Australia’s Subsidised Wind & Solar Rush Threatens Total Power Grid Collapse

Australia’s self-inflicted renewable energy calamity was as perfectly predictable as it was perfectly avoidable.

Now, amongst the myriad of energy commissars and boffins, it’s a case of avoiding responsibility for the disaster that everybody (save them) saw coming.

For years the likes of Kerry Schott – head of the inaptly named Energy Security Board – have been talking up the inevitable transition to an all wind and sun powered future. However, now, with Australia’s Eastern Grid on the brink of collapse, Schott and her fellow travellers are all crab walking away from the disaster for which they are, in large part, responsible. [Note to Ed: what’s that line about ‘failure being an orphan’?]

The Federal Government’s Large-Scale Renewable Energy Target is the principal source of subsidy for wind and large-scale solar – delivered by way of renewable energy certificates (LGCs) – the cost of which is added to all retail power bills – to the tune of some $60 billion over the life of the LRET.

The Fed’s Small-Scale Renewable Energy Scheme underwrites domestic rooftop solar with renewable energy certificates (STCs) worth $40 per MWh to the tune of $1.9 billion each year – with the tab for that ludicrous largess picked up by all Australian taxpayers.

Both the LRET and SRES are doing precisely what they were designed to do: destroying Australia’s reliable and affordable power supply. As that object has largely been achieved, those responsible for promoting and maintaining Australia’s renewable energy scam are apparently keen to smoke screen their way out of trouble.

Here’s a run of articles from The Australian detailing Australia’s renewables driven energy debacle.

Renewable energy policy sparks electricity free-for-all
The Australian
Judith Sloan
5 January 2021

There were some important developments in our electricity market last year that attracted scant attention but have potentially important future ramifications.

The National Electricity Market — which covers all the states bar Western Australia, plus the ACT — is now a national market in name only. Every state — and the ACT — has decided to dance to its own tune, and the national nature of the market is being held together only by relatively weak interconnectors that link the states’ electricity supplies.

In the event of blackouts or persistent price increases, consumers (and voters) will know who to blame — the state governments. Fortunately, this realisation is acting as a brake, stopping even worse energy policies, with the possible exception of NSW.

The original vision of the NEM was to unite the state-based electricity generation systems so electricity could be produced more efficiently using an agreed set of rules. In this way the NEM would replace the self-reliant, over-engineered and overstaffed state systems. For many years the NEM worked well. Productivity in the electricity sector improved and wholesale and retail prices fell. Investment decisions were made with the backdrop of the NEM in mind. Privatisation occurred in some, but not all, states.

Cracks began to appear with the uncoordinated addition of intermittent renewable energy into the system, initially wind but more recently large-scale and rooftop solar. In this context, the combination of the federal government’s renewable energy target, which began in a modest form in 2001, and state initiatives to promote renewable energy has been critical. Without these impetuses, the growth of renewable energy would have been a fraction of what has occurred.

By 2010, all the earlier sectoral productivity gains had been eliminated. And since then, sluggish productivity in electricity, gas and water has been a drag on national productivity. Electricity prices soared, reaching some of the highest tariffs in the world. Thankfully, there has been some recent abatement in prices.

Fast forward to this year, and the final RET target of 33,000 gigawatt hours was met. One effect has been the decline in the underlying degree of subsidisation implicit in the RET. Another effect has been the halving of the value of the large-scale generation certificates, the subsidy mechanism that operates alongside the RET.

Renewable energy companies, many overseas owned, increasingly have turned to state governments and the ACT to underwrite their projects by entering into power purchase agreements that effectively guarantee cashflows on projects. With the price of electricity often close to zero at certain times of the day, there are few companies that would be prepared to invest in renewable energy without this support.

State governments and the ACT, in turn, have devised their own plans involving RETs, entering into contracts with renewable energy companies and opening up zones in which renewable energy installations are concentrated. South Australia was an early mover and now has massive installations of renewable energy with the output often being curtailed because there is no demand.

But with the backdrop of the 2016 statewide blackout in mind, the SA government’s obsession is to see an interconnector built with NSW to reduce the degree of renewable energy curtailment as well as improve the reliability of the state’s grid.

While Victoria has entered into deals with renewable energy companies, the fragility of that state’s grid has made the Andrews government wary of pushing large-scale renewable energy installations too quickly without immediate firming capacity. Account is taken of the unexpected growth in rooftop solar installations when determining the required investment in large-scale renewable energy.

This latter consideration is significant and errors can make a great deal of difference. For instance, the Australian Energy Market Operator recently predicted that a certain amount of additional rooftop solar will occur in the coming years, when the likely figure is three times greater based on the current uptake.

The latest development in these self-directed state government policies is the initiative announced by NSW Energy and Environment minister Matthew Kean. Using the veil of cabinet-in-confidence to refuse to release the modelling underpinning his proposal to push an additional 12 gigawatts of renewable energy into the NSW grid within a decade, he at least has an inkling that the modelling is full of holes and would not withstand scrutiny.

The failure to adjust the amount of large-scale installations to accommodate variations in the uptake of rooftop installations means the timing of the closure of the remaining coal-fired power stations easily could be brought forward. Balancing (reliable) supply with demand into the future is a tricky proposition.

Of course, Kean may be in another position or out of politics when real troubles arrive. But the NSW grid wobbled recently when one of the Liddell units went down, the Tomago smelter was put on standby and the wholesale price peaked at more than $10,000 a megawatt hour.

In addition to the fragmentation of the NEM back to its state components, the market is also separating between intermittent and firmed capacity, with the characteristics and pricing of the two parts quite distinct.

