It’s a gas, gas, gas.

Sep 20, 2020

With the Federal Government announcement of a gas-lead recovery (and as a potential centrepiece having the large coal-fired power station, Liddell in NSW, replaced by gas generation) Australians can now have both lower emissions and lower energy prices. High fives all round.

Except there are not.

Gas producers (like Santos and Origin), are pleased because they will be able to sell more gas – and have another card to play for cracking the fracking moratoriums in NSW and Victoria.

The large-energy using manufacturers (like Brickworks and Bluescope and the aluminium smelters) are happy because they could see ourselves going out backwards without some sort of action on energy costs and reliability.

Snowy Hydro like it because they might get to expand even more and even get to take over the whole thing (which might not be the worst outcome in the world).

On the other hand:

“It’s overkill”, says the Australian Financial Review, because it “distorts the market” (and what could be worse than that?)

“It’s counterproductive… and risks deterring the very investments the government is attempting to encourage” say the large electricity generators through their peak body the Australian Energy Council. They were hoping that Liddell’s closure would have the same outcome as the Hazelwood closure in 2017, which created a shortage of generation and enhanced their profits.

“It should be a new coal generator”, says the on-again-off-again Energy Minister, Nationals Matt Canavan.

The Energy Security Board and its newly reappointed head, Dr Kerry Schott, could be expected to be slightly miffed, given the amount of effort they are investing into trying to reform the system to make it workable.

The Labor Party pointed out that this is the Government’s 19th energy policy and repeated its offer to work with the Government to produce a framework for a policy that might lead to an actual energy plan.

In fact, energy policy in Australia is a dog’s breakfast. Everyone has an opinion; most have a firm belief on the correct path forward. Hardly any are based on an understanding of how the system, particularly the electricity grid actually works, or to put another way, they are based on deep misunderstandings.

One example of a passionate believer is “tech titan” Mike Cannon-Brookes, who told ABC News that he and fellow investors “in the Northern Territory, we’re putting in somewhere between 25 to 30 Gigawatt hours of storage between now and 2027.”

Does he mean batteries? California plans to have 1.3 Gigawatts of battery storage by the end of this year. That’s a lot of Tesla batteries at 250 megawatts each (there are 1000 Mw in a Gw) – and the Tesla’s only last for one hour. And the original proposal was to send this energy to Singapore. Last week his proposal was for a high voltage cable to bring solar energy from Western Australia

The point here is that when it comes to energy, most people are inclined to shoot from the hip.

Further, many of the key players resort to euphemisms, or jargon to make their points. Often this is to avoid offending holders of the various polarised “beliefs”.

By way of example, the following is from a media report on 7 September quoting Energy Security Board chair Dr Kerry Schott. She says in reference to the Energy Security Board’s Post 2025 Energy Market Design Report (which is supposed to map a path through the transition:

· “exit of generation is not in itself a problem…if forward looking reforms are made.”

· We need a market for the essential services that firm and dispatchable power provides – and where these services are properly valued.

· If we have these services, “the Australian Energy Market Operator (AEMO) can stop intervening to ensure these services are available – which is currently very expensive.”

· We also need new market rules to “harness the benefits of …distributed energy resources”.

· CSIRO have apparently modelled that households with roof top solar can make annual average electricity savings of $414. (Melbourne Age, 7/9/2020)


· Closure of coal fired power stations is not a problem as long as we can replace like for like in terms of reliability.

· Coal (and gas, hydro, diesel) generation provides services to the grid which previously have not needed to carry a monetary value, but now we have sun and wind generation that does not provide these services. The main service is the capacity for 24/7 operation. There are others to do with ensuring stability of voltage and frequency. Because they are essential and not a normal by-product of all generation, we need to find a way to pay generators who do provide these services.

· To stop blackouts caused by a shortage of power, AEMO increasingly pays large users of electricity, like smelters and steelworks, to switch off or cut back when there are shortages of power.

· “Distributed energy resources” is the industry euphemism for roof top solar. For the system operator, harnessing the benefits of roof top solar is like the Man from Snowy River starting his chase of the wild bush horses on foot. First of all we need a mechanism to control it. At the moment, AEMO can control wind and large commercial solar generators – making them spill their energy if too much electricity is coming into the grid, but roof top solar is not centrally controlled. Smart meters are the first stage, but only Victoria has them.

· “Can make”, but there are catches. CSIRO’s modelling probably doesn’t take into account the frequent scenario where the household inverter will automatically turn off the feedback function. If the inverter detects the grid is running a bit too hot for it to input to safely (because too much power is being fed in by other roof top solar systems and voltage is near the upper safety parameter) the household doesn’t feed in power and doesn’t get paid.

When it comes to modelling, it’s great to model economic benefit, we all know how accurate and reliable that is – but it would be useful to do some actual technical work so we have a system that can reliably measure every generation input and inform a system that can control it. My understanding is that currently none of the myriad of agencies has responsibility for doing this.

Australia is facing a once in a century technical transformation. The fundamental need is to start being realistic and honest about energy. Knowing where everyone is coming from helps. Who is making (or losing) money from proposed changes is a starting point. But it’s time for governments state and federal to stop playing their own game with what is a national system and start working towards a national plan. (And as with COVID, WA can sit this one out.)

Gary Moorhead

Most recently consultant to the St Baker Energy Innovation Fund (Sep 2019 – March 2020). Previously Chief of Staff to Senator Kim Carr (Shadow Minister/Minister for Innovation, Industry Science and Research 2017-2019; 2009 – 2013). Other experience includes senior executive roles at Professionals Australia (2016-2017), in the Commonwealth Department of Human Services (2013-2015), CEO of Sports Medicine Australia (1999-2009), adviser to other federal Labor politicians (Brian Howe, Jenny Macklin, Lindsay Tanner 1995-1999), various roles in the contemporary music industry and as a TAFE and secondary school teacher.

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