Gas cartel threatens power grid collapse

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Via the AFR:

Australia’s power grid is only coping with the rapid influx of intermittent wind and solar power with the help of costly daily intervention by the energy market operator to keep the lights on, an assessment of the electricity system has found, ramping up pressure for a long-term federal framework that integrates climate and energy policy.

The report on electricity system security by the Australian Energy Market Commission for 2017-18 pointed to a large number of directions needed by the Australian Energy Market Operator to maintain the strength of the power system that had been weakened by the fluctuating load on the grid.

For the first time ever AEMO also had to switch off high voltage transmission lines in Victoria to keep voltages stable, on several occasions. It also had to trigger the Reliability and Emergency Reserve Trader (RERT) mechanism for the first time to bring on extra supply and prevent blackouts over the summer, an exercise that had to be repeated this past summer but still didn’t prevent thousands of households losing power on January 25 and January 31.

Once again, let’s recall how we got here. The original plan was to allow gas-fired power to substitute for coal as renewable plus storage caught down in price. This is how we planned to lower emissions (gas is cleaner than coal) while sustaining frequency in the grid as renewables plus storage was steadily rolled out.

Instead what we have done is subsidise renewables such that power frequency is threatened before there is anywhere near enough storage while letting a gas export cartel skyrocket prices, marginalising that fuel from use as coal shuts.

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If we continue down this path then three things will happen:

  • the power grid will begin to disintegrate with ever wider blackouts;
  • renewables will be blamed and coal make a comeback, and
  • the Shorten Government will be stillborn into an energy crisis.

The answer is to address the problem at its source. The gas export cartel must be smashed permanently using draconian domestic reservation policies that guarantees local supply at reasonable prices ($5-6Gj). That will drop gas and power prices, slow the renewables roll out and boost gas power usage to cover the loss of coal, as storage is rolled out over a sustainable period.

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There will be those that bleat about “sovereign risk” for the gas firms involved but the truth is the opposite. The east coast gas cartel is a clear and present danger to Australian sovereignty and national security.

Break it.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.