch?
      Is it really worth being off the grid? especially in terms of additional costs incurred on-site backup generator etc.
      At the moment all the cost cases that I’ve looked at suggest it is worth staying grid connected

      • Nope. Not off the grid at all. I don’t have anything like the capacity to go off grid. Would need 3x the solar panels and probably 5x the battery capacity to do that. I have fairly high electricity usage so the solar panels were a no-brainer to keep costs down. The ROI on the battery is a lot more questionable, but when you’re the only cool house in the neighbourhood on a 43 degree day you worry less about that.
        I disconnected from the gas network a while ago and replaced all our gas appliances with electrical equivalents. I also charge an electric car at home which covers about 200km/week.
        My total energy bill after all that averages about $120 a month.

      • Well if your not off-grid than the Anti-Islanding technology in the grid-tied Inverter should have kicked in when the grid dropped out. and shut down your PV system. That’s why I’m asking. unless the PV system is dedicated to tasks like Pool pump or hot-water. or AC but even these sorts of half off-grid systems are a bit of a grey area in the legislation because they’re definitely a risk factor for power workers / electricians who assume everything is off once they switch the main breaker (or during a blackout)
        At the very minimum you must have an isolation switch or otherwise you’d be powering the whole neighbourhood (well that’d never actually happen because of loss of grid synch…)

      • You’re right if it’s just a solar panel system but all of what you describe comes with the battery. There are big warning symbols on the circuit breaker board and the meter at the front of the house stating there is an electrical storage system in place. Nothing illegal about it. All standard with a battery.

  5. How about we start building passive solar homes instead of the current dog-boxes requiring air conditioning to make them livable?.

    • A modest well-sited, well-built house on a 1/4 acre block with gardens and trees would solve this electricity and greenhouse gas problem.
      The answers lie back in time.

  6. It is indeed a great time to be burning methane in Western Australia 🙂 cheap as chips…
    Its treasonous that there is no domestic gas reservation in place for East Coast users… this needs to become a federal issue, debated by people who understand the basics, prior to the upcoming election.

  7. I think everyone would understand that energy underpins the economy.
    Everything you eat, drink, heat, cool, build, manufacture, transport and more requires energy.
    The profits energy companies make is added to all of the above.
    All of this energy ultimately rolls back to the power grid.
    Call me a communist if you like, (I,m not) but I believe the Government should supply energy to the economy at cost.
    Private companies can compete in the economy at all levels above this but don,t give them the bottom line.
    The Government then could take energy policy where ever it needs to go, instead of currently trying to dictate to the energy companies. Once you have sold the farm it’s gone, if you want to control how it’s run, you have to own it.
    Give the economy and the country a boost, reduce the bottom line (energy), take back the farm.