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June 15th 2010 print

Tom Quirk

The looming energy disaster

What is distressing about the renewables approach is that the expansion of the scheme from a few percent of demand to near 20% occurred without serious consideration of the consequences and with bi-partisan support.

Australia, where too much wind is still never enough 

The Deakin Lectures for 2010, Brave New World – The Climate Change Challenge, were launched by Tim Flannery on June 6. The first detailed session, Future Energy Solutions followed on June 8 led by Grant King. 

Grant King the CEO of Origin Energy is a believer in man-made climate change. A man who has invested some of his shareholders’ funds in wind farms, geothermal prospecting and solar voltaics research deserved some respect. He should have been treated as a hero, or at least in the words of Sir Humphrey Appleby, seen as courageous but he had a bumpy reception at the Edge in Federation Square when he delivered his Keynote Address on Future Energy Solutions: Powering a Sustainable Tomorrow. 

Australia is well endowed with energy resources. On present rates of consumption we have 100 years of identified black coal reserves, 500 years of brown coal reserves and very large reserves of natural gas and uranium. Our success as a country has been powered by these resources yet present policy is taking us elsewhere to renewable sources of energy. The table below is an example of present electricity energy demand and where it is sourced.


There are substantial economic costs associated with generation of electricity from renewable sources. Grant King was putting the best case forward but unfortunately he is a practical man who has to run a business that is profitable. 

A summary of the state of play in the renewables tournament is that an energy demand target of 41,000 Giga-watt-hours (GWh) has been set for the year 2020. If you take out hydro-electricity generation then the target is 27,000 GWh. Divide this by the number of hours in the year and you need an apparent 3,100 Mega-watts (MW) of generator power. Not a lot you might think since we already have about 50,000 MW of installed generation. But for wind which comes and goes the present performance tells us that you need around 10,000 MW of installed wind turbines to get the required energy. Grant King stood on a very windy hill and declared that he only needed 7,000 to 9,000 MW to satisfy the demand (of the legislators not the customers). But it gets worse. The Australian Energy Management Operator (AEMO) does not consider wind farms very reliable and will only credit them with 10% of their installed capacity. The reason for this miserable credit is that the AEMO knows that customers get upset if they experience black-outs so when forecasting the need for more generators, most of the demand must come from reliable conventional plant. This was once a mixture of coal burning plant that satisfied the steady expansion of the base load and gas turbines or hydro for peak demand times. But with the uncertainty over an Emission Trading Scheme, it is unlikely that any coal burning plants will be built. This leaves gas turbines on the playing field with substantially higher operating costs compared to coal fired power stations. They may well interfere with a game in another stadium where gas producers and consumers try to balance their supply and demand. The link occurs on very cold winter days when gas turbine generators are meeting peak demand and need gas at exactly the time domestic heating is being turned up. The only forecast that can be made for this situation is trouble not only for the capacity of the transmission pipelines but also for the future supply and price of gas. This means more infrastructure and more costs. 

The AEMO forecasts a need for 7,000 to 9,000 MW of new generators to satisfy the growing demand for electricity up to 2020. A rough estimate of the cost is $7 to $9 billion. But there is a saving of 1,000 MW from the wind farm contribution at a marginal cost of $14 to $20 billion! 

The cost of meeting the expanding demand for electricity and introducing a legislated renewable energy target is $21 to $29 billion. The contribution from wind energy in the supply planning could be met for just $1 billion with gas turbines rather than the $14 to $20 billion for wind farms.  

The transmission system will need significant expansion to cope with dispersed windfarms and their varying output incurring further billions of dollars in costs. Management of the system will become more difficult with the wind supply swings so more generator back-up will be needed and further costs added. 

South East Australia is reckoned to have 15,000 MW of available wind resources but a single weather system can cover this region and then in a heatwave you may have no wind power. 

There is another tournament like this in another place. It is called the National Broadband Network. What is distressing about the renewables approach is that the expansion of the scheme from a few percent of demand to near 20% occurred without serious consideration of the consequences and with bi-partisan support. Electricity generation is responsible for about 50% of our carbon dioxide emissions. The renewable scheme aims to reduce this by about 10%. 

The electricity sector is taking a double hit of 10% when the government target is a 5% reduction. 

The renewable energy scheme is chasing the reduction of carbon dioxide emissions. This is driven by the supposed linkage of increasing carbon dioxide to a dangerous rise in global temperatures. Yet the science is by no means certain while our governments assume certainty and make choices that may well damage the economy. The collateral risk is the uncertainty for the industry superannuation funds and other investors in wind farms and alternative energy technologies that depend on government policy and subsidy. 

Grant King laid this out without necessarily connecting the dots for his audience. However it did not matter, for his audience had brought their own dots. They complained that he had given no credit to base load solar thermal generation, paid little attention to those that wanted solar panels on their houses and ignored the successes of Spain and Norway. Worst of all he was picking winners by going for the lowest cost solution. His co-conspirators in the panel discussion that followed his address did not help: either talking on an evangelical level or promoting technology that is just on the horizon for deployment. 

It is worth rereading the chapter in Gulliver’s Travels where Gulliver visits the island of Laputa to get a sense of what might happen if we were all unlucky enough to see this scheme brought to fruition.