Paying Australia’s coal-fired power stations to stay open longer is bad for consumers and the planet

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Daniel J Cass, University of Sydney; Joel Gilmore, Griffith University, and Tim Nelson, Griffith UniversityAustralian governments are busy designing the nation’s transition to a clean energy future. Unfortunately, in a misguided effort to ensure electricity supplies remain affordable and reliable, governments are considering a move that would effectively pay Australia’s old, polluting coal-fired power stations to stay open longer.

The measure is one of several options proposed by the Energy Security Board (ESB), the chief energy advisor to Australian governments on electricity market reform. The board on Friday released a vision to redesign the National Electricity Market as it transitions to clean energy.

The key challenges of the transition are ensuring it is smooth (without blackouts) and affordable, as coal and gas generators close and are replaced by renewable energy.

The redesign has been two years in the making. The ESB has done a very good job of identifying key issues, and most of its recommendations are sound. But its option to change the way electricity generators and retailers strike contracts for electricity, if adopted, would be highly counterproductive – bad both for consumers and for climate action.

One proposed reform to Australia’s electricity market would be bad for consumers and climate action.
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The energy market dilemma

The National Electricity Market (NEM) covers every Australian jurisdiction except Western Australia and the Northern Territory. It comprises electricity generators, transmission and distribution networks, electricity retailers, customers and a financial market where electricity is traded.

Electricity generators in the NEM comprise older, polluting technology such as gas- and coal-fired power, and newer, clean forms of generation such as wind and solar. Renewable energy, which makes up about 23% of our electricity mix, is now cheaper than energy from coal and gas.

Wind and solar energy is “variable” – only produced when the sun is shining and the wind is blowing. Technology such as battery storage is needed to smooth out renewable energy supplies and make it “dispatchable”, meaning it can be delivered on demand.

Some say coal generators, which supply dispatchable electricity, are the best way to ensure reliable and affordable electricity. But Australia’s coal-fired power stations, some of which are more than 40 years old, are becoming more prone to breakdowns – and so less reliable and more expensive – as they age. This has led to some closing suddenly.

Without a clear national approach to emissions targets, there’s a risk these sudden closures will occur again.

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Wind and solar energy is variable.
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So what’s proposed?

To address reliability concerns, the ESB has proposed an option known as the “physical retailer reliability obligation”.

In a nutshell, the change would require electricity retailers to negotiate contracts for a certain amount of “dispatchable” electricity from specific generators for times of the year when reliability is a concern, such as the peak weeks of summer when lots of people use air conditioning.

Currently, the Australian Energy Market Operator has reserve electricity measures it can deploy when market supply falls short.

But under the new obligation, all retailers would also have to enter contracts for dispatchable supply. This would likely require buying electricity from the coal generators that dominate the market. This provides a revenue source enabling these coal plants to remain open even when cheaper renewable energy makes them unprofitable.

The ESB says without the change, the closure of coal generators will be unpredictable or “disorderly”, creating price shocks and reliability risks.

The ESWB says the recommendation would address concerns over electricity reliability.
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A big risk

Even the ESB concedes the recommendation comes with considerable risks. In particular, the board says it may:

• impose increased barriers to retail competition and product innovation
• lead to possible overcompensation of existing coal and gas generators.

In short, the policy could potentially lock in increasingly unreliable, ageing coal assets, stall new investment in new renewable energy storage such as batteries and pumped hydro and increase market concentration.

It could also push up electricity prices. Electricity retailers are likely to pass on the cost of these new electricity contracts to consumers, no matter how much energy that household or business actually used.

The existing market already encourages generators to provide reliable supply – and applies strong penalties if they don’t. And in fact, the NEM experiences reliability issues for an average of just one minute per year. It would appear little could be added to the existing market design to make generators more reliable than they are.

Finally, the market is dominated by three large “gentailers” – AGL, Energy Australia and Origin – which own both generators and the retail companies that sell electricity. The proposed change would disadvantage smaller electricity retailers, which in many cases would be forced to buy electricity from generators owned by their competitors.

Australia’s gentailers are heavily invested in coal power stations. The proposed change would further concentrate their market power while propping up coal.

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The proposed change brings a raft of risks to the electricity market.
Kelly Barnes/AAP

What governments should do

If coal-fired power stations are protected from competition, it will deter investment in cleaner alternatives. The recommendation, if adopted, would delay decarbonisation and put Australia further at odds with our international peers on climate policy.

