05/05/2021

(AU The Conversation) Paying Australia’s Coal-Fired Power Stations To Stay Open Longer Is Bad For Consumers And The Planet

The Conversation -  |  | 

Shutterstock

Authors
  •  is Research Affiliate, Sydney Business School, University of Sydney
  •  is Associate Professor, Griffith University
  •  is Associate Professor of Economics, Griffith University
Australian 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. Shutterstock

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.

Wind and solar energy is variable. Shutterstock

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. Shutterstock

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.

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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(AU SMH) There’s A Key Element Missing From The Debate About Australia’s Journey To Net-Zero Emissions

Sydney Morning Herald - Lynne Gallagher

Author
Lynne Gallagher is the chief executive officer of Energy Consumers Australia.
Were you electrified by the Energy Security Board’s recently released options paper for the future energy system? Did it feel relevant to your family? Critical to the way you think about the future?

Last week’s report made big waves among energy insiders, providing much-needed solutions for the security challenges that have shadowed Australia’s energy transformation since they were revealed by the South Australian blackout of 2016.

And there has been plenty of talk about proposed new revenue streams for carbon-emitting power stations (also available for large renewable generators) that some critics view as a subsidy to prolong their operating lives — extending the time it will take us to reach net zero carbon emissions.

The Kerry Schott-led Energy Security Board’s recent paper probably didn’t fire up consumers. Credit: Louie Douvis
But reading through the plan I was mostly struck by what it doesn’t say. In all this talk of systems and security, regulatory and policy levers, how are everyday Australians supposed to see themselves and their interests reflected?

The idea of net zero is now close to widespread acceptance among policy makers. We call it a target but it isn’t really. It’s a destination.

When you think about it this way, everything shifts. Not an abstract goal or a number to be hit. Not a test of moral purity or political partisanship but a journey to be undertaken by people.

A journey, after all, is as much about the experience of the travellers as the place they are going. In what condition will they arrive? Will the process of getting there be positive or negative? What are the stops and stages along the way? Will they arrive together or will some lag far behind?

Power grid warnings spark calls for fresh wave of national reforms
Extreme bushfires and floods have made Australians aware that we face a point of no return with our planet’s warming. It can be tempting, then, to think of climate change mitigation as a zero sum game. 

But for this journey that we’re on together there’s no single correct path or timetable that must be adhered to, without regard for its impact on people.

The pace of change matters. We cannot get to net zero without Australians making myriad changes to the ways they use electricity in their homes and businesses. 

These changes are not costless and nor are the opportunities to contribute to reducing emissions evenly shared across our community. Renters, working families, those living at or below the poverty line and people living in apartments or townhouses all face limits on the choices they can make. They cannot be left behind.

Energy Consumers Australia has done plenty of research, asking everyday Australians what they expect from a future energy system. 

The simple answer? They expect energy to be affordable and abundant, but also clean. They expect “smart” technology will help their homes to be more energy efficient and themselves to be more self-reliant via rooftop solar or home energy storage (whether that is a smart hot water system, a battery or an electric vehicle).

They see themselves as part of a connected energy system, and want opportunities to share with their neighbours and within their local community.

Australia emits 1.2 per cent of the world's greenhouse gases. So who must act to cut emissions?
Australians are putting solar on their roof at a rate not witnessed anywhere else in the world. Their preferences and needs are what’s driving change but also what is provoking a response from those who plan and operate the system.

The Energy Security Board has mostly (and successfully) focused on the larger-scale transition out of fossil fuels, as it was asked to do. 

What has been missed is a vision for the future energy experience consumers want, and would contribute positively to shaping if given the opportunity. Instead, we see a focus on curbing or controlling their behaviour, such as “turning off” those who export rooftop solar electricity back into the grid at inconvenient times.

Consumers should not be seen as an externality – a threat or inconvenience to an elegant, efficient system. They are the system. To make good on this idea we need to extend the energy conversation we’ve been having beyond a tight circle of policy experts, engineers and system architects and into the Australian mainstream.

