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April 03rd 2017 print

Alan Moran

A Dead Man Warns of a Dying Grid

Not long before his sudden and premature death, Australian Energy Market Operator chief Matt Zema spoke candidly at a private conference of power-industry executives. The enormous subsidies heaped on renewables, he said, mean one thing and only one thing: "The system must collapse"

broken turbineMatt Zema, inaugural head of the Australian Energy Market Operator (AEMO), attended a meeting a year ago of the Regulation Economics Energy Forum at which a number of prominent electricity industry executives were present.  Proceedings at the meeting were private, but the need for confidentiality was removed with Matt’s sad death three months later. The following were among his remarks:

“The renewable developments and increased political interference are pushing the system towards a crisis.  South Australia is most vulnerable with its potential for wind to supply 60% of demand and then to cut back rapidly.  Each new windfarm constrains existing ones and brings demand for more transmission. The system is only manageable with robust interconnectors, but these operate effectively only because there is abundant coal-based generation in Victoria…

… wind, being subsidised and having low marginal costs, depresses the spot price and once a major coal plant has a severe problem it will be closed…

… wind does not provide the system security.  But the politicians will not allow the appropriate price changes to permit profitable supply developments from other sources.  And the original intent of having the generator or other beneficiary pay for transmission and services over and above energy itself has now been lost so there are no market signals, just a series of patch-ups that obscure the instability and shift the problem to include Victoria. In the end the system must collapse…”

A month later South Australia’s coal-fuelled Northern Power Station was disconnected from the network because it was unable to operate profitably against subsidised intermittent renewable energy that has priority over other supplies.

In September, 2016, as a result of this capacity reduction, South Australia lost all its power when storms triggered outages and several wind generators were unable to “ride through”,  causing the main interconnector with Victoria to shut down.  A more limited loss of power took place in February, 2017, when wind supply dropped from 800MW to under 100MW in four hours.

The September, 2016, blackout is estimated to have cost the state $367 million. BHP, whose senior executives have long engaged in virtue-signalling in favour of carbon taxes and exotic “clean” renewables, reported a loss of $US105 million with their Olympic Dam project — a loss magnified by the company being forced to suspend its proposed doubling of the mine’s capacity as a result of power uncertainties.

Alan Moran’s new book, Climate Change: Treaties and Policies in the Trump Era
can be ordered by clicking here

Engie, the owners of Hazelwood announced in November, 2016, that the 1600 megawatt facility (supplying between 20% and 25% of the state’s power) will be the fourth big coal-fired power station to close. Hazelwood had been allowed to deteriorate as a result of subsidised wind making the plant unprofitable, which did not stop Engie  being ordered to complete major repairs to at least five of the eight boilers in order to meet occupational health and safety regulations.

The bottom line is that the loss of the coal-powered stations has resulted in at least a doubling of the wholesale electricity price in the southern states and the concomitant loss of reliability.

Blame shifting between politicians has characterised the various events. Reliable coal plants are being forced to close due to competition from renewables which currently enjoy a subsidy of $84 per MWH, double the actual price received by coal plants.  The forced closure of these plants has compounded the cost impost by forcing up pool prices. The subsidies favouring renewable energy include several put in place by state governments, but the most important regulations are at the Commonwealth level — especially those requiring increasing shares of wind and solar within the supply mix.  These regulations give rise to the current subsidy for wind and solar, currently at $84 per MWh and capped at $92.5 per MWh.

The roll-out of new subsidised power is on-going.  And various schemes are being floated for buffering and overcoming wind’s intrinsic lack of reliability. Among these is the mooted South Australian battery investment using the technology developed by Elon Musk and the proposal floated by the Prime Minister to augment the Snowy hydro system with “pumped storage”.  These measures, should they go ahead, allow the transfer of power over time and, in doing so, reduce the gross power available.

New “solutions” using subsidised wind and solar abound.

Last week, for example, South Australian Premier Jay Weatherill announced a new solar-battery combination, Lyon Solar in the Riverland, which promises 300 Megawatts of capacity.  This is the equivalent of perhaps 80 megawatts of coal fuelled electricity and comes at a cost of one billion dollars.

The now-shuttered Northern Power Station had 540 megawatts, yet Weatherill declined to take up an offer that would, for a mere $25 million, have kept it open. Instead, he plumped to spend $500 million-plus on a gas generator of half that capacity and, plus Elon Musk’s much bally-hooed batteries!

On paper, the new Lyon Solar facility is profitable only because of the penalties imposed on coal. These include the subsidy under the Renewable Energy Target of $84 per MWh.  In addition, the facility benefits from the forced closure of the coal-fired stations. This has resulted in the wholesale price of electricity rising to a new norm of $130 per MWh, compared with the average price in the four years to 2015 of $50 per MWh. The bottom line is that the consumer will pay $214 per MWh for $50-per-MWh worth of electricity from the new facility.

With that sort of money being littered around the industry for gee-whizz exotic projects it is little wonder that moochers are circling the state like moths round a candle. In the end, renewables require at least three times the price of the supposed dinosaur facilities they are displacing; consumers and industry will need to pay this and, in addition, fork out for grid additions to offset some of the inevitable deterioration of reliability the brave new energy world entails.  Obviously many outfits, especially those in the energy intensive mining and smelting and agricultural processing sectors will not find it profitable to remain in an Australian market where wholesale electricity prices have more than doubles and the system’s reliability has deteriorated.

We are seeing the future with these renewable energy facilities and it is not working. The contagion that is undermining the South Australian economy and impoverishing the state’s households is spreading to Victoria.

Ominously, on the very day that Hazelwood closed, Victoria evidenced what will be the new norm.

Incredibly, with no heatwave or any other factor to inspire a spike in electricity demand, it had to import electricity from New South Wales and Tasmania.