The federal and state governments must work together to develop a plan for electricity that facilitates clean energy investment while controlling costs for consumers.

The plan should be coordinated across the states. Without this, we risk creating a sharper shock later, when climate diplomacy requires the planned retirement of coal plants. Other nations have acknowledged the likely demise of coal, and it’s time Australia caught up.

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Daniel J Cass, Research Affiliate, Sydney Business School, University of Sydney; Joel Gilmore, Associate Professor, Griffith University, and Tim Nelson, Associate Professor of Economics, Griffith University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Electricity has become a jigsaw. Coal is unable to provide the missing pieces

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Peter Martin, Crawford School of Public Policy, Australian National University

There’s something the energy minister said when they announced the early closure of Victoria’s second-biggest coal-fired power station last week that was less than complete.

Yallourn, in the Latrobe Valley, provides up to 20% of Victoria’s power. It has been operating for 47 years. Since late 2017 at least one of its four units has broken down 50 times. Its workforce doubles for three to four months most years to deal with the breakdowns. It pumps out 3% of Australia’s carbon emissions.

On Wednesday Energy Australia gave seven years notice of its intention to close it in mid-2028, four years earlier than previously announced, a possibility for which regulators had been preparing.

In what might have been a rhetorical flourish, Energy Minister Angus Taylor warned of “price spikes every night when the sun goes down”.

Then he drew attention to what had happened when two other coal-fired power stations closed down — Victoria’s Hazelwood and South Australia’s Northern (South Australia’s last-remaining coal-fired generator).

He said “wholesale prices skyrocketed by 85%”.

And there he finished, without going on to detail what really mattered. South Australia and Victoria now have the lowest wholesale power prices in the National Electricity Market — that’s right, the lowest.

Coal-fired plants close, then prices fall

Before Northern closed, South Australia had Australia’s highest price.

Five years after the closure of Northern in 2016, and four years after the closure of Hazelwood in 2017, South Australia and Victorian have wholesale prices one-third lower than those in NSW and two-fifths lower than those in Queensland.

Something happened after the closure (largely as a result of the closure) that forced prices down.

South Australia became a renewables powerhouse.

South Australian wind projects congregate around power lines.
AEMO

The Australian National University’s Hugh Saddler points out that renewable-sourced power — wind and grid solar — now accounts for 62% of power supplied to the South Australian grid, and at times for all of it.

Much of it is produced near Port Augusta, where the Northern and Playford coal-fired power stations used to be, because that’s where the transmission lines begin.

Being even cheaper than the power produced by the old brown-coal-fired power stations, there is at times so much it that it sends prices negative, meaning generators get paid to turn off in order to avoid putting more power into the system than users can take out.

It’s one of the reasons coal-fired plants are closing: they are hard to turn off. They are just as hard to turn on, and pretty hard to turn up.

Coal can’t respond quickly

There are times (when the wind doesn’t blow and there’s not much sun, such as last Friday in South Australia) when prices can get extraordinarily high.

But coal-fired plants, especially brown-coal-fired plants such as Victoria’s Hazelwood and Yallourn and Victoria’s two remaining big plants, Loy Yang A and B, are unable to quickly ramp up to take advantage of them.

Although “dispatchable” in the technical meaning of the term used by the minister, coal-fired stations can’t fill gaps quickly.

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Batteries can respond instantly to a loss of power from other sources (although not for very long), hydro can respond in 30 to 70 seconds, gas peaking plants can respond within minutes.

But coal can barely move. As with nuclear power, coal-fired power needs to be either on (in which case it can only slowly ramp up) or off, in which case turning it on from a standing start would be way too slow.

What was a feature is now a bug

That’s why coal-fired generators operate 24-7, to provide so-called base-load, because they can’t really do anything else.

Snowy Hydro generators can be turned on and off at will.
Alex Ellinghausen/AAP

Brown coal generators are the least dispatchable. Brown coal is about 60% water. To make it ignite and keep boiling off the water takes sustained ultra-high temperatures. Units at Yallourn have to keep burning coal at high output (however low or negative the prices) or turn off.

In the days when the other sources of power could be turned on and off at will, this wasn’t so much of a problem.

Hydro or gas could be turned on in the morning when we turned on our lights and heaters and factories got down to business, and coal-fired power could be slowly ramped up.

At night, when there was less demand for coal-fired power, some could be created by offering cheap off-peak water heating.

But those days are gone. Nationwide, wind and solar including rooftop solar supplies 20% of our needs. It turns on and off at will.

