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the SA government’s six-point plan for energy security, in the face of a carping Federal government

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South Australian Premier Jay Weatherill, right, with SA Energy Minister Tom Koutsantonis

The South Australian government has a plan for energy, which you can take a look at here. And if you’re too lazy to click through, I’ll summarise:

  1. Battery storage and renewable technology fund: Now touted as the world’s largest battery, this will be a storage facility for wind and solar energy, and if it works, it will surely be a major breakthrough, global in its implications. The financing of the battery (if we have to pay for it!) will come from a new renewable energy fund.
  2. New state-owned gas power plant: This will be a 250 MW capacity gas powered facility designed initially for emergency use, and treated as a future strategic asset when (and if) greater energy stability is achieved at the national level. In the interim the state government will (try to?) work with transmission and distribution companies to provide 200 MW of extra generation in times of peak demand.
  3. Local powers over the national market: The government will legislate for strong new state powers for its Energy Minister as a last-resort measure to enable action in South Australia’s best interests when in conflict with the national market. In addition, all new electricity-generation projects above 5 MW will be assessed as to their input into the state electricity system and its security.
  4. New generation for more competition: The SA Government will use its own electricity contract (for powering schools, hospitals and government services) to tender for more new power generators, increasing competition in the market and putting downward pressure on prices.
  5. South Australian gas incentives: Government incentives will be given for locally-sourced gas development (we have vast untapped resources in the Cooper Basin apparently) so that we can replace all that dirty brown coal from Victoria.
  6. Energy Security Target: This new target, modelled by Frontier Economics, will be designed to encourage new investments in cleaner energy, to increase competition and put downward pressure on prices. The SA government will continue to advocate for an Emissions Intensity Scheme (EIS), contra the Federal government. It’s expected that the Energy Security Target will morph into an EIS over time – depending largely on supportive national policy. Such a scheme is widely supported by industry and climate science.

It’s an ambitious plan perhaps but it’s definitely a plan, and definitely actionable. The battery storage part is of course generating a lot of energy already, both positive and negative, as pioneering projects tend to do. I’m very much looking forward to December’s unveiling. Interestingly, in this article from April this year, SA Premier Jay Weatherill claimed 90 expressions of interest had been received for building the battery. Looks like they never stood a chance against the mighty Musk. In the same article, Weatherill announced that the expression of interest process had closed for the building of SA’s gas power plant, point two of the six-point plan. Thirty-one companies from around the world have vied for the project, apparently. And as to point three, the new powers legislation was expected to pass through parliament on April 26. Weatherill issued a press release on the legislation in late March. Thanks to parliamentary tracking, I’ve found that the bill – called the Bill to Amend the Emergency Management (Electricity Supply Emergencies) Act – was passed into law by the SA Governor on May 9.

Meanwhile, two regional projects, one in the Riverland and another in the north of SA, are well underway. A private company called Lyon Group is building a $1 billion battery and solar farm at Morgan, and another smaller facility, named Kingfisher, in the north. In this March 30 article by Chris Harmsen, a spokesperson for Lyon Group said the Riverland project, Australia’s largest solar farm, was 100% equity financed (I don’t know what that means – I’ll read this later) and would be under construction within months. It will provide 300MW of storage capacity. The 120 MW Kingfisher project will begin construction in September next year. Then there’s AGL’s 210MW gas-fired power station on Torrens Island, mentioned previously. It’s worth noting that AGL’s Managing Director Andy Vesey spoke of the positive investment climate created by the SA government’s energy plans.

So I think it’s fair to say that in SA we’re putting a lot of energy into energy. Meanwhile, the Federal Energy minister, Josh Frydenberg, never speaks positively about SA’s plans. Presumably this is because SA’s government is on the other side of the political divide. You can’t say anything positive about your political enemies because they might stop being your enemies, and then what would you do? The identity crisis would be intolerable.

I’ve written about macho adversarial systems in politics, law and industrial relations before. Frydenberg, as the Federal Minister, must be well aware of SA’s six-point plan (found with a couple of mouse-clicks), and of the plans and schemes of all the other state governments, otherwise he’d be massively derelict in his duty. Yet he’s pretty well entirely dismissive of the Tesla-Neoen deal, and describes the other SA initiatives, pathetically, as ‘an admission of failure’. It seems almost a rule with the current Feds that you don’t mention renewable, clean energy positively and you don’t mention the SA government’s initiatives in the energy field except negatively. Take for example Frydenberg’s reaction to recent news that the Feds are consulting with the car industry on reducing fuel emissions. He brought up the ‘carbon tax’ debacle (a reference to the former Gillard government’s 2012 carbon pricing scheme, repealed by the Abbott government in 2014), declaring that there would never be another one, as if the attempt to reduce vehicle emissions – carbon emissions – had nothing to do with carbon and its reduction, which was what the carbon pricing scheme was all about. This is the artificiality of adversarial systems – where two parties pretend to be further apart than they really are, so that they can engage in the apparently congenial activity of trading insults and holier-than-thou tirades. It’s so depressing. Frydenberg was at pains to point out that the government’s interest in reducing fuel emissions was purely to benefit family economies. It would’ve taken nothing but a bit of honesty and integrity to also say that reduced emissions would be environmentally beneficial. But this apparently would be a step too far.