Where is the prime time “war on waste” style program beaming exciting energy possibilities, technologies and social practices into millions of Australian homes? Where is the outreach to get everyday Australians thinking and talking about what is now possible and how our system should accommodate it?

Fastest change in the world: coal’s demise sparks call for energy market reforms
Reform should start with a conversation about what’s possible and preferable for Australian households and businesses.

That matters more than the purity of exiting gas early or keeping a bit of it around until our storage capacity matures. It matters more than disputes about how to accelerate or manage the inevitable exit of coal-fired power stations from the grid.

The point of system reform is not to punish emitters for their sins against climate, it’s to provide consumers with a version of the net-zero journey that meets their needs and expectations: energy that is affordable, abundant and clean.

To go fast, go alone, the saying goes. To go far, go together. To get to our destination we need consumers to be part of the process. They need to be listened to, included, learned from and engaged.

If they don’t trust in the system and believe their best interests are at the heart of change then they won’t come along.

There is urgency about the threat of climate change, to be sure, but we have a long way to travel and we need to arrive together.

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(AU Grist) Countries Are Getting Serious About Climate Change. And Then There’s Australia.

Grist - Zoya Teirstein

How Australia fudged the numbers at Biden's climate summit.

Grist / Lisa Maree Williams / Auscape / Universal Images Group via Getty Images
President Joe Biden’s recent climate summit was a challenge to the rest of the world to step up its game. And despite the irony of the U.S. throwing down the gauntlet after four years of hostility to climate action, a few countries rose to the challenge.

Japan, Canada, and Brazil upped their emissions-reduction targets, while the U.K. and the E.U. finalized new targets ahead of the summit. India announced a new investment partnership with the U.S. South Korea pledged to end public financing for overseas coal projects. Even Russian President Vladimir Putin came to the summit with a promise to “significantly reduce” his country’s emissions. 

Is the world finally turning the page on decades of denial and delay? There’s a big difference between saying you’ll make progress and actually putting policies in place that will make it happen. There’s even a difference between saying you’ve already made progress and actually making progress. Nowhere is that more obvious than in Australia. 

At Biden’s Leaders Summit on Climate Change earlier this month, Australian Prime Minister Scott Morrison, a member of Australia’s center-right Liberal Party, touted his nation’s victories. “Australia is on the pathway to net-zero,” he announced. “We are well on the way to meet and beat our Paris commitments.”

 For proof of Australia’s progress, Morrison cited two numbers: His country had reduced emissions 19 percent since 2005 — 36 percent if you discount exports. Australia, he said, is one of the few countries that’s still on track to meet its target under the Paris Agreement, which is to cut overall emissions 26 percent compared to 2005 levels by 2030.

On its face, that assertion is true. But Australian climate policy experts say Morrison’s numbers are basically completely made up. 

“It’s deeply deceptive,” Robyn Eckersley, professor in political science at the University of Melbourne and author of multiple books on Australian politics, told Grist, referring to Morrison’s assertion that Australia had cut emissions 36 percent.

That number excludes not just exports themselves, she said, but all emissions associated with producing fossil fuels for export, like the fugitive emissions — leaks and other irregular releases of greenhouse gases — that are produced in the process of digging up coal, extracting gas via fracking, liquifying natural gas, and other fossil fuel development. The countries that import those fossil fuel products aren’t putting the emissions produced by extracting and exporting those products on their climate ledgers.

So who claims them, if not Australia? “We have the economic benefit from these industries,” Frank Jotzo, director of the Center for Climate Economics and Policy at Australian National University, told Grist. “We will have to wear the emissions that happen in the actual production of those fuels.”

Excluding all emissions associated with exports wouldn’t be such a massive oversight if Australia were just dabbling in the fossil fuel business, but it is the biggest exporter in the world for metallurgical coal, the second-biggest exporter of thermal coal, and the third-biggest exporter of fossil fuels overall.

