Gas cartel wrecks Australian electricity grid

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Via Matthew Warren, former chief executive of the Australian Energy Council, the Energy Supply Association of Australia and the Clean Energy Council, at the AFR:

Wholesale spot electricity prices are now regularly trampolining in Queensland, NSW and Victoria, with prices hitting zero or entering negative territory, and then rocketing back up once the sun has set.

This price volatility is the result of putting gigawatts of intermittent solar and wind on top of gigawatts of inflexible coal generators.

…The reason for this gradually escalating crisis is simple. For the past decade Australia’s national electricity policy has consisted solely of one populist idea: build lots of renewables. We’ve ended up with two national schemes and a host of additional measures by state governments.

But there is nothing else: no policy to ensure there is adequate and flexible storage or peaking capacity to complement the gigawatts of intermittent generation. No scheme for the orderly exit of coal and its timely and complete replacement.

Not quite true. There was a plan. It was for gas-fired generation, which is eminently dispatchable, to stabilise the grid until storage had caught down in price. It’s the same plan underway worldwide.

Sure, we stuffed around with less than optimal policy levers to get renewables up. But that failure pales next to the disaster of gas. It’s role in the plan was destroyed by the emergence of an east coast gas export cartel which priced that fuel out while making it cheap everywhere else, leaving us with no base load stabiliser.

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It is one of the greatest policy screw ups in the history of energy. Matched in scale only by the ease of the fix: forcing the gas export cartel to leave more gas here so that gas “peaker” plants can provide the power needed at short notice when renewables fail.

But that kindergarten level answer to the entire energy crisis and transformation has been so beyond our deeply corrupt political economy that when I tell this story at dinner parties nobody believes me.

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.