Issue 225, January 2024
Here we go again! It’s the dawn of a new calendar year but the energy market issues all seem old hat and the Australian electricity system on the east coast remains in a fragile state, causing end-user prices the majority of consumers don’t like at all and with the prospect of reliability problems they will like still less. While the federal government capered in mid-December in the luxurious, energy-guzzling environs of Dubai’s “Expo City,” back home sentiment about energy among household and small business consumers was revealed to have fallen to its least-positive level in five years. Confidence in Chris Bowen’s grand renewables plans to improve the consumer lot is not exactly brimming over even allowing for an announcement before the CoP meeting in the form of a major “capacity investment scheme.” The policy release came with a refusal to reveal what the CIS will cost taxpayers over the rest of the decade and beyond. (Bowen rejected a media claim of $23 billion.) Meanwhile, the market operator has helped soothe nerves – not – by announcements that simultaneously point to a summer of extreme demand driven by El Nino conditions, declare preventing blackouts in the NEM cannot be guaranteed and present confidence that the grid “is in good shape to cope.”
“Consumers are nervous” – Energy Consumers Australia commenting on its December “sentiment survey.”
“In most cases, consumers see a successful energy transition as one where all Australians have access to reliable and affordable energy” – the ECA.
“Chris Bowen is about to spruik Australia’s renewable energy target to the world, but a new consumer survey shows we want the government to act on power prices first” – Melbourne’s Herald Sun newspaper on the eve of CoP 28.
“There is no doubt fossil fuels will play a reduced role in our future, but we can’t just jump from fossils to a wholly renewable economy overnight. The consequences of pushing too hard, too fast would be calamitous” – Innes Willox, CEO of Australian Industry Group.
“To be blunt, Australians have been sold a pup when it comes to the energy transition and the benefits that would flow from it” – economics commentator Judith Sloan. “The notion that it would be good for the economy, the climate and consumers is disingenuous – and that’s the best you can say.”
“Irrational ideological fervor seems to be a requirement for Australia’s current crop of energy politicians. They readily pile on ever-increasing subsidies for wind and solar to destroy coal and gas, then subsidize coal and gas to prevent a collapse in the system they have created” – Alan Moran in The Spectator Australia.
“The AEMO updated energy plan shows the lowest-cost way to deliver a secure and reliable grid over coming decades is a renewables grid with hydro, batteries, flexible gas and transmission” – federal Climate & Energy Minister Chris Bowen in his media statement a week after the ECA published its survey. “AEMO reiterates what we already know: firmed renewable energy is not just clean, it is the cheapest way to ensure a reliable grid.”
“What particularly jumped out at me in the AEMO media release is that to deliver the lowest-cost pathway for secure and reliable energy calls for investment that would add almost four times the firming capacity from dispatchable storage, hydro and gas-powered generation by 2050” – Paul McArdle, WattClarity.
Energy Minister Chris Bowen was welcomed back from his CoP28 safari by an Australian Financial Review report of a political opinion poll it had commissioned showing (a) he has a favorable rating of 16 per cent, (b) an unfavorable rating of 22 per cent, (c) a “neutral” rating of 36 per cent and 26 per cent of respondents “have never heard of him.”
As 2023 ended, Energy Consumers Australia unveiled a public sentiment survey that identified energy costs as a major concern to householders and small businesses with only 54 per cent of respondents believing their electricity service provides value for their bill costs – a fall from 67 per cent in 2021.
The confidence level was 59 per cent in 2022 and the biggest falls have been in Victoria (down seven per cent) and New South Wales (down six per cent), home to the largest number of consumers.
ECA chief executive Brendan French says this news “should be a wake-up call for the entire industry” – although not adding “and for governments.”
He declares: “We’ve seen some big (energy transition) developments over the past year, particularly with plans to dramatically increase renewable capacity. (These changes) must now be matched by equivalent focus and investment on the consumer side.
“Consumers for the most part find themselves trapped in the headlights, knowing massive change is bearing down on them but having little idea what to do about it.”