Wind often blows strongly at night. What was a feature of coal — its ability to provide steady power rather than fill gaps – has become a bug.

Gas and batteries can fill gaps coal can’t

It’s as if our power system has become a jigsaw with the immovable pieces provided by the wind and the sun. It’s our job to fill in the gaps.

To some extent, as the prime minister says, gas will be a transition fuel, able to fill gaps in a way that coal cannot. But gas has become expensive, and batteries are being installed everywhere.

Energy Australia plans to replace its Yallourn power station with Australia’s first four-hour utility-scale battery with a capacity of 350 megawatts, more than any battery operating in the world today. South Australia is planning an even bigger one, up to 900 megawatts.

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Australia’s Future Fund and AGL Energy are investing $2.7 billion in wind farms in NSW and Queensland which will fill gaps in a different way — their output peaks at different times to wind farms in South Australia and Victoria.

Filling the gaps won’t be easy, and had we not gone down this road there might still have been a role for coal, but the further we go down it the less coal can help.

As cheap as coal-fired power is, it is being forced out of the system by sources of power that are cheaper and more dispatchable. We can’t turn back.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

35 degree days make blackouts more likely, but new power stations won’t help

Whether your energy comes from coal or renewable sources isn’t likely to make a difference to your risk of a blackout this summer.
yellowbkpk/Flickr, CC BY-SA

Guy Dundas, Grattan Institute and Lucy Percival, Grattan Institute

Summer is here with a vengeance. On hot days it’s very likely something in the power system will break and cause someone to lose power. And the weather bureau expects this summer to be hotter and drier than average – so your chances of losing power will be higher than normal.

We’ve analysed outage data from the electricity distribution networks over the past nine years and linked it to Bureau of Meteorology maximum daily temperature data for each distribution network. The findings are stark: customers are without power for 3.5 times longer on days over 35 degrees than on days below 35.

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Grattan Institute

What causes outages on hot days?

Hot weather puts more stress on all parts of the power system. Wires sag and short, fuses blow, transformers overheat, and fires and storms damage power lines. And demand spikes when people get home from work and turn on the air-conditioner.

When the air-conditioner doesn’t work during a heat wave, people get upset and politicians rush to assign blame. They often point the finger at a lack of electricity generation capacity – just ask the current federal energy minister, who responded to a report forecasting supply shortages in Victoria this summer by saying:

This is a direct result of Victorian government policies forcing out reliable 24/7 power, and a failure to prioritise firming of heavily subsidised intermittent wind and solar generation.

Media reports highlight this risk, too. But the truth is, if you do lose power it’s much more likely to be because of problems in your local network.

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There have been generation shortfalls in Australia on only three days in the past fourteen years, whereas there are network failures every summer all around the country, every year.

The last time a lack of generation affected large numbers of customers was in Victoria and South Australia in January 2009. But even on very hot days that summer, Victorians and South Australians lost 14 times more power because of network failures and weather damage than generation shortfalls.

Outages caused by generation shortfalls are also easier to manage than network problems. Power can be restored at a flick of a switch, as soon as demand falls or supply increases. And the blacked-out areas can be rotated, to reduce the impact on any individual customer. By contrast, if your power goes out because of a network failure or storm damage, you’re stuck with the problem until a crew can come out and fix it.

Our analysis of outages shows almost all customers affected by generation shortfalls in 2009 were back on line in less than an hour. By contrast, if your power goes out for other reasons, you will normally be waiting more than an hour to get back on line. In the worst cases, you can be left waiting for more than five hours.

Grattan Institute

What should we do (or not) about summer blackouts?

The main thing governments should to address summer blackouts is… nothing, just sweat it out. If governments over-react to newspaper headlines about blackouts, customers will pay more in the long run. Power failures on a hot day are unpleasant, but the bill to avoid them entirely would almost certainly be worse.

Blackouts in 2004 prompted the New South Wales and Queensland state governments to tighten network reliability standards. This caused over $18 billion of network over-spending and delivered only modest improvements in reliability. Network costs were the largest cause of increasing residential electricity prices in those states over the past decade, which increased more than 50% above inflation in New South Wales, and more than 70% in south-east Queensland.

Customers are unlikely to be willing to pay for more network “gold-plating”. Research by Energy Consumers Australia shows more customers are satisfied with the reliability of their power supply than with the price they pay.

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Customers can also play an important role. If your power does go out, don’t buy into the political blame game. Contrary to the impression the politicians and media might give, it’s very unlikely the outage will have been caused by a lack of power supply – whether coal, gas or renewable.

