Businesses will need to cut their power use this summer or face supply interruptions, despite a reinstatement of some dormant gas-fired power generation, according to the Australian Energy Market Operator (AEMO).
At the same time, consumers face increasing electricity prices and ongoing renewable energy subsidies. And at least two States, Victoria and South Australia, will be desperately trying to avoid blackouts by reaching for diesel generated electricity.
These are the consequences of the closure of coal-fired power stations in South Australia and Victoria and the rapid deployment of intermittent wind and solar power.
AEMO announced this week that it had identified 2000 megawatts of power ‘resources’ in the East Coast grid which would guard against the risk of power cuts in Victoria and NSW this summer.
However, any rejoicing at a ‘discovery’ of new supply would be misplaced. In fact the AEMO forecast of increased availability for some customer segments is based primarily on agreed customer reduction of demand in other segments (1143MW).
The other major factor is the reinstatement of gas-fired power (833MW) from generators which had not been operating or had been partially mothballed. This return to operations by gas-fired generators in Queensland, Tasmania and South Australia is good news for business and consumers.
However, despite this rekindling of gas-fired capacity, the broader electricity supply situation remains constrained.
With its demand response strategy, AEMO is seeking to address a supply problem by convincing some electricity users to cut back their consumption so that others may avoid disruption. This is good news for some – older people relying on air conditioning for example –but it is not good for business. It is a regressive step, which, if sustained, can be expected to flow through to reduced economic activity.
It also sets the scene for sustained or increased wholesale electricity prices, because demand exceeds supply – aside from other possible factors affecting price.
While this demand management strategy by AEMO may pay political dividends (via reduced potential consumer disgruntle at power outages), it does nothing to resolve future demand increases as population grows.
And as the grasping for diesel generation in SA and Victoria illustrates, there is no certainty it will be enough.
On current policies, every Australian State is increasing its taxpayer-funded commitment to increased renewable energy generation and storage.
In recent years SA has led the pack. Having shut down its coal-fired power and switched to wind and solar power (42% or more), it has suffered some of the highest electricity prices in the world, and been forced to rely on brown coal-fired electricity being transported 1000km from eastern Victoria to fill the gaps in SA supply.
Now, having allowed the closure of the Hazelwood coal-fired power station, Victoria has its own problems, and is also reaching for diesel power – as many as 100 units to be set up on the site of decommissioned coal-fired generators at Morwell, in south-eastern Victoria.
Despite Government reassurances to the contrary, Victoria’s wholesale price of electricity has jumped markedly in the wake of the Hazelwood closure. Recommissioning gas-fired generation has helped get the price of power down in SA.
Yet, the Victorian Government still refuses to look to the solution that developing its own natural gas resources could provide.
The SA example should provide more than enough guidance for the Victorian Government, which has a policy to go even further than the current SA deployment of wind and solar power – to 50% renewable energy by 2030, in fact.
It was natural gas which came to the rescue when the State suffered its unprecedented whole-of-State blackout last year. Now the SA Government plans to spend $400-500 million to build a gas-fired generator to provide the stability the grid needs to ensure supply when the sun is not shining and the wind is not blowing.
It needs this gas power because the wind and solar energy, plus the much vaunted (but undisclosed cost) Elon Musk big battery storage capability are not enough to ensure security of electricity supply.
The SA Government has taken the first steps towards this future stability goal. Having seen mothballed gas-fired generators back in action, this week it announced the ‘recommissioning’ and expansion of existing plant which had been wholly or partially dormant.
This is an important interim step in restoring stability for the potentially demand-intensive summer period. And it is an important step in cutting out the need for high-carbon emission diesel electricity generation.