In its commentary on the new survey, ECA notes that just 12 per cent of those surveyed believe they will see their power bills decrease in the short term thanks to the “transition.”
The association comments that consumers “are going through a historic cost-of-living crisis,” facing pressure from mortgage or rental payments, grocery costs and energy bills. “Affordability is front of mind for consumers, with over half saying they are more concerned about paying their electricity bills than they were a year ago.”
In one survey segment, where respondents are asked to nominate the most important issue for the future energy system, 54 per cent opt for having affordable energy prices – with barely 10 per cent choosing a rapid transition to renewable energy sources of supply.
“Our qualitative research,” says ECA, “found consumers struggle to list anything beyond sustainability as an advantage of the transition. However, they are able to list the potential drawbacks – from higher energy prices to loss of jobs to decreased energy security.”
Energy Consumers Australia’s survey of household opinion reveals some striking views among voters of key policy issues.
Only 11 per cent of respondents thought a rapid transition to renewable energy sources was the most important issue – and just 14 per cent put it second.
Asked about when the transition to 100 per cent renewable energy should be achieved, only 25 per cent said by 2030 and 17 per cent opted for 2040. Ten per cent saw no need for a transition and 26 per cent thought it impossible.
Respondents were also not especially happy with federal government communication about the transition. Just 14 per cent thought it was “very clear” versus 37 per cent who saw it as “not at all clear.”
Mark Collette, CEO of Energy Australia, wants State governments to establish strategic reserves of coal-fired generation to support the energy transition that is “happening at light speed.”
Collette followed up the mid-December publication of the Australian Energy Market Operator’s latest commentary on the reshaping of the NEM, by declaring that, without such a reserve scheme, “the electricity system holds too much risk for consumers.”
He says the scale of transformation required by the federal government’s 2030 transition target “is hard to overstate,” adding that “a Commonwealth/State agreement on a strategic reserve for each State is essential.”
The AEMO draft of the latest version of its biennial “integrated system plan,” which models the next 20 years in the NEM, postulates that all coal-fired power stations in the market will be closed by 2038, five years earlier than previously envisaged with 90 per cent of the current 21,000 MW of this generation capacity taken off the grid by 2034-35.
This outlook jars with current commitments by coal power owners to operate Millmerran in Queensland until 2051, Victoria’s Loy Yang B until 2040 and Lithgow’s Mt Piper in NSW until 2047.
The operator also suggests the removal of coal plants could be faster than it has modelled, depending on their maintenance and operating costs as well as fuel security.
AEMO proposes the addition of 6,000 MW of grid-scale renewable capacity annually over a decade as well as investment in another 18,000 MW of rooftop solar systems. It says there will also need to be development of 50,000 MW of dispatchable storage and 16,000 MW of gas plant.
AEMO claims 10,000 kilometres of transmission lines will need to be built in the NEM by 2050 to enable the transition – and it flags social licence as a major key to this grid expansion.
Meanwhile, according to data published in the report, coal has remained the market’s largest power source at 56.3 per cent of total generation (including rooftop solar), down from 58.6 per cent a year earlier.
AEMO aims to publish the final version of the new “integrated system plan” in June.
One of Australia’s leading energy figures, Adi Paterson, until recently head of the Nuclear Science & Technology Organisation, has publicized a letter written to the Prime Minister in which he declares “your electricity plan for a massive expansion of the grid with wind and solar sources is deeply flawed and expensive.”
He adds: “Predictable, low-carbon, always-on electricity is no longer assured.”
The letter warns Anthony Albanese the government approach “will fail to deliver quality, 24-hour electricity” and it calls on his government to lift a long-standing ban on nuclear power to meet energy needs.
Paterson also says: “Several independent engineering studies of grids like ours show that saturation of intermittent sources will make (them) unstable and expensive – because of the principles of engineering.
“Adding a much larger grid will not solve this fundamental problem – it will exacerbate it.”
