Electricity Woes

Recently the National Electricity Market in Eastern Australia had to be temporally suspended due to a short-fall in generation.

Now, the new Federal Government, that came to power on a promise to substantially cut power bills, has had to concede, that instead, there will be substantial price increases.

In part, they are blaming the war in the Ukraine; the consequent sanctions against Russia; and Russian retaliation. 

During the election campaign the Shadow Minister for Climate Change and Energy repeatedly asserted that the solution lay in increased wind and solar generated electricity, that he also repeatedly asserted were cheaper than fossil-fuel generated electricity. 

Yet, now the solution is said to lie in 'temporary' price caps on the spot-price of steaming coal and gas (mainly methane).  

An observer from another planet might ask: why the global demand for steaming coal and gas is still rising (and with it their price) when wind and solar are, allegedly, so much cheaper? 

Meanwhile, last July (2022) Wendy and I had occasion to visit the town of Rønne on the small Danish island of Bornholm. There on the quayside were a dozen huge wind-turbine nacelles.

As I had some spare time on my hands, I looked on-line and discovered that they were Vestas V174-9.5 MW units for installation off the coast of Germany, for either the Baltic Eagle or Arcadis Ost 1 project. I compared the published project costs with those of other large scale energy projects around the world.

You can read my analysis here (Europe 2022 - Part 1 - An Energetic Diversion). 

Suffice it to say, that wind-generated electricity is not price-competitive with modern fossil generated electricity - it's just a lot cleaner.

Most importantly: nor is off-shore wind anywhere near price-competitive with the latest nuclear generated electricity (on a dollar per unit of installed capacity basis), as nuclear power has a similar cost per Watt of capacity but doesn't require additional batteries or pump-storage to satisfy fluctuating demand.

The present situation on the east coast of Australia may (or may not) have been aggravated by the war in the Ukraine.  Yet, the short-fall was entirely predictable, over a decade ago, and  it will not go away when the war ends.

In anticipation, back in 2012, I called for a 'root and branch' reappraisal of the combined impact of the Renewable Energy Target scheme, in the context of the operations of the National Electricity Market (NEM):

I asserted that together these were making essential base load generators unprofitable and may lead to brownouts and blackouts in the future:

The article was written at a time when an ill-conceived Carbon Tax, that only targeted particular industries and in some cases individual businesses, was severely distorting the energy marketplace even further. 

A year earlier I had objected to the Gillard Government's short lived Carbon Tax on these grounds:

The Carbon Tax has gone but not the underlying problem remains: traditional coal fired power stations - upon which we will still need to rely for at least another decade - cannot remain viable as long as they are continually gazumped in the NEM by cross- subsidised renewable electricity generators.

This cross-subsidy, is in the form of Large-scale Generation Certificates (LGC's), paid for by electricity retailers (in other words: you). Each MWh of renewable energy supplied receives this cross-subsidy (effectively at the expense of other generators). It applies irrespective of the rapidly fluctuating (NEM) market price for that electricity (energy), that from time-to-time is very low or negative, due to ample wind or sunlight and low consumer demand.

By this means, renewable electricity, including rooftop solar, has been given a 'leg-up', in order to meet the Australian Government's Renewable Energy Targets.

When governments intervene in markets it always has consequences. Such an intervention maybe necessary in the long-term public interest, for example due to externalities, like the environment, or international responsibilities. Yet, then it is beholden on Government to put in place accompanying means of mitigating the inevitable negative consequences. 

In this case the negative consequences of Renewable Energy Targets on base-load electricity generation have been well known for well over a decade but nothing has been done in mitigation.

Possible mitigations might include:

• an off-market base-load generation reservation and/or, perhaps;
• ineligibility of all Renewable Energy Certificates (small and large scale) for energy supplied when supply exceeds demand.

Comprehensive modelling of these and other possible interventions, such as a targeted subsidy, is now essential to determine the best transition path to a secure electricity future.

A 'root and branch' review is long over-due.

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