Heresy: The government’s lack of electricity energy policy is probably a good thing

| September 27, 2018

Even though I am very keen on the transition to renewable energy, I don’t see the government’s lack of policy as a big problem.

According to the Clean Energy Regulator’s August assessment, there were 3,000 MW of new renewables connected to the grid since Jan 1 2016. Some of these plants still have not reached full production but by the time they do, over the next few months, following the trends shown in the NEM tracking widget OpenNEM the grid will be running at close to 25% renewable including rooftop solar and hydro.

In addition, the CER finds that there is a further 5,000 MW in round figures committed. Because the new wind farms have high capacity factors and most of the new solar farms are tracking types. this 5,000 MW will generate about 16-17,000 GWh per year. That will take the renewable total to 33-35% of NEM supply.

However it seems that the Committed figures do not include the 928MW recently awarded by Victoria, the 1,000 MW that Alinta is calling for expressions of interest, the 420 MW solar farms that Adani and Simec Zen are building in SA, 800 MW of solar and wind that Snowy Hydro is seeking bids for, the 140 MW Solar Reserve plant in SA, the 400 MW or so on AGL’s radar or the Queensland Government’s 400 MW plan etc etc.

Nor does it include about 900 MW of other plants which the CER lists as probable. Some of those “probables” have since received PPAs. Thus, at the current rate by 2022-23 there will be another 4,000-5,000 MW of large-scale plants on line which will add a further 14-16,000 GWh taking renewables to 40-42% of generation.

All this assumes that economic growth entirely offsets increases in behind the meter solar production and energy efficiency. While this has been the case for the last couple of years, the longer-term trend is down. Peak demand is down from 35.5 GW to 32.5GW while annual NEM demand is down from about 210 TWh in 2008 to 190 TWh in the last 12 months (Source AER/AEMO).

The trend for behind the meter generation and energy efficiency to reduce demand has been most noticeable in WA where generation by the South West retailer Synergy has fallen by 14% since 2014

The recent trend for behind the meter solar is up quite dramatically, it has moved from about 800-900 MW/y to a projected 1,500-1,700 MW this year, so it is quite likely that wholesale demand will fall by about 3-5% by 2023. In that case and particularly if one or two of the less certain solar and wind projects come to fruition,

45% renewables is achievable by 2025 without any action by the federal government. If some of the big projects like Liverpool Range and Golden Plains wind farms which can supply power well below current wholesale prices get up, 50% renewables by 2025 is well within the bounds of possibility.

In a strange way, lack of action by the federal government will force companies to follow Mars, CUB, Telstra, Bluescope etc and set up Power Purchase Agreements directly and thus may speed up the transition, because businesses looking for “certainty” can certainly buy power on long term contracts directly from wind and solar farms for less than they can get contracts from the big retailers today. That is why corporate PPA’s are booming in Australia as well as in many other countries.

Then of course the question is security of supply and handling all those intermittent renewables. To be brief it is not a significant problem. In the first case even after Liddell closes there will be between 41 and 42GW of dispatchable capacity left on the grid, while peak demand less minimum renewables will be around 28GW.

Other jurisdictions have already shown the way. Southwest Power Pool in the US which distributes about 30% more energy than the NEM gets about 27% of its electricity from wind and very little from solar or hydro, but on some days, it can get 60% from wind alone and is planning for 75%, similar numbers apply in Texas, Germany, California, Scotland and Denmark and yet their grids survive.

We are lucky that our interstate connections which run between 25 & 30% of each state’s peak demand (except Queensland’s) are significantly stronger than most European or North American interregional connections which are between 5 & 15% of peak demand.

Further we have a very good balance between wind, solar and hydro and according to ANU 22,000 potential sites for pumped hydro. At 45% renewables it will be about 7% hydro, 20% wind and 18% solar. Moreover, peak hydro is more than 20% of NEM demand. Peak hydro in SPP, Texas, the UK and Germany is between 3 and 7% and they all manage with lower wholesale power prices than us, a higher renewable share and enviable supply reliability.

To give another perspective on supply, after Tasmania’s new windfarms come on line, the only state to be a net power importer will be NSW. SA is already a net exporter, Victoria has recovered from the loss of Hazelwood and is marginally positive (although in the last couple of months very low output from the brown coal plants may have caused a deficit) and of course Queensland has been profiting from NSW for years.

To put the costs of transition in an unusual light. In real terms a 5kW solar system with a 10 kWh battery costs as much as a television did in 1958. In seven years 70% of Australian households found the money to buy a television.

If 70% of Australian households and small business premises found the money to buy a battery and they were connected into a vast virtual power plant, that would provide about 40 GW/80GWh peak supply so every generator, wind turbine, hydro dam and solar panel in the country could go offline for 2-3 hours before we ran out of power.

In conclusion if the federal government goes to sleep on the electricity industry (and NSW wakes up) it is probably a good thing. Any new federal policies are likely to be costly, out of date long before they are introduced and counterproductive.