So be sceptical when a hot-headed politician tells you the solution is their preferred energy generation technology. Neither a new coal-fired power station nor a giant solar-fed battery will keep the power on if your local network fails.

Guy Dundas, Energy Fellow, Grattan Institute and Lucy Percival, Senior Associate, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Ultra, super, clean coal power? We’ve heard it before

Marc Hudson, University of Manchester

Replacing old coal power stations with new “ultra-supercritical” stations could help meet Australia’s greenhouse gas targets, according to research commissioned by Resources Minister Matt Canavan. Other analysts have reacted with scepticism.

Echoing recent prime ministers, Canavan retorted that these criticisms were part of an “ideological” attack on coal:

Coal has an important role to play as Australia and the rest of the world reduce carbon dioxide emissions… Australia has the resources to be a low-cost and efficient energy superpower. Access to affordable and reliable power underpins our economy and is the key to long-term jobs in the manufacturing sector.

This is not the first time Canavan has put his weight behind increasing Australia’s coal production to “help the environment”.

But technological promises and government support for coal’s bright future stretch back almost 40 years, long before the election of Tony “coal is good for humanity” Abbott, and have been entirely bipartisan, as have claims that Australian coal is especially clean.

Early days

The NSW was funding “supercoal” research for air-pollution reasons from the early 1980s. Climate change entered the fray in 1988, when delegates at the Australian Coal Association conference were told:

Coal’s contribution to the greenhouse effect is small… Means of controlling C0₂ emissions from coal-fired plant are considered best achieved by improved overall operating efficiency using new technology, rather than by endeavouring to capture C0₂ emissions.

The early Labor advocate of climate action, Graham Richardson, told a reporter in July 1989:

Fortunately we use mostly – but not entirely – the cleanest coal in the world. But that doesn’t mean we can’t improve the technology and so limit how much carbon dioxide is blown up the spout.

(Times change; Richardson recently called on Opposition Leader Bill Shorten to recant on his “silly” green goals.)

The same year the visiting president of the US National Coal Association told a government committee that, while much of the low-emissions technology was still in the laboratory stage, he was confident it could be applied soon to plants using coal to produce energy.

In 1991 Australian government funds supported an international conference on clean coal in Sydney.

After Australia’s first climate policy, the National Greenhouse Response Strategy, was agreed in December 1992, it quickly became clear that the Commonwealth was not going to stand in the way of state-level support for new coal-power stations.

On March 21 1994, the UN Framework Convention on Climate Change became international law. Coincidentally, Singleton Council in New South Wales approved a new coal-fired power station. Greenpeace launched a legal challenge, but this failed in November 1994. The State Electricity Commission of Victoria’s greenhouse reduction plans died with privatisation.

Peak (clean) coal

It is debatable, but Labor perhaps had more concern – for both climate change and coalminers’ jobs – than the incoming Howard government. The Prime Minister’s Science Engineering and Innovation Council in 1999 suggested Australia ratify the Kyoto Protocol and see it as an opportunity and spur to new technologies.

This fell on John Howard’s deaf ears, but a December 2002 report, chaired by Rio Tinto’s chief technologist and government chief scientist Robin Batterham, was taken up, and the enthusiasm for carbon capture and storage (CCS) was born. A COAL21 plan followed in 2004, and the Australian Coal Association Low Emissions Technologies group was formed.

Howard’s enthusiasm for coal over renewables was such that he even called a “secret” meeting of fossil fuel producers to advise on lower emissions technologies.

The 2004 Energy White Paper continued the trend in support for CCS over renewables.

Labor’s innovation in 2007 was to say yes to both. As opposition leader, Kevin Rudd announced he would bring in a National Clean Coal Centre.

Had the Coalition won the 2007 election, it would have removed the Renewable Energy Target and replaced it with a scheme that would have allowed coal-with-CCS to be considered “low carbon”.

In 2008 the coal association spruiked “NewGenCoal” in television adverts.

It all started to go wrong in 2009, shortly after the launch of the expensive and controversial Global Carbon Capture and Storage Institute, Rudd’s brainchild.

Former Liberal minister Ian MacFarlane, who had previously urged the coal industry to sell its message, told ABC’s Four Corners:

The reality is, you are not going to see another coal-fired power station built in Australia. That’s, that’s a simple fact. You can talk about all the stuff you like about carbon capture storage, that concept will not materialise for 20 years, and probably never.