Without state government con­tracts, intermittent operators wouldn’t make money. By contrast and depending on what happens with the timing of coal-fired plant closures, the establishment of new gas plants and pumped hydro — batteries are likely to remain a side play for some time — the money is likely to be in provision of firmed capacity.

While all this may sound complicated, it’s essentially the result of cack-handed government intervention and woolly thinking about the economics of electricity generation. In the meantime, the federal government is doing its best to offset the more perverse effects of the states’ policies, including by underwriting a new gas plant to replace the lost Liddell capacity. And lower gas prices as well as close to zero electricity prices during some days are helping to reduce wholesale electricity prices. But watch this space in 2021 and beyond.
The Australian

Clock ticking in rush for effective electricity system
The Australian
Graham Lloyd
5 January 2021

The red lights are still flashing on the energy security dashboard where it matters most.

Coal, the bedrock of Australia’s existing electricity system, is being crushed and forced out by weather-dependent renewables that cannot be relied upon to deliver.

The boom in wind and solar means the withdrawal of coal generation is likely to happen faster than had been anticipated.

Technology fixes are in the pipeline but it is still not certain what they will be, or whether they will arrive in time or at the scale required.

The bottom line, according to Energy Security Board chairwoman Kerry Schott, is the system now in place is no longer fit for purpose.

Networks are being squeezed by the phenomenal uptake in rooftop solar at a household level and the boom in construction of large-scale wind and solar.

An abundance of energy at some times has crashed wholesale prices.

This will speed the end of coal, but what then?

The ESB says continued innovation and the subsequent cost reductions in the likes of electric vehicles, hydrogen electrolysers, batteries and fuel cells have the potential to fundamentally reshape the future as these technologies are increasingly paired with solar and wind.

But the International Energy Agency has warned that the COVID-19 pandemic might slow development as investors seek safer and lower risk investments.

The ESB says this presents a challenge for the NEM as existing power stations age and need to be replaced or refurbished while there is increasing ambition to reduce emissions

The ESB will this year recommend a raft of reforms to take ­effect from 2025 to tackle the looming problems.

Schott has been candid that while everyone agrees on the problems, “many people in the energy sector have different perspectives on the possible solutions or priorities”.

The transition is under way and the clock is ticking in a rush to ensure Australia retains an electricity system that is affordable and works.
The Australian

Energy Security Board lifts red flag on renewables
The Australian
Editorial
6 January 2021

Finally, there is acknowledgment that Australia’s electricity system has suffered through a combination of denial about the shortcomings of weather-dependent sources of renewable energy and policy misadventure by governments eager to showcase their green credentials. The warnings of engineers, that intermittent generation cannot maintain the national electricity grid as it was built, have been proven correct. The latest report from the Energy Security Board has thrown up a red flag that warrants deep reflection.

It would have been sensible, clearly, to start the reconfiguration of Australia’s power system with a firm plan on how it would work. Instead, there has been a chaotic and contested process of undermining the existing system using public subsidies without proper regard for what ultimately will replace it. The warning from the ESB that urgent action is required is not yet backed up with detail about exactly what actions are needed or even what technologies will be available. Instead, there are vague references to making sure that all consumers are able to participate both as power providers and consumers.

The federal government’s technology road map points to a future with more storage and new technologies including hydrogen. But these technologies are not there yet and decisions must be made soon on what is going to replace the coal-fired power that at times provides up to 80 per cent of demand. Pumped hydro, including Snowy 2.0, is a drop in the bucket of what will be required. The ESB report makes clear there is a prospect that existing coal generators may have to retire earlier than expected because of unsustainable price pressures from the influx of renewables. The challenge is for industry and governments to agree a way forward that does not result in higher prices for consumers or Australia’s heavy industry being forced to move offshore. Admitting the problem is a first step. Deciding what to do is more difficult, particularly when industry participants and various levels of government cannot agree.

The ESB remains fully committed to Australia’s transition to low carbon dioxide emissions. ESB chairwoman Kerry Schott says the transition to date has resulted in emissions being cut by about 25 per cent from 2005 levels. She says: “By 2030 those emissions will be between 40 and 60 per cent lower than 2005. And between 70 and 95 per cent lower by 2042.” Given the experience to date, however, the problems identified will get only worse as the percentage of intermittent generation in the system increases. Dr Schott concedes there has been an “exponential increase of system instability in recent years”. She says the energy sector was slow to deal with the reality that power systems with rising levels of intermittent, weather-driven generation are simply harder to manage. It is more difficult, she says, to maintain security and reliability with more variable generation: “Years of insufficient action in the face of this fact (have) cost us.”

While there is broad agreement about the issues that need to be tackled, there are conflicting views on how this should be done or what technologies should play a part. A credible road map is urgently needed that can bring industry and all levels of governments to the table. The National Electricity Market, which covers all states bar Western Australia, is now a national market in name only. State governments effectively have extended the federal renewable energy target by entering power purchase agreements with renewable energy companies.

No one seems to know the answer to what will happen when the coal-fired generators have gone. It is hard to see how future coal-fired plants will find financial backers. The federal government is right to keep the gas option alive as a transition. Alternatives of battery storage and hydrogen may have potential but they are unlikely to be available at sufficient scale and low enough price anytime soon. This leaves complex systems of solar micro-grids and demand management arrangements that pay consumers and industry not to use power. There is also nuclear, a technology that has been identified globally as an essential part of a low-emissions power supply future. It is a key part of US president-elect Joe Biden’s Green New Deal. It is a sobering fact that the loudest voices against nuclear have been those that have claimed, erroneously, that a renewable energy transition will be cheap, reliable and effectively pain-free.
The Australian

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January 8, 2021 at 12:30AM

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