The 19 percent number is misleading, too. Australia’s emissions dropped around 10 percent during the COVID-19 pandemic last year, which is when Morrison elected to assess Australia’s progress on reducing emissions. But those emissions have largely bounced back now. Eckersley called it a “standard case of cherry picking.” 

Jotzo pointed out that Australia is likely to meet its existing Paris target without any new climate policies being passed. Old coal-fired power plants are closing down across Australia and being replaced by wind and solar power because renewable energies are getting more competitive. Cars are getting more efficient as technology advances.

The nation’s six states and two territories have passed their own climate policies aimed at reducing emissions, similar to what some U.S. states did under former President Donald Trump.

All of those things combined will help Australia achieve that 26 percent reduction in emissions by 2030. The emissions reductions that Australia has logged so far, Jotzo said, are almost entirely attributable to land use change. Australia has mostly stopped clearing vast amounts of land for agriculture and industry use, thanks to state-level policies. “If you set that aside, all other emissions combined are about the same now as they were in 2005,” he said.  

Sofia Gonzales-Zuñiga, a climate policy analyst at NewClimate Institute, an organization that tracks the world’s climate progress with a tool called the Climate Action Tracker, says Australia is lagging behind other developed countries. “Japan, the U.S., the E.U., they’re all stepping up their actions, they’ve shown bigger commitments,” she said. “And then you have Australia.”

Countries are supposed to update their targets under the Paris Agreement every five years, but Morrison has not increased Australia’s target under the Paris Agreement since it was set in 2015.

By comparison, Japan, whose goal was previously identical to Australia’s, just upped its target to 46 percent by 2030 compared to 2013 levels. Canada said it would slash emissions between 40 and 45 percent compared to 2005 levels by 2030, up from 36 percent. Brazil’s Jair Bolsonaro — an ardent opponent of environmental regulations — pledged to reach net-zero emissions by 2050.

Morrison can’t even commit to that far-off goal. He said Australia will reach net-zero “preferably by 2050.” That leaves a lot of room for interpretation.  

Australia could vastly reduce its emissions with better national policies in place. It has enormous wind and solar development potential. But instead of becoming a clean energy superpower, Australia’s government is doubling down on its immense trove of fossil fuels. “One has to develop a black sense of humor,” Eckersley said. “Otherwise you’d wake up and weep every morning.” 

Morrison’s performance at Biden’s climate summit may have been exceptionally misleading, but he’s not the only world leader blowing hot air. Biden is determined to prove to the world that “the U.S. is back,” but he has no real strategy to slash emissions more than 50 percent by 2030 compared to 2005 levels, as he has promised.

Biden’s only climate plan right now is a $2 trillion infrastructure plan aimed at fixing the nation’s ailing infrastructure and creating a bunch of green jobs. U.S. climate experts say that plan isn’t guaranteed to produce the emissions cuts Biden needs. Eventually, Biden will have to ease up on the carrots — green jobs, funding for clean energy technologies, wind and solar energy credits — and start pulling out the sticks — a federal emissions cap on emissions or a federal emissions trading system. 

In the meantime, though, Biden’s pledges alone could be enough to inspire Australia to up the ante. “What comes out of Washington now is a really big factor in Australia,” Jotzo said. “The U.S. is hands down Australia’s most important international partner.” Before Biden took office, anyone opposed to new climate policy in Australia could defend their position by pointing to the Trump administration’s policies. That’s no longer the case.

Eckersley thinks Australia will keep twiddling its thumbs until the U.S. and other major world powers realize that it’s not responding to peer pressure and start exerting other kinds of leverage. Biden has already floated the idea of a border adjustment tax on imports from countries that aren’t doing enough to curb emissions.

Such a policy would be aimed at leveling the playing field in the international trading system, something global leaders have said is a crucial piece of the climate action puzzle. Europe and the U.K. are considering levying a border adjusted tax on imports, too. “Australia is out on a limb,” Eckersley said. “It’s very cold out there, it’s very lonely. People are going to start getting very tired of Australia.”

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