In my next post I hope to get my head around battery storage technology, and lithium-ion batteries.

References/links

https://ussromantics.com/2017/07/14/whats-weatherills-plan-for-south-australia-and-why-do-we-have-the-highest-power-prices-in-the-world-oh-and-i-should-mention-elon-musk-here-might-get-me-more-hits/

https://ussromantics.com/2011/06/25/adversarial-approaches-do-we-need-them-or-do-we-need-to-get-over-them/

http://ourenergyplan.sa.gov.au/

http://www.abc.net.au/news/2017-04-13/sa-gas-fire-power-station-gains-international-interest/8442578

https://www.premier.sa.gov.au/index.php/jay-weatherill-news-releases/7263-new-legislation-puts-power-back-in-south-australians-hands

http://www.abc.net.au/news/2017-04-13/sa-gas-fire-power-station-gains-international-interest/8442578

https://www.parliament.sa.gov.au/Legislation/BillsMotions/SALT/Pages/default.aspx?SaltPageTypeId=2&SaltRecordTypeId=0&SaltRecordId=4096&SaltBillSection=0

http://www.abc.net.au/news/2017-03-30/new-solar-project-announced-for-sa-riverland/8400952

http://www.investopedia.com/terms/e/equityfinancing.asp

https://en.wikipedia.org/wiki/Carbon_pricing_in_Australia

 

What’s Weatherill’s plan for South Australia, and why do we have the highest power prices in the world? Oh, and I should mention Elon Musk here – might get me more hits

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just a superhero pic to rope people in

I’ve written a few pieces on our electricity system here in SA, but I don’t really feel any wiser about it. Still, I’ll keep having a go.

We’ve become briefly famous because billionaire geek hero Elon Musk has promised to build a ginormous battery here. After we had our major blackout last September (for which we were again briefly famous), Musk tweeted or otherwise communicated that his Tesla company might be able to solve SA’s power problems. This brought on a few local geek-gasms, but we quickly forgot (or I did), not realising that our good government was working quietly behind the scenes to get Musk to commit to something real. In March this year, Musk was asked to submit a tender for the 100MW capacity battery, which is expected to be operational by the summer. He has recently won the tender, and has committed to constructing the battery in 100 days, at a cost of $50 million. If he’s unsuccessful within the time limit, we’ll get it for free.

There are many many South Australians who are very skeptical of this project, and the federal government is saying that the comparatively small capacity of the battery system will have minimal impact on the state’s ‘self-imposed’ problems. And yet – I’d be the first to say that I’m quite illiterate about this stuff, but if SA Premier Jay Weatherill’s claim is true that ‘battery storage is the future of our national energy market’, and if Musk’s company can build this facility quickly, then it’s surely possible that many batteries could be built like the one envisaged by Musk, each one bigger and cheaper than the last. Or have I just entered cloud cuckoo land? Isn’t that how technology tends to work?

In any case, the battery storage facility is designed to bring greater stability to the state’s power network, not to replace the system, so the comparisons made by Federal Energy Minister Josh Frydenberg are misleading, probably deliberately so. Frydenberg well knows, for example, that SA’s government has been working on other solutions too, effectively seeking to becoming independent of the eastern states in respect of its power system. In March, at the same time as he presented plans for Australia’s largest battery, Weatherill announced that a taxpayer-funded 250MW gas-fired power plant would be built. More recently, AGL, the State’s largest power producer and retailer, has announced  plans to build a 210MW gas-fired generator on Torrens Island, upgrading its already-existing system. AGL’s plan is to use reciprocating engines, which executive general manager Doug Jackson has identified as best suited to the SA market because of their ‘flexible efficient and cost-effective synchronous generation capability’. I heartily agree. It’s noteworthy that the AGL plan was co-presented by its managing director Andy Vesey and the SA Premier. They were at pains to point out that the government plans and the AGL plan were not in competition. So it does seem that the state government has made significant strides in ensuring our energy security, in spite of much carping from the Feds as well as local critics – check out some of the very nasty naysaying in the comments section of local journalist Nick Harmsen’s articles on the subject (much of it about the use of lithium ion batteries, which I might blog about later).

