Only reliable electricity can give the economic jolt we’ll need
By Judith Sloan
These past few months have taught us many things, including the fact many state government ministers are none too bright.
Competition for the wooden spoon has been fierce, including Victorian Health Minister Jenny Mikakos, who claimed the response of her department to the runaway COVID-19 outbreak at a Melbourne abattoir had been “perfect”. Mind you, NSW Health Minister Brad Hazzard has been giving her a run for her money.
But the competition is not confined to health. The recent actions of South Australian Energy and Mining Minister Dan van Holst Pellekaan demonstrate a failure to appreciate the new economic challenges and his determination to hammer the last nail in the coffin of the worst-performing state economy.
Last week, this minister expressed his support for SA accelerating the date at which the state should reach 100 per cent renewable electricity generation. The current time frame is 2030.
I don’t know what he thought he was doing attending the launch of the newly constructed gas-fired electricity generation facility at Barker Inlet in Adelaide last November. The minister raved about the plant, built by AGL Energy, being “good news for affordability and reliability of electricity supplies in South Australia”. Are we to assume that the plant will be closed down by 2030 (or before) for the state to meet its renewable energy target?
And I wonder how he interprets the depressing results of SA becoming an electricity island earlier in the year? As a result of the need to repair the interconnector linking SA with Victoria, the Australian Energy Market Operator was forced to drastically curtail the amount of renewable energy generated in the state and instead rely on expensive gas generation to ensure the stability and reliability of the grid.
The cost of managing the power system was $310m in just the first quarter of this year, more than double the previous record set in 2008. It is estimated that managing the grid accounted for 8 per cent of all energy costs compared with the historical average of between 1 per cent and 2 per cent.
South Australian voters might have expected a change of direction when the longstanding Labor government was voted out. But the Liberal government headed by wet Premier Steven Marshall is every bit as beholden to the renewable energy players as the previous government.
The dream is that a new interconnector will be constructed between SA and NSW that will allow the excess renewable energy generated in SA to be exported to NSW — when the wind blows and the sun shines, that is.
And because the interconnector will be regulated, consumers will bear the cost. This will significantly inflate electricity prices.
According to the witless policy advice to the SA government, reliable electricity could be imported from NSW and Victoria to offset the inherent unreliability of renewable energy, even given the addition of short-living and expensive batteries. This way the illusion of SA being 100 per cent renewable can be maintained.
The economics of baseload or intermediate electricity generation in those other states is undermined by virtue of renewable energy being sent across the border. And let’s not forget that the NSW government has silly plans in relation to the promotion of renewable energy, too. The same goes for Victoria and Queensland.
At this rate, all the eastern states could become an electricity island, awash with unreliable energy and insufficient backup.
Into this policy quagmire comes the advice of the ideological Australian Energy Market Operator, telling us that it would be technically possible to have 75 per cent renewable energy electricity generation. That’s if we spent a lot of money — for example, on more expensive interconnectors, transmission and distribution — and changed the rules to favour renewable energy providers even more than they do now. This is poor advice.
The only sensible alternative in the post-COVID world is to junk the obsession with renewable energy (which is an inefficient way of reducing emissions, particularly when measured on a life-cycle basis), to kill the subsidies and to secure affordable, reliable electricity based, in all likelihood, on new gas plants.
When green rent-seekers start calling for a green new deal — more subsidies for renewable energy — the response should be that we have had a green new deal for more than a decade. And it has worked out badly for Australia’s industrial competitiveness. It’s time for a change.
And when the rent-seekers moan about fugitive emissions from gas, tell them these have already been taken into account when emissions are calculated by the federal government. Estimates, including by the CSIRO, put fugitive emissions at between 1 per cent and 1.4 per cent of total production.
With the lower price of gas this year and the possibility that new reserves will be developed in the Bowen and Beetaloo basins and possibly Gippsland, we are on the cusp of an exciting new phase for electricity generation and other heavy industry. With cheaper and reliable power, it’s easy to foresee substantial investments in the manufacture of explosives, paper, glass and bricks, and in food processing, among other possibilities. It simply won’t happen if we depend on renewable energy.
To be sure, we won’t need to junk the raft of renewable energy that already exists in the electricity grid, although some will begin to wear out in the not-too-distant future. (Several overseas renewable energy construction companies are already leaving the country.) But only firmed electricity — that is, 24/7 power with backup — should be accepted from these providers, a requirement that exists in most parts of the world.
We have paid a heavy penalty — some of the highest electricity prices in the world — for allowing renewable energy providers to offer electricity into the grid without bearing the costs of reliability and stability (frequency/inertia).
Unless the SA government takes a realistic stance in relation to energy and other matters, the place will be just a footnote in our economic history in 50 years.
And I haven’t even mentioned the urgent need for the federal government to cancel the expensive and unviable submarine project. That might be the last straw for the state’s economy — or a wake-up call for the South Australian government to get real rather than chase rainbows.