Geology intervened as the Queensland ZeroGen project ended in late 2010, when the state government decided to stop throwing taxpayers’ money at it.

And in 2013 it emerged that the coal association’s funding for low-emissions technologies had been broadened to include “promoting the use of coal”.

While there is now a functioning CCS plant in Canada, in Australia CCS limps on and the sums involved now are pitifully small.

Dark days ahead

Three concepts from the study of technological innovation may help us understand what is going on.

The first is the “hype cycle” – the observation that initial unrealistic enthusiasm for a shiny new technology goes up like a rocket and down like a stick, followed by a more gradual, tempered enthusiasm over time (for a recent appraisal see here).

The second is the sailing ship effect. When challenged by steamships, the incumbent technology added more sails, automated sailors and so on, trying to keep up. But ultimately it was in vain – a new technology won out.

Thirdly, supporters of incumbent technologies highlight teething problems in the challenger technologies, in what academics call “discursive battles”.

It’s fair to guess three things. Promises of clean coal, high-efficiency, low-emissions (HELE) coal power and bio-energy carbon capture and storage(BECCS) will escalate, but perhaps learning from the public mockery of the last two efforts – Australians for Coal and Little Black Rock.

Protests, by people who agree with James Hansen’s 2009 assessment that coal-fired power stations are death factories, will continue. Legal challenges will escalate.

Governments – state and federal – will keep wrestling with the greased pig that is the “energy trilemma”. 2017 will be bloody, and noisy.

Marc Hudson, PhD Candidate, Sustainable Consumption Institute, University of Manchester

This article was originally published on The Conversation. Read the original article.

Delaying shutting power stations will bring big disruption later: Climate Institute research

Michelle Grattan, University of Canberra

Modelling done for the Climate Institute indicates that without big policy changes Australia’s path to zero emissions from the electricity sector by 2050 would mean huge disruption after 2030.

The report, “A Switch in Time: Enabling the electricity sector’s transition to net zero emissions”, warns that a weak policy now means big adjustments later, and calls for a range of initiatives including a program to progressively shut down power stations.

Electricity emissions are about 30% of Australia’s total emissions. They have risen by 5.5% in the past two years due to some increasing demand and the scrapping of Labor’s carbon price.

Climate Institute CEO John Connor said the modelling found that a modest carbon price rising to $40 per tonne by 2030 would result in emissions reductions similar to the Coalition government’s 2030 target of 26-28% below 2005 levels.

But “this would result in almost no replacement of existing high-carbon power stations with clean energy; a 60% collapse in projected clean energy growth from 2020 followed by stagnation through most of the 2020s, and 98% of the sector’s 30 year carbon budget used up in the first 10 years”.

This meant that the action on climate after 2030 would have to be more extreme, Connor said.

“More than 80% of the coal-fired generation fleet would have to be closed in less than five years, and new clean energy capacity would have to jump four fold and keep rising. The impact of such a disruptive shift would be felt across the economy.”

The government currently has a “direct action” policy, while Labor is crafting a new version of emissions trading and related policies with the details still to be announced. The government plans a 2017 review of the policies needed for its 2030 and longer term targets.

The Climate Institute calls for the systematic retiring of existing high carbon generators on a timeline that would have them all stopped by 2035. The policy should facilitate replacing them with zero or near zero emission energy, it says.

There should be a well funded structural adjustment package for communities affected by the closures; energy efficient policies to minimise costs to energy users and further reduce emissions; and a carbon pricing mechanism capable of scaling up over time that provides a signal to investors.

“There is a low probability that a price of sufficient strength and reliability will emerge quickly”, so the other measures proposed would be needed to deliver a timely transition, the report says.

The report estimates the additional cost to build and operate the new power infrastructure would be about $50 billion over the 30 years 2020-2050. But it argues the disruptive costs to jobs, communities and energy security of other approaches would be more than this.

The preferred approach would represent an increase in retail energy prices of 3% a year although bills would not go up by this much if energy efficiency was improved.

The report says that while both major political parties “have acknowledged the need to achieve net zero emissions, existing climate and energy policies provide no prospect of reaching this goal”.

The research was done by leading electricity market modeller Jacobs to test the ability of policy options under discussion to reduce electricity emissions in line with the Paris commitment to limit global warming to 1.5-2°C.

– Reporting with James Whitmore

https://www.podbean.com/media/player/xdwwc-5e609a?from=yiiadmin

Michelle Grattan, Professorial Fellow, University of Canberra

This article was originally published on The Conversation. Read the original article.