Paterson writes to Albanese: “It is essential that you urgently apply your mind to an independent review that includes nuclear power in its scope. Australia needs real options. Policy settings can be changed. It is a question of scientifically sound engineering, and economics and practicality.”
In an interview televised by Sky News, Paterson said he had looked through the plans for the future of Australia’s electricity grid and – as an engineer – he cannot see how they can be achieved. “We've lost the plot because we trying to pursue renewables, not low carbon energy, and we're doing it in a way that compromises the fundamental integrity of the electricity grid.”
The former CEO of ANSTO said it appears the market operator has come to “believe its own narrative” and was not subjecting this to
“engineering facts and a reasonable set of scenarios for the future.”
The Clean Energy Council reports that “the sluggish investment landscape for large-scale renewable energy generation projects in Australia continued in the third quarter of 2023.”
CEC says just two new projects totalling 161 megawatts achieving financial commitment during the period.
This result was the fourth lowest quarterly installed capacity total since 2017.
It brought the total financial investment commitments during the 2023 calendar year to 509 MW.
However, the CEC adds, there are currently 108 generation and storage projects which have either reached financial commitment or are under construction. This equates to 12,600 MW of generation project capacity.
The association comments that the renewable energy sector needs to be seeing financial commitments in the order of 5,000 to 7,000 MW of new large-scale generation every year between now and 2030, in order to reach the Australian government’s 82 per cent renewable energy target.
Meanwhile, the CEC’s Ecogeneration publication is claiming a record in 2022-23 financial year for renewable power output in the NEM.
Using OpenNEM website data, it points to a 36.8 per cent market share for renewables versus 33.3 per cent in 2021-22.
OpenNEM shows 207 terawatt hours of electricity output in the market when rooftop solar (10 per cent of the total} is taken in to account. The other renewable contributions are listed as wind power 13 per cent, hydro power 7.6 per cent and solar farms 6.1 per cent.
Of the fossil fuels generation, Victoria’s brown coal stations provided 15.1 per cent of the NEM total and black coal units in New South Wales and Queensland 42.5 per cent. Natural gas plants contributed 5.2 per cent of the NEM’s power.
Australian Energy Producers, representing the oil and gas sector, is warning that the industry is confronted by “immense uncertainty” in the policy and investment environment.
CEO Samantha McCulloch says “everything from interventions in the east coast gas market to an offshore regulatory system that is fundamentally not working” are contributing to concern around investment of “huge sums.”
McCulloch says that there have long been warnings by the market operator and the competition regulator of east coast gas supply shortages, “but now there are projected shortages on the west coast, where we have ample gas supply.” The first requirement for remedying the problem, she asserts, is to fix the environmental approval system. At present, she says, approvals can take years when gas supply is urgently needed.
McCulloch reports that the petroleum sector is currently committed to $36 billion worth of developments, about half of all Australian resource projects currently listed – but only one oil and gas development reached a final investment decision in the year to November 2023. “So many of these projects are stuck in the regulatory process when new gas supply is urgently needed to avoid blackouts and put downward pressure on prices while securing future economic benefits.”
Victorian government policy is a particular bugbear for AEP. In mid-December McCulloch assailed the extension of its “gas substitution roadmap,” declaring it “continued to ignore the fundamentals of the energy system transformation to net zero – including the importance of gas as a partner to renewables in reliable electricity generation.”
Meanwhile, in Western Australia, the association says, the State government “continues to ignore the fundamentals of the energy system transformation” and must “rethink its ban on onshore projects from accessing export markets.”
And Queensland’s State government imposition of a ban on new gas production in the rivers and floodplains areas of Lake Eyre basin, AEP declares, is a decision to “rip gas production out of the east coast energy market in coming years, showing a reckless disregard for Australia’s energy security amid forecast supply shortfalls.” It says the State government’s solution to cost-of-living pressures and energy supply challenges is “to do the opposite of what is needed.”