It’s also interesting that Harmsen himself, in an article written four months ago, cast serious doubt on the Tesla project going ahead, because, as far as he knew, tenders were already closed on the battery storage or ‘dispatchable renewables’ plan, and there were already a number of viable options on the table. So either the Tesla offer, when it came (and maybe it got in under the deadline unbeknown to Harmsen), was way more impressive than others, or the Tesla-Musk brand has bedazzled Weatherill and his cronies. It’s probably a combo of the two. Whatever, this news is something of a blow to local rivals. What is fascinating, though is how much energetic rivalry, or competition, there actually is in the storage and dispatchables field, in spite of the general negativity of the Federal government. It seems our centrist PM Malcolm Turnbull is at odds with his own government about this.

So enough about the Tesla-Neoen deal, and associated issues, which are mounting too fast for me to keep up with right now. I want to focus on pricing for the rest of this piece, because I have no understanding of why SA is now paying the world’s highest domestic electricity prices, as the media keeps telling us.

According to this Sydney Morning Herald article from nearly two years ago, which of course I can’t vouch for, Australia’s electricity bills are made up of three components: wholesale and retail prices, based on supply and demand (39% of cost); the cost of poles and wires (53%); and the cost of environmental policies (8%). The trio can be simplified as market, network and environmental costs. Market and network costs vary from state to state. The biggest cost, the poles and wires, is borne by all Australian consumers (at least all on the grid), as a result of a massive $45 billion upgrade between 2009 and 2014, due to expectations of a continuing rise in demand. Instead there’s been a fall, partly due to domestic solar but in large measure because of much tighter and more environmental building standards nationwide as part of the building boom. The SMH article concludes, a little unexpectedly, that the continuing rise in prices can only be due to retail price hikes, at least in the eastern states, because supply is steady and network costs, though high, are also steady.

A more recent article (December 2016) argues that a rising wholesale price, due to the closure of coal-fired power stations in SA and Victoria and higher gas prices, is largely responsible. Retail prices are higher now than when the carbon tax was in place in 2013.

This even recenter article from late March announces an inquiry by the Australian Competition and Consumer Commission (ACCC) into retail pricing of electricity, which unfortunately won’t be completed till June 30 2018, given its comprehensive nature. It also contains this telling titbit:

A report from the Grattan Institute released earlier in March found a decade of competition in the market had failed to deliver better deals for customers, with profit margins on electricity bills much higher than for many other industries.

However, another article published in March, and focusing on SA’s power prices in particular (it’s written by former SA essential services commissioner Richard Blandy), takes an opposing view:

Retailing costs are unlikely to be a source of rapidly rising electricity prices because they represent a small proportion of final prices to consumers and there is a high level of competition in this part of the electricity supply chain. Energy Watch shows that there are seven electricity retailers selling electricity to small businesses, and 12 electricity retailers selling electricity to households. Therefore, price rises at the retail level are likely to be cost-based.

Blandy’s article, which looks at transmission and distribution pricing, load shedding and the very complex issue of wholesale pricing and the National Energy Market (NEM), needs at least another blog post to do justice to. I’m thinking that I’ll have to read and write a lot more to make sense of it all.

Finally, the most recentest article of only a couple of weeks ago quotes Bruce Mountain, director of Carbon and Energy Markets, as saying that it’s not about renewables (SA isn’t much above the other states re pricing), it’s about weak government control over retailers (could there be collusion?). Meanwhile, politicians obfuscate, argue and try to score points about a costly energy system that’s failing Australian consumers.

I’ll be concentrating a lot on this multifaceted topic – energy sources, storage, batteries, pricing, markets, investment and the like, in the near future. It exercises me and I want to educate myself further about it. Next, I’ll make an effort to find out more about, and analyse, the South Australian government’s six-point plan for our energy future.

References and more reading for masochists

http://www.abc.net.au/news/2017-03-10/tesla-boss-elon-musk-pledges-to-fix-sas-electricity-woes/8344084

http://www.adelaidenow.com.au/business/sa-government-announces-who-will-build-100mw-giant-battery-as-part-of-its-energy-security-plan/news-story/9f83072547f41f4f5556477942168dd9

http://www.smh.com.au/business/sunday-explainer-why-is-electricity-so-expensive-20150925-gjvdrj.html

http://www.skynews.com.au/business/business/market/2017/03/27/accc-to-find-out-why-power-prices-are-so-high.html

http://www.adelaidenow.com.au/news/south-australia/south-australia-will-have-highest-power-prices-in-the-world-after-july-1-increases/news-story/876f9f6cefce23c62395085c6fe0fd9f

http://indaily.com.au/news/business/analysis/2017/03/07/why-sas-power-prices-are-so-high-and-the-huge-risks-of-potential-fixes/

http://www.theaustralian.com.au/opinion/columnists/graham-richardson/jay-weatherill-must-come-clean-on-elon-musks-battery-deal/news-story/f471b33ebdf140a71b41e0b0bea7894f

http://www.news.com.au/technology/environment/climate-change/why-higher-electricity-prices-are-inevitable/news-story/042712e35c08bf798ed993d13ee573ea

Written by stewart henderson

July 14, 2017 at 10:55 am