Australia’s Federal government is led by the patrician and aloof, Malcolm Turnbull. A former investment banker and, before that, trusted Consigliere to media heavyweight, the late Kerry Packer, Turnbull is grappling with a renewable energy target that is set to destroy once profitable and productive Australian businesses and punish Australian families for generations to come.
A week or so back, we reported on Malcolm’s move to finance the construction of high efficiency, low emissions (HELE) coal-fired power plant: Turnbull’s Reliable Power Play: Australian PM Pushes Coal-Fired Future
At a political level, the plan to back coal is obviously directed at garnering blue collar votes in coal-rich Queensland, where the Liberal National Party are bracing for a drubbing at the expense of One Nation at the upcoming State election.
In a speech to the National Press Club last Wednesday, the PM sought to dance with the devil, which is always in the detail. Relevant extracts of that speech follow.
THE HON. MALCOLM TURNBULL MP, PRIME MINISTER
Address to the National Press Club, Canberra
1 February 2017
Energy bills are also making up an increasing proportion of household budgets.
If you doubt the central importance of energy security, pay a visit to South Australia as I did when I visited Port Lincoln on Saturday.
The tuna fishermen and seafood processors have been hit by constant power failures, massive price hikes and to rub salt into the wound, the need to invest in more diesel generators to provide backup when the SA grid fails next time.
But the problem goes well beyond South Australia. We have an abundance of coal, gas, sun and wind resources – not to speak of uranium.
And yet our energy is among the most expensive in the OECD.
States are setting huge renewable targets, far beyond that of the national RET, with no consideration given to the baseload power and storage needed for stability.
South Australia, now with the most expensive and least secure energy, has had its wake-up call. One storm blacked out an entire State.
But Labor snores on, heedless of what awaits the rest of the country if Labor Governments, and would-be governments, continue their mindless rush into renewables.
This is not good enough. Australia should be able to achieve the policy trifecta of energy that is affordable, reliable and secure, and that meets our substantial global emissions reduction commitments as agreed in the Paris climate change treaty.
And all governments and industry must work together to achieve that trifecta.
Families and businesses need reliable and affordable power.
Nothing will more rapidly de-industrialise Australia and deter investment more than more and more expensive, let alone less reliable, energy.
Bill Shorten’s energy plan whether it is a 50% RET by 2030 or double our Paris emissions reduction target by 2030 is a sure recipe to deliver much more expensive and much less reliable power.
In Victoria the closure of Hazelwood will cost the state 20% of its electricity capacity, yet the Victorian Labor Government supports a 40% renewable target and opposes all onshore gas development – conventional and unconventional, while Victorian gas reserves are beginning to decline as exploration fails to replace production.
Increasing gas supply in Australia is vital for our energy future and vital for industries and jobs, but State bans on onshore gas development will result in more expensive and less reliable energy.
And without gas, or substantial new forms of energy storage, where will the firming power come from to support intermittent renewables like wind and solar?
We are willing to sit down with the states to determine the right incentives to enable desperately needed sustainable onshore gas development.
Energy storage – long neglected in Australia -will also be a priority this year.
Last week, at my request, ARENA and the Clean Energy Finance Corporation (CEFC) agreed to work together on a new funding round for large scale storage and other flexible capacity projects, including pumped hydro.
I have also written to Alan Finkel asking him to advise on the role of storage and pumped hydro in stabilising the grid.
Large scale storage will support variable renewables like wind and solar, it will get more value out of existing baseload generation and it will enhance grid stability. And we are getting on with it.
Turning to coal. Australia is the world’s largest exporter of coal, has invested $590 million since 2009 in clean coal technology research and demonstration, and yet we do not have one modern High Efficiency Low Emissions (HELE) coal fired power station let alone one with CCS?
Here’s the current picture – old, high emissions coal fired power stations are closing down, reducing baseload capacity. They can not simply be replaced by gas – because it’s too expensive – or by wind or solar because they are intermittent.
Storage has a big role to play, that’s true, but we will need more synchronous baseload power and as the world’s largest coal exporter we have a vested interest in showing that we can provide both lower emissions and reliable base load power with state of the art clean coal fired technology.
The next incarnation of our national energy policy should be technology agnostic – it’s security and cost that matter most, not how you deliver it. Policy should be “all of the above technologies” working together to deliver the trifecta of secure and affordable power while meeting our emission reduction commitments.
The battlelines have been drawn – it is clear that the Coalition stands for cheaper energy.
Regional Australia is vast, no one city or town is the same as another. Many parts are thriving, others are doing it pretty tough. But there is one common denominator – the resilience, confidence and enterprise of regional Australians.
And we are backing our regions with infrastructure, with new and open markets, and with job opportunities – we can’t succeed as a nation without our regions succeeding.
Trade is delivering more jobs in our regions, the NBN and our mobile black spots program is improving communications and our massive infrastructure programmes such the Pacific, Bruce and Midland Highways, and the Inland Rail are conquering the tyranny of distance.
Above all in every way we are working in partnership with regional communities to give them confidence in the opportunities of the future.
Just like regional job security is vital for our nation, national security is the foundation of every freedom we enjoy.
Creating more opportunities underpins everything that we do as a government.
Opportunity is built on security: job security, economic security, energy security, national security.
Our Australian values – enterprising and egalitarian – have a go and lend a hand – are as right today as they were a century ago.
Together believing we can do anything, determined that our greatest days are ahead of us, we will deliver a brighter future for our children and grandchildren and generations to come.
National Press Club, Canberra
1 February 2017
Predictably, by attempting to please everyone, Malcolm Turnbull has pleased no one and infuriated many.
Before we turn to one of the latter, STT Champion Judith Sloan, the first major quibble STT has is with Malcolm’s nonsense about saving Australia’s Large-Scale RET by throwing more subsidies at “large scale storage and other flexible capacity projects, including pumped hydro”.
We take his reference to “large scale storage” to be a reference to giant, grid-scale battery storage. There is no such thing as the grid-scale (ie ‘bulk’) battery storage of electricity in operation anywhere in the world, nor is any such system under development.
As to pumped hydro, Malcolm is on safer ground, but the economics of pumped hydro only make sense when the power that is used to pump water uphill for later use comes from reliable, low-cost sources. A detailed technical rundown on the cost of pumped hydro is included in this post: The Fantasy of Storing Wind Power: No Commercial System Exists & None is Likely
Australia’s Snowy Hydro Scheme already includes pumped hydro plants (Tumut 3 and Murray 1, a conventional gravity plant supplemented by pumped inflow). However, the power sourced to pump water to elevated storage points comes from the spare capacity that exists in coal-fired power plant overnight (when demand is at its lowest).
In that circumstance conventional generators are happy to deliver power to Snowy Hydro at rates barely above marginal cost (in the order of $20-25 per MWh). Coal-fired generators can profitably deliver low-cost power overnight, when there is no opportunity to dispatch to the grid, rather than simply idling back their plant, burning and wasting fuel until morning.
Also, whereas wind power output may collapse overnight or for days on end, conventional generators can guarantee delivery overnight, every night. To make a reasonable return on their capital investment and to remain profitable, pumped hydro operators depend on being in the position to deliver power during the daytime, each and every day – which means they need to have their water pumped to elevated storage overnight and every night.
Moreover, the ultimate cost of delivering pumped hydro if the generation source were wind power would be staggering. Under the current LRET wind power generators are guaranteed fixed rates in the order of $110 per MWh, based on the value of the Renewable Energy Certificate received for every MWh dispatched. Accordingly, there is simply no incentive for wind power outfits to cut their rates to deliver power to pumped hydro operators.
With operations and maintenance costs of around $25 per MWh (see our post here) wind power outfits are not likely to match conventional generators and the cost of the power they can reliably deliver to pumped hydro operators. The LRET – through the grant of RECs worth $93 each – establishes a guaranteed price of around $110 per MWh for simply dispatching wind power to the grid (whether or not there is any market for it), giving no reason for wind power outfits to discount their power at all.
To reach the ultimate 33,000 GWh LRET target by 2020 is to dream the impossible dream, and would require total wind power capacity to more than double its present 3,891 MW capacity.
Building the volume of pumped hydro capacity necessary to accommodate 8,000 MW of wind power output – sufficient to store it as water pumped uphill for later use in a pumped hydro plant – would involve building two Snowy Hydro Schemes.
The Snowy Hydro Scheme is the largest engineering project ever undertaken in Australia, comprising 16 major dams; 7 power stations; 2 pumping stations; and 225 kilometres of tunnels, pipelines and aqueducts that took 100,000 workers from 30 countries 25 years to build. Its hydro power plants have a combined capacity of 3,772 MW.