Ian Macfarlane, a former federal resources minister and retiring CEO of the Queensland Resources Council, says new State Premier Steven Miles first highlighted the importance of gas for pursuing a low emissions future and then, four days later, “stopped the future development of the industry in its tracks by banning gas exploration in some of the most prospective gas areas in Queensland.”
A long-running debate over an explosion that wrecked one of two units of the Callide C power station in Queensland took another twist in December with Czech power investor Sev.en heading to the Federal Court to seek appointment of an investigator – having waited 30 months for a State government-appointed inquiry to report on the disaster (which was followed by the collapse of parts of a cooling tower at an adjacent unit months later).
Meanwhile, the State government says its inquiry’s report is “imminent.”
NEM wholesale power prices have risen since the Callide explosion.
The site failures took 932 megawatts of capacity off the market – and futures prices spiked again in May 2023 when the State government, which is a 50/50 owner of the operation, announced the October return of the C4 unit could not be met because new cooling infrastructure needed to be installed.
The rebuilt C3 unit is now supposed to restart operation early this year.
The self-imposed task of reading very large amounts of opinion, grandstanding and some news from and about CoP28 in December was somewhat mind-numbing; like standing under a waterfall with a tin cup in search of a drink, as someone once put it to me.
If the self-congratulation of our chief representative in Dubai, Climate & Energy Minister Bowen, is more than you can bear, join what appears to be a lengthening queue. And gird yourself for much more noise as he and Prime Minister Albanese pursue holding CoP31 in Australia in 2026.
(Hazard a guess at who probably wants to be president of that gathering…….?)
As I was contemplating what to say in this Last Word about the Dubai CoP, which almost overwhelmed energy news in Australian media for a fortnight in December, one of my friends directed me to a post on Twitter (now X) by a German physicist and author, Sabine Hossenfelder, who came up with a YouTube channel she dubbed “Science without the Gobbledygook” while trapped indoors by Covid. It now has a million international subscribers and a sufficiently large number of patron supporters to earn income for her scientific research rather than chasing grants.
In the post I was sent, Hossenfelder comments that a price can’t be imposed on carbon emissions today without also a subsidy for fossil fuels because of their critical global economic importance. (She says: “I think we should put a price on carbon but we need to find a way to ease the transition.” And goes on: “It would have been easy enough 50 years ago to do so, to switch to nuclear and, with further improvements, to solar – but we missed that bus.” Adding: “This is a difficult problem – and the reason is not technological, it’s mostly economical.”)
She then moved in the post to this point, which is salient for us in Australia: “I think the extensions of the electric grid necessary to support the transition to renewables are an under-appreciated problem. Without the grid, nothing else is going to work.” Which sits four-square with what, as reported in this issue of the newsletter, Adi Paterson, a long-serving immediate past head of ANSTO, has been seeking to impress on the federal government in a recent letter to the Prime Minister.
Paterson has told the PM that, in policy, “we have lost the plot” by trying to pursue renewables rather than low-carbon energy and are doing this in a way that comprises the fundamental integrity of the electricity grid.
Paterson also put up a LinkedIn post just before the year’s end in which he snapped at AEMO that its market goal of 100 per cent “immediate penetration of intermittent renewables” has no reference to price, customers, ecology, landscapes or sustainable industry.
He added: “This ‘plan’ will not decarbonize our economy – we will look like the Germany of the southern hemisphere. And a smaller economy will result in no aluminium smelters, 10,000 kilometres of new grid (manufactured where?), massive investment in non-renewable batteries imported in to this country with a 10-year operational life, and no 24-hour cities.”
In a Sky interview with Peta Credlin in December he also commented that “we are committed to doubling our energy infrastructure to reduce the amount and stability of electrons it can carry.”
This is trenchant stuff, not coming from a political sniper but from a serious and very well respected engineer.
Will the Prime Minister respond when federal parliament resumes in this new year? I hope the Opposition takes an early opportunity to ask him to do so.
Keith Orchison
30 December 2023