Antinuclear

Australian news, and some related international items

Peter Martin on the role of gas in causing Australia’s high electricity prices

It’s not the wind, it’s the gas. Why power prices are going berserk http://www.brisbanetimes.com.au/comment/it-not-the-wind-its-the-gas-why-power-prices-are-going-berserk-20170712-gx9lxe.html, Peter Martin, 12 July 17

Prepare for a shock. On July 1 electricity prices jumped 15 to 20 per cent in NSW, 16 to 20 per cent in South Australia, 19 per cent in the Australian Capital Territory and 11 per cent in Western Australia.

All this, three years to the day since the Coalition axed the carbon tax.

Victoria gets six months’ grace, with increases of about the same size due in January.

And those are just the retail prices. Wholesale prices and those charged to businesses that buy directly are up an extraordinary 60 to 70 per cent. It’s renewables that are doing it, along with the closure of Victoria’s giant Hazelwood coal-fired power generator, according to Tony Abbott.

The truth is simpler, and speaks volumes about the appalling way we’ve handled energy planning.

 South Australia is the poster-child for renewables. It has far more wind farms than any other state, more solar cells and has closed all of its coal-fired power stations. It’s also the poster-child for power prices. They are the highest in the nation and among the highest in the world. But, to be fair to renewables, they’ve always been the highest, even back in the days when most of South Australia’s power was overwhelmingly sourced from appallingly low-quality coal that was useless for anything else.

In his latest emissions audit prepared for the Australia Institute, the Australian National University’s Hugh Saddler graphs the South Australian wholesale price since 1999 alongside the share of its electricity output produced by wind. There’s no relationship. As the share of wind has climbed to 45 per cent, the wholesale electricity price has moved both up and down in real terms, and even now is slightly below the peak reached in the days when wind powered just 5 per cent of the state.

His second graph shows an ultra-clear relationship. The electricity price has moved up and down in tandem with the gas price, almost exactly.

“The correlation is striking,” Saddler says. “It confirms that higher wholesale electricity prices, and hence higher retail prices, are almost entirely caused by higher gas prices.”

“A similar, though less stark effect is seen in the other mainland eastern states – this is not a malfunction of the National Electricity Market, but precisely how it was expected to operate.”

Gas is the swing fuel. Although it doesn’t supply a particularly large portion of Australia’s electricity, it usually provides the last bit when nothing else is available, and at those moments it determines the price.

Things were set up that way because back in the 1980s and 1990s electricity suppliers around the world realised they would need to transition to low-emission fuels. They wouldn’t go straight away to zero emissions because that would be expensive and low emissions weren’t yet required by law. Instead they met the future halfway, knowing that if instead of building new coal-fired power stations they built new gas-fired ones, they would be better able to deal with the carbon price or carbon rules when they came.

It helped that gas was ridiculously cheap.

But then at about the same time they moved towards a carbon tax, the Rudd and Gillard governments approved massive gas export terminals in Queensland with the ability to suck up gas from as far afield as Bass Strait and ship it to Japan.

For a while, gas prices actually fell as production ramped up in anticipation of the export deals, but couldn’t leave the country. Then, when the terminals were complete and exports began, prices went berserk. Whereas once it had cost gas-fired power stations very little to come in as the swing supplier, suddenly it cost them and their customers big-time.

And there are few other swing suppliers. Coal-fired plants usually can’t do it. They are either on or off, and they take a long time to turn on. Wind can’t do it. The blades are either turning or they’re not. Same with the sun. Only hydro-electricity is as good as gas at rapidly responding to peaks (better, actually) but when the water that turns the turbines is used up, it can’t turn them again until it rains.

Elon Musk and the South Australian government have begun to find a way out. The 100-megawatt battery farm the Tesla chief has promised South Australia (the biggest in the world) will indeed be tiny compared to South Australia’s needs, as Josh Frydenberg, Barnaby Joyce and all manner of Coalition MPs have been quick to point out. But, as the central role of gas has made clear, you don’t need to produce the bulk of the power in order to determine the price for power. What’s needed is to be able to provide the last bit, very quickly, when all alternatives have been exhausted. Far from creating the problem of high prices, South Australia may be able to help solve it.

And it’ll do something else. Its lights went out on September 28 when its gas and wind generators shut down during a storm. Most of them stayed off even after the storm was over because, just like gas cooktops, they can’t be started without electricity. Musk and South Australia are about to gift us a battery.

Peter Martin is economics editor of The Age.

Follow Peter Martin on Twitter and Facebook

Advertisements

July 14, 2017 - Posted by | AUSTRALIA - NATIONAL, energy

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: