This week’s renewable energy announcement by the Victorian Government sets the scene for higher electricity prices and more pain for businesses and consumers.
It reinforces what Prime Minister Malcolm Turnbull labelled a folly of “extremely aggressive, extremely unrealistic” renewable energy targets; what former Labor Federal Environment Minister Graham Richardson said was a policy “doomed to fail”.
Adopting a goal for 40% renewables without adding any stabilising gas-fired generation is setting a ‘Back to the Future’ course for South Australia 2016, the scene of the nation’s first ever whole -of-State blackout, and a series of smaller subsequent outages, accompanied by Australia’s highest electricity charges.
South Australia has learned the hard way and has now changed tack. A gas-fired power station is being brought out of (premature) retirement and the Government has set aside $500 million to build a new gas-fired generator to complement the intermittent wind and solar power which accounts for 42% of the State’s generating capacity.
Despite this very near and recent flashing warning sign, the Victorian Government is pressing ahead with its 40% wind and solar target, seeking to stop erosion of the Labor vote by the environmental movement.
Environmental activist groups think the change should be even more rapid, touting a ludicrous “100% renewable, right now” mantra. Their political representation, the Greens, have adopted a policy which goes significantly than the Victorian Government’s – worryingly so.
A part of the plan to increase penetration of renewable energy is to decommission coal-fired power. This is what happened in SA as well, resulting in the loss of hundreds of jobs and pushing electricity prices up substantially.
The process has already started with this year’s closure of the Hazelwood power station in the La Trobe Valley, south-east of Melbourne.
This move took out almost a quarter of the State’s power and has already resulted in 20-25% increases in wholesale electricity prices. Close to 1,000 employees and contractors lost their jobs.
To accommodate the subsidised new wind and solar power there will need to be more closures in the La Trobe Valley. The Loy Yang A and Loy Yang B power stations are next on the chopping block.
AGL owns Loy Yang A and has declared it is on a path to quit coal-fired generation. If the Greens have their way, AGL will be doing this within the next five years. And another two coal-fired power stations would also be shut down, including Loy Yang B, taking out as much as three quarters of electricity generating capacity available to Victorian customers at the start of the year.
Such a rapid run-down of generation capacity would have catastrophic consequences.
It would cause major disruption in NSW and havoc in Victoria. It would make the job of managing the SA grid almost impossible until planned gas-fired back-up is commissioned.
To fill the gap created by coal-power shutdowns, billions of taxpayer and private sector dollars will need to be spent on new wind and solar plants. But even assuming taxpayers and the market are willing to pay for this, there is a major structural problem: Wind and solar power are intermittent and battery technology is not yet capable of storing power for long enough to provide certainty of supply for more than a number of hours and definitely not for a whole State.
The world’s biggest battery storage plant is planned for SA, and even it has capacity only enough to keep about 300,000 homes on line for a handful of hours. As Treasurer Scott Morrison said in Adelaide recently, it is a ‘nice to have’, but it is not a solution.
This situation has manufacturers, agribusinesses (such as dairies, pig and fish farms) and industrial users of gas very frightened indeed. Unions are also very worried, because businesses would close and thousands of jobs would be lost if power supply could not be guaranteed.
Indeed, industry and union anxiety is not new this week – it has been expressed before.
But this week’s announcement, potentially exacerbated by the Greens policy, can only add to anxiety.
The Greens want to see coal-fired power generation shut down in NSW as well. AGL has already indicated it plans to close the Liddell power station within the next five years, taking out about 10% of NSW capacity.
Electricity interconnection between the States helps them deal with demand spikes. When that element is not available, and demand overloads the system, it is now an uncomfortable reality that a whole State can go black, as SA found out the hard way last year.
Since the closure of Hazelwood, Victoria has drawn more on NSW power. But will that cross-border back-up be enough after one or both of the Loy Yang stations are closed? After Liddell is closed there will be times when there is little or no power available from NSW.
Last summer, the Energy Market Operator put out calls for voluntary power use reduction in order to head off a possible system overload in NSW. The big electricity users were able to cut back on their use, so black outs were avoided.
At such a time there is no NSW power available for any other State’s use. If Victoria is short of power at the same time, the heat will really be on.
Unless we have a mild season, the interconnected SA-Victoria-NSW grid will be tested again this summer. In sustained hot weather across southern Australia, with little wind, the sytem is more vulnerable than it has ever been.
Implementation of Greens policies would markedly increase this vulnerability.
When the crunch came in SA – in winter – the Government was forced to buy diesel generators and encourage small businesses to do the same. Not a win for the environment.
While it has wisely taken steps for the future, SA’s reliance on the Victorian interconnector remains – which is another loss for the environment because this electricity is generated from brown coal (the most carbon intensive type) which has to be transported 1000 kilometres, with 15-20% lost in transmission.
So, at 42% renewable energy, SA is still dependent on brown-coal electricity from 1000km away.
If the Labor/Greens policies proceed, you can bet the gas-fired generators in SA will be working hard.
The question is, what will Victoria do? Hope that NSW can prop it up in time of need?
The State’s major energy users, plus tens of thousands of agribusineses and other smaller business users nervously await an answer. And so do millions of residential electricity and gas consumers.