Antinuclear

Australian news, and some related international items

Peter Martin’s guide to the Finkel review, and Tony Abbott’s obstructionism

Doing nothing, as Abbott and other non-readers seem to want, doesn’t offer a way out.

Worse, it allows the system to become more fragile.

Finkel wants to keep the lights on and wants to keep the system stable so that new operators feel able to invest. Abbott is standing in the way.

Finkel review: a bluffer’s guide for those who haven’t read it  How Finkel would keep the lights on, and why Abbott’s not so keen http://www.brisbanetimes.com.au/comment/how-finkel-would-keep-the-electricity-on-20170614-gwqwqo.html Peter Martin  So much does Tony Abbott dislike the Finkel review of the electricity market that he hasn’t read it. On Monday, three full days after it was released, he branded its key recommendation a “magic pudding” and a “tax on coal” while conceding that he had been guided by “reports of the report” rather than the report itself.

I understand where he is coming from. Who wants to wade through 200 pages of a report they won’t like? But I’d feel better about it if I thought that at least some of the 20 or so other backbenchers who spoke out against the Finkel Report at the Coalition party room meeting on Tuesday had taken the time to read it.

I fear that most haven’t, and I reckon you probably won’t as well.

So in the interest of ensuring the people deciding the future of our electricity system have some idea of what they are talking about, here’s my potted summary.

First up, electricity prices. While the wholesale price accounts for only 31 per cent of the typical bill (the rest is distribution, retailing and the like), wholesale prices have been soaring in recent months.

It’s happening because unreasonably cheap electricity is leaving the system. Until March the Hazelwood power station in the La Trobe Valley supplied as much as 25 per cent of Victoria’s electricity and 5 per cent of the nation’s. It was cheap partly because the brown coal that fed it wasn’t good enough for much else, and especially because its owner, a French firm called Engie, had bought it for next to nothing. It didn’t need to recoup the cost of building it.

It’s the same at the nearby Loy Yang A power station. Its owner, AGL, bought much of it from the Tokyo Electric Power Company in a fire sale after the Fukushima nuclear disaster. Whatever replaces Loy Yang A and Hazelwood will cost real money, which will have to be recouped.

Seven coal-fired power stations are due to close in the next 20 years, each having reached the “retirement age” of 50. Each is roughly the size of Hazelwood.

But for a decade now scarcely anyone has felt confident enough to put up real money to build a new conventional power station. The rules about carbon prices and targets keep changing against the ever-present backdrop of an official emissions reduction target that means they will have to change again.

Plenty of investors have been prepared to build new wind and solar plants (having little to fear from a change in the rules) but those wind and solar plants don’t operate around the clock, meaning gas has had to close the gap.

Extra output from gas-fired power stations was used to close the gap 24 per cent of the time in May this year, up from 9 per cent three years ago. But three new enormous gas export contracts have suddenly made it hard to get, and very expensive.

Doing nothing, as Abbott and other non-readers seem to want, doesn’t offer a way out.

Worse, it allows the system to become more fragile.

During the Melbourne Cup a decade or so ago I stood in an electricity control room and watched as power stations around the state were directed to turn off or turn down their output while the race was on and then resume and increase their output after it was over and factories restarted and demand returned to normal. Wind and solar plants are bad at doing the kind of regular adjustments that are needed to keep the system stable minute by minute. They turn on when they want to, rather than when we want them to.

So Finkel has recommended that they be reconfigured to provide the kind of fast frequency response we have traditionally got from coal and hydro. It ought to be technically feasible. And he wants all new power wind and solar plants to come equipped with backup batteries so their output doesn’t suddenly drop.

To make responding to the next lot of closures easier, he wants each big generator to provide three years’ notice before closing down, instead of five months, as did Hazelwood.

And he wants a widely-understood and stable “Clean Energy Target” in order to end what he calls the “investment freeze” outside of renewables.

Unlike the present Renewable Energy Target, the Clean Energy Target would be technology-neutral. Any generator that produced power below a baseline of emissions set by the government would be regarded as “clean”, whether it made the power from wind, the sun, hydro, highly-efficient gas or even coal, should that one day be possible.

Retailers would have to buy a certain proportion of their electricity from “clean” generators (and would have to obtain certificates from them to prove they had done it), if necessary by offering more.

His modelling suggests the target would leave more coal-fired power in the system than would an emissions trading or emissions intensity scheme, but there’s probably little difference.

Finkel wants to keep the lights on and wants to keep the system stable so that new operators feel able to invest. Abbott is standing in the way.

Peter Martin is economics editor of The Age.

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June 16, 2017 - Posted by | AUSTRALIA - NATIONAL, energy

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