Gas is clearly the solution to renewable intermittency

August 12th, 2016

The latest forecast from the national energy market operator has raised serious concerns about future electricity reliability NSW, Victoria and South Australia.

In a clarion call to next week’s COAG Energy Ministers meeting, the Australian Electricity Market Operator has predicted possible issues with electricity supply reliability within three years in SA and within another five years in NSW and Victoria.

This is a pretty safe bet in the case of SA, which has already had a recent electricity price spike crisis caused by a combination of cold weather, weak wind generation and a lack of coal fired backup from Victoria.

The underlying reason for the recent SA crisis and the worrying AEMO reliability breach forecasts are the rapid deployment of intermittent wind power and the closure of coal-fired power sources.

The obvious solution to this problem is greater use of gas as an electricity source, which was part of the solution to alleviating the SA crisis, and is exactly what has happened in the US in recent years, creating both cheaper energy for industry, business and consumers and simultaneously reducing carbon emissions.

This is a formula which has been raised by Federal Energy and Environment Minster Josh Frydenberg, who will chair next week’s COAG meeting in Canberra.  Mr Frydenberg has called for an end to the State-imposed blockages to development of gas resources in Victoria and NSW – and his call has been backed by SA Treasurer and Energy Minister Tom Koutsantonis.

The AEMO report — likely to be a hot topic at the COAG meeting — anticipates the outcome of current State policies to reduce carbon emissions, notably in Victoria, which would be likely to bear the brunt of coal-fired generation closures.

AEMO modelling results suggest “…potential (electricity supply) reliability breaches occurring in South Australia from 2019-20, and New South Wales and Victoria from 2025 onwards.”

“These breaches would most likely occur when demand is high (usually between 3-8pm), coinciding with low wind and rooftop photovoltaic (solar) generation, and low levels of electricity supply imported from neighbouring regions.

“In this scenario, the majority of coal-fired generation withdrawals are assumed to come from Victoria, which would reduce that State’s generation output to support South Australia and New South Wales via the interconnected network.”

The AEMO report may be an unpleasant dose of reality for renewables promoters including the Australia Institute and the Clean Energy Council, who vehemently denied that the failure of wind power had anything to do with the price-hike crisis in SA.

Both organisations claimed that battery storage was the missing link and that current technology batteries could be deployed more cheaply than any other solution.

It was no surprise then to see the cheers from the Clean Energy Council at this week’s  Commonwealth announcement of a battery trial in SA, a trial which would provide a “glimpse into our renewable energy future”.

If that is the case, then it might be considered a somewhat disconcerting glimpse because it is very expensive and totally reliant on taxpayer funding – in fact a massive 80% subsidy from taxpayers.

This move is understandable when the batteries cost a whopping $16,000 each.

Participating rooftop solar customers are being asked to stump up $3500 per battery  – itself no small contribution.  In return, they will get the ability to store power and use it at times when the sun is not shining.

Clearly, this is no cut-and dried winner.  It will take a long time before customers are able to recover their $3500 investment.  With the effects of inflation and technology atrophy, it is doubtful the units will ever be able to catch up with full cost recovery including the cost of capital for the $16,000 unit price.

This is a widespread problem in existing rooftop solar set-ups, which are dependent on purchase/installation subsidies as well as generous Government-mandated feed-in tariffs for them to deliver an effective return to the purchaser.

Another challenge with this type of approach is that the feed-in power is difficult for the electricity network managers to assimilate into the grid without sacrificing network quality of delivery – which confers a cost to the network owner, or other customers, or both.  So other customers add their subsidy to the taxpayer subsidy handed out for the units in the first instance.

So while this experiment may work in a technical sense, it is a far cry from an economical package; which means it is unlikely to ever be implemented anywhere except where political mood supports heavy taxpayer subsidisation.  If unreliability of supply remains an issue, as it has been in SA in recent summers and this winter, it is an open question as to how long taxpayer patience will last.

In the meantime, gas-fired power remains the only viable complement to renewables as we seek to reduce our national carbon emissions and those of the whole world.

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