What Malcolm might have forgotten is that the Australian Greens emerged from a hemp-shirted, Tasmanian protest movement that rallied around a slogan that simply read ‘NO DAMS’ (see above).
Getting the planning approvals past eco-warriors like GetUp! for the odd pumped hydro plant might be possible, but will probably take years of litigation and $millions in legal costs.
However, trying to sneak 6-8,000 MW of pumped hydro capacity (ie, 2 Snowy Hydro Schemes) past the Greens and GetUp! would see an outbreak of protest from eco-loons chaining themselves to bulldozers and living like hermits atop threatened ancient gum trees. Just like Tasmania in the 1980s, which spawned characters like the charismatic and die-hard economy wrecker, Bob Brown:
With the rise of the lunatic green-left there is no way that a Snowy Hydro Scheme could be built today, so Malcolm Turnbull’s mass pumped hydro plan is unlikely to ever get off the ground.
Even if Malcolm’s battery storage pipedream and/or his pumped hydro scheme came to fruition, with the inevitable planning hold-ups, litigation, protests, the usual political backbiting and the financial risk attached to investing in power generation when Australia’s energy policy is on the brink of collapse, it would be at least 5, if not, 10 years before Australia has any serious pumped hydro capacity. The cost-effective and economic grid-scale storage of power is generations away, if it ever emerges.
Meanwhile, the bulk of Australia’s wind turbines were installed between 2009 and 2012.
Just 8 years old, the Suzlon S88s that were used to carpet South Australia are already grinding to a halt. Around Jamestown and Hallett, dozens of Suzlon turbines are now idle, with damaged bearings, gearboxes or generators: practically worn out, it is no longer economic to spend the hundreds of thousands of dollars needed to restore them to operating capacity (see our post here).
By the time Malcolm’s pumped hydro storage system came online, the vast majority of the turbines presently installed will be beyond their useful economic lives, quietly rusting in some dimwit’s back paddock: turbines have an economic lifespan of around 11 years. So Malcolm’s push for pumped hydro is unlikely to salvage the LRET or the wind industry.
Here’s Judith Sloan’s take on Turnbull’s turn.
Malcolm Turnbull oblivious as world moves on
2 February 2017
Malcolm Turnbull’s speech to the National Press Club was predictable, unenlightening guff. It was also gutless. Soaring rhetoric about opportunity and hand-ups doesn’t really cut it when the policy cupboard is so bare, particularly in terms of new thinking and new policies.
There is nothing I can think of that was new, apart from instructing yet another government agency to hand out $20 million on storage demonstration projects in the energy space — batteries and pumping hydro (do people even know what that means?).
But don’t worry, Labor’s energy policies are a highway to expensive, unreliable electricity, according to Turnbull, whereas the government’s policies will lead to cheaper and more reliable electricity. Really? Both sets of policies are essentially the same, bar their aspirations; electricity prices will continue to soar under both scenarios.
And all that stuff about being technology-agnostic while spruiking the benefits of clean coal was just filling in the minutes. With the renewable energy target firmly in place until 2030, there is no way that there will be any investment in any new coal-fired power plants in this country even if this trend is accelerating around the world.
Turnbull even had the hide to talk about Labor’s “mindless rush into renewables”, when his policy is nearly as mindless. We are sitting at 15 per cent of electricity being generated by renewables and he is sticking with 23 per cent in less than three years. And electricity price rises over the past five years have been the highest of any developed country.
We are now seeing electricity retailers opt to pay the shortfall charge rather than invest any further in renewable energy. This means we are paying more for our electricity for no additional investment. And yet the Prime Minister refuses to contemplate any changes to the RET. …
Are we any wiser after the Prime Minister’s speech? We learnt very little in terms of any new policies from a leader who comes across as a classic insider while weirdly denying that he is a political hack. That the world may have moved on doesn’t seem to have dawned on him.
Plenty for Malcolm to chew on there, in yet another solid effort from Judith Sloan
The one real positive that came from Malcolm Turnbull’s speech, is that he has simply added to the dreaded ‘uncertainty’ faced by Australia’s wind industry; guaranteeing that the retail power market will suffer the imposition of the ‘shortfall charge’ – a $20 billion stealth tax on all Australian power consumers – and, thereby, ensuring the ignominious collapse of Australia’s Large-Scale RET. After Malcolm’s speech, no banker or investor is going to risk so much as a penny on any new wind project. Oh dear, how sad, never mind.