What's Really Going Wrong With Electricity

Fairfax - Adam Morton

The extreme weather conditions and 80,000 lightning strikes that thrust South Australia into darkness last week was extraordinary enough; the disingenuous debate it sparked about Australia's changing energy system has been something else again.
At the heart of the issue - as Malcolm Turnbull has identified - is ideology. Unfortunately, the Prime Minister's words on the subject would have had more power had he not allowed himself to be seen as an ideological player.

The collapse of transmission lines led to the shutdown of SA's entire power network. Photo: Tom Fedorowytsch/ABC

After noting the blackout was the result of a storm, he whacked Labor-led states for setting "extremely aggressive, extremely unrealistic" clean energy targets rather than merely sticking to what should be his central point: that an inevitable change is under way in the electricity system.
The only real questions are: are we managing it well? If not, how do we to fix that?
The answer to the first is a resounding no. The second remains an open question that, as federal and state energy ministers prepare to meet in Melbourne on Friday, we are some distance away from meaningfully addressing.

The Capital Wind Farm in NSW. Picture: Bloomberg

In reality, it is too early to say anything of the sort. But the idea - more popular with politicians than the population, and significantly over-represented in influential media commentary – that the growth in renewable energy is a problem that needs to be stopped or reversed persists.
At the other end of the spectrum, and to a lesser extent, so does a suggestion that the shift to a cleaner grid will be simple. Neither are true. But the change is necessary and inevitable.
Consider the facts.  Burning coal to make electricity has been good for Australia's economic development, but it wasn't and isn't cheap. It carries a hidden cost that is passed on to future generations.

Speculation is mounting that the Hazelwood power plant will close. Picture: Chris Hopkins

Coal itself is neither good nor evil. It's just fossilised carbon that burns easily. The idea of carbon pricing, introduced and abandoned by the federal government, was developed as a response to the problem it causes – that we should pay the true cost of using a fuel now to reflect the damage being done.
Recent indicators suggest that damage is encroaching: 2016 is on track to be the hottest year on record; summer Arctic sea ice reached its second lowest level on record; the Greenland ice sheet is melting faster than previously thought; coral reefs are bleaching and dying at rates that have stunned scientists.

Global mean surface temperature for January to June 2016. Source: NASA

It doesn't matter whether an individual accepts the mainstream climate science that links these extraordinary shifts to human activity - the global community has accepted it on their behalf. Nearly 200 governments agreed in Paris last December that average warming needed to be limited to well below 2 degrees and acknowledged the ultimate goal should be zero emissions. As of this week, more than 55 countries responsible for more than 55 per cent of global emissions have ratified the Paris deal, crossing the threshold for it to take effect

Celebrations as the climate deal is secured in Paris in December. Picture: AP

Many of those countries don't yet have policies in place to meet the targets required, but the traffic in policy terms is one way.
Businesses across the globe, hard-headed and rationalist, have taken the hint. Shareholders increasingly want to know how companies are responding to climate change. In both China and India, the huge investment in coal power has begun to slow, with some projections suggesting solar power may soon be cheaper to build.

China is aiming to reach a peak its greenhouse gas emissions by 2030. Picture: Getty

In Australia, the major energy companies all acknowledge coal is on the way out and want the government to intervene to help with an orderly transition to cleaner generation. French energy giant Engie, which owns 72 per cent of Hazelwood, has begun to "exit from coal" by shutting or selling its dirtiest plants across the globe. The Victorian generator is in its sights. Already, some old and inefficient coal plants across the country have shut because they were not profitable.
Turnbull and Josh Frydenberg, his Environment and Energy Minister, have indicated publicly they understand the trend. Both have also acknowledged that under the Paris deal Australia's climate targets (a 26-28 per cent cut in emissions by 2030 compared with 2005 levels) will have to become more ambitious over time.

Environment and Energy Minister Josh Frydenberg. Picture: Philip Gostelow

Yet we remain stuck in the disingenuous position of having federal policies – mainly the "direct action" emissions reduction fund – that no one believes are capable of meeting even existing commitments. The government currently has no policy to cut the coal-fired emissions of the electricity sector.
It has a policy to boost renewable energy that Tony Abbott sought to kill but couldn't, that Turnbull and Frydenberg have backed to deliver about 23.5 per cent of generation by 2020. But it stops in that year with no plan to extend it.
In this vacuum, Labor state governments have pledged to dramatically increase the share of renewable energy on their own turf. Some, including Victoria, have released details of how they plan to do this. Other targets, such as Queensland, are little more than aspirations. It is arguable whether state targets are helpful – some experts say they increase costs unnecessarily. As recently as last December, then environment minister Greg Hunt said he had encouraged states to offer extra investment if they wanted to attract more clean power. Blame for the current mess lies more with Canberra than the provinces.

Wholesale electricity prices increased dramatically in South Australia in winter. Picture: Jessica Hromas.

Currently, most renewable energy policy is building the cheapest form, wind power. It has proved effective well beyond doomsday predictions, but how much of our electricity should it provide?
Australia's coal plants are mostly old, need replacing over the next couple of decades, and no one is going to build a new coal plant. There is an argument that gas-fired electricity – with lower emissions than coal - could have a role as a transitional power source. But gas is increasingly expensive and are governments really going to introduce a new subsidy – whether direct or implied through regulation – for fossil fuel generation?
The economics and impossible politics of nuclear power continue to rule that out, but it is likely large-scale solar power could have a significant part to play. The cost is coming down rapidly and battery storage continues to advance. And an increasing chunk of the energy system will be decentralised – powered by people and businesses across the country with solar panels and batteries. Already, nearly 2 million Australian homes have solar panels.
Wherever it lands, the transition won't be straight-forward. But those arguing clean energy should be held back due to concerns the transmission network can't cope are approaching the issue in reverse. The question needs to be how can the network be transformed, and what rules need to be changed, to make the grid smart and robust enough to handle a complex mix of centralised, decentralised and intermittent generation underpinned by batteries? And what can we learn from places such as Germany and parts of the US, which have adapted to life with a higher proportion of renewables and micro-grids in certain areas that would protect against blackouts on the scale seen last week?
Energy ministers meeting on Friday could begin by agreeing to change what's known as the national electricity objective to reflect that their decisions should consider reducing emissions alongside the key issues of price and reliability.
It would make it easier to approve new connections between states – a step that should improve reliability of the grid, and is likely to lift the pace of transition.
They could discuss - ahead of a federal review next year - what policies are needed to transform the electricity sector at cheapest cost, and that could be scaled up to meet more ambitious targets. (Hint: start by turning direct action into a form of carbon pricing.)
They could consider how to best ensure coal plants are closed and clean energy brought on in a staged and predictable way.
With their colleagues in other portfolios, they could agree on a template for supporting people in coal towns who deserve support and empathy as their livelihood winds up - including, perhaps, an industry policy that brings work to those regions.
That would be a start. Here's hoping.

Links

• Emergency ministers meeting after SA blackout a 'political stunt': Vic
• Preliminary Report – Black System Event In South Australia On 28 September 2016
• Series of faults plunged SA into darkness, says AEMO report.
• Preliminary report reveals cause of South Australia blackout
• South Australian blackout highlights need for a national energy transition plan