 

Alan Moran’s latest book,  Climate Change: Treaties and Policies in the Trump Era, is now published and, if not in your local bookshop, available on Amazon and direct from publisher Connor Court.

Comments [11]

  1. Bill Martin says:

    The story the above article tells is about criminal insanity, about wanton vandalism to solve a nonexistent problem. The trite old cliche about the inmates running the asylum has never been more appropriate. When the “invisible hand” ala Adam Smith is shackled to some crackpot ideology, the course to ruin is well and truly set. The spectacular demise of the Soviet Union is the most dramatic example of the phenomenon, well supported by the current slow-motion train wreck of Venezuela. In those cases the ideology was socialism, in our case it is climate change alarmism, equally as effective for the distraction of the nation’s economy. Thus we regress from a prosperous, lucky country to a destitute, miserable backwater. Vale, Australia, my beloved country.

  2. ianl says:

    > ” … a series of patch-ups that obscure the instability and shift the problem to include Victoria. In the end the system must collapse…” from Matt Zema’s quote about 12 months ago.

    None of that for Matt Zema’s Waffle-picked AEMO successor, who has opined that there is no proof of this. That is, one must prove a negative … which is the time-dishonoured ploy of the charlatan. Anyone who may still doubt Waffle’s real policy intent simply needs to understand this as one of the end results of Zema’s extremely unhappy, untimely, tragic death.

  3. Lawrie Ayres says:

    Like the total collapse of the Liberal Party it will take the total collapse of the power supply to waken the imbeciles in charge of both. Even then they will be desperate for scapegoats. Where is the media? They would have to admit their own failure to report and investigate instead of the current flag waving for the anti-coal lobby. At what point will the public rise up? A true leader could motivate a real change in public opinion.

  4. Tezza says:

    Great article. I still cannot understand how the highy regarded Zema presided over the AEMO’s 2014 submission to the Warburton review of the RET, in which AEMO assure Warburton that everything was manageable with the unintentionally high RET. That advice killed the Abbott Government’s ability to argue down the RET by a bigger amount, and brought forward the current catastrophe.

  5. ianl says:

    > ” … the AEMO assure Warburton that everything was manageable with the unintentionally high RET” [2014]

    Yes, that remains a puzzle. As conjecture, Zema and the AEMO did not then fully appreciate the true, cascading effect of the RET. If that even half-way approaches the truth, it is beyond depressing.

  6. Ian MacDougall says:

    Yet in our local country town, not exactly a bastion of radical political correctness, an ever-increasing number of solar panels are a feature of rooves, and particularly in our modest CBD.
    Someone must have let out that the coal will not last forever. Or else that ventilating an ever-increasing amount of the proven greenhouse gas CO2 will have global consequences. Or merely that the price of grid power is set to climb thanks to ageing infrastructure.
    Or whatever.

    • ron.house says:

      I have no idea what this weird comment is trying to say. Of course CO2 is a proven greenhouse gas. EVERYONE agrees that doubling the atmospheric concentration of CO2 raises the earth’s temperature about 1.1C. Everyone, alarmist and realist alike. But the alarmists then go on to say that this causes more H2O to evaporate, and, water being a far more effective GHG than CO2, multiplies that 1.1C by 2, 3, 4, 6, or however many times alarmists feel is necessary to scare us witless.

      But if that were true, there would be: (1) a hotspot in the upper troposphere, (2) more water vapour at the top of the troposphere, and (3) less radiation escaping to space.

      But there is (1) no hotspot, (2) less water vapour, and (3) more radiation to space.

      Therefore the alarmist theory (NOT the basic greenhouse theory that everyone agrees with) is proven false three times over.

    • Tezza says:

      Subsidies, perhaps? That did it for me. Unfortunately, my benefit as a homeowner selling overpriced solar power back into the grid when power is cheap, but reliant on the grid when power is dear, is in effect paid by my son, who is a renter.

  7. Mike_O28 says:

    Using 2016 data decided to model a scenario where I pick the most efficient power station on the grid which is Snowtown South at a 41% capacity factor. Then connect the Tesla 100 MW power pack to it. The idea was to get constant power.

    On average you can get about 30% of the plate capacity. But in this case not at all. You get about 10%. The problem is the battery is too small. It becomes fully charged very quickly a day or two. After that if you are going to keep a constant output you have to stop generating. A waste of about 540 MWh for the year. If you don’t do that then your output becomes very variable again. An energy storage facility of about 8 GW hours is sufficient to give you 30% of the plate capacity constantly. That would be a stable 40 GW all the time. To make it work all that is needed is another 19 Tesla Power packs.

  8. Mike_O28 says:

    Sorry about that I must’ve been half asleep Snowtown South generates in a year about 452 GW hours if you try to get a constant output by using the power pack you will get close to 110 GW hours. That means of course 342 GW hours is lost.

  9. Mike_O28 says:

    So to correct my comment of last night read the following.


    Using 2016 data I decided to model a scenario where the most efficient power station on the grid which is Snowtown South at a 41% capacity factor is selected. Then the Tesla 100 MW power pack is connected to it. The idea is to get constant power.

    On average you can get about 30% of the plate capacity. But in this case not at all. You get about 10%. The problem is the battery is too small. It becomes fully charged very quickly in day or two. After that if you are going to keep a constant output you have to stop generating. A waste of about 342 GW hours for the year. If you don’t do that then your output becomes very variable again. An energy storage facility of about 8 GW hours is sufficient to give you 30% of the plate capacity constantly. That would be a stable 37.8 megawatts all the time. To make it work all that is needed is another 19 Tesla Power packs.

    This is not a criticism of the Tesla powerpack or of Tesla. As a solution for large scale energy storage one should commend the effort and innovative design.