Column-Australia energy crisis to lead to more solar energy and regulation: Russell By Reuters


© Reuters. FILE PHOTO: Liddell Coal Power Plant pictured in Hunter Valley, north of Sydney, Australia, April 9, 2017. REUTERS / Jason Reed

By Clyde Russell

LONCESTON, Australia (Reuters) – It makes no sense that one of the world’s largest exporters of liquefied natural gas (LNG) and coal is struggling to provide enough domestic supplies to support lighting, but this is the current reality in Australia.

Known power outages have so far been avoided in the National Electricity Market (NEM), which includes the densely populated eastern states but not the more remote states of Western Australia and the Northern Territory.

But this is more likely a matter of luck, as generation and grid systems are strained by a lack of supply amid interruptions to coal-fired power plants, high spot gas prices, seasonally lower solar production and a cold start. winter.

As is often the case, the situation is much more complicated than the various politicians, lobby groups and commentators might believe you.

There are several levels of failure, the main one being the lack of a coordinated national energy policy between the federal and state governments, leading to a lack of investment in the electricity sector.

Much of the blame could be thrown at the door of the conservative Liberal National Coalition Government, which held power at the federal level for nine years until it was ousted by the center-left Labor Party in last month’s general election.

It was widely believed that the former government was in the pocket of the fossil fuel lobby, even going so far as to advertise what it called the recovery of gas from the COVID-19 pandemic, which only led to approval to build a gas-fired New South power plant. Wales says energy analysts have said it is not needed and would be economically uncompetitive to manage.

It is worth looking at what will not happen, what is likely to happen and what should happen if Australia is to achieve the dual goals of reliable and affordable electricity, as well as decarbonising the current coal production system.

What will not happen is that Australia will build new coal or nuclear power plants.

Considerable media attention has been paid to this idea, but these are inappropriate conversations of conservative politicians who have done little to advance this program during their nine years in power.

What will happen is that Australians will vote with their wallets and install even more home solar and battery in an attempt to reduce energy bills, which have increased by more than 20% for customers in some areas of NEM this year.

Although this will help alleviate the pressure on household spending, it contributes to grid management problems, as solar energy without battery storage means overproduction in the middle of the day and insufficient electricity at night or during prolonged cloudy weather. , because it can sometimes happen in the winter.

This is where the new government can act by directly subsidizing household batteries or working with state governments to provide sufficient incentives for consumers to add storage to their solar systems.

Federal and state governments can also act to increase incentives for utilities to install grid batteries and build more wind farms to provide production when solar power is low.

COMING REGULATIONS?

What is also likely to happen is increased regulation in one form or another, given the widespread public outrage that the country, which competes with the United States and Qatar as the world’s largest exporter of liquefied natural gas, and with Indonesia as a leading supplier of coal, it cannot provide enough supplies at a reasonable price for domestic use.

Part of the problem last week, when the Australian energy market operator was forced to shut down the spot electricity market, was that peak gas generators could not make enough money due to the high spot price of gas.

The natural gas lobby claims that there are enough supplies on the domestic market and that most customers are on fixed-price contracts.

This may be true, but the gas lobby does not like to talk about the high cost of spot supplies needed when coal generators go out of order, as is currently the case.

The industry’s decision is to build a natural gas storage facility that can release supplies during times of stress.

This may work, but it conveniently places the cost and work of storage on someone else, most likely either the market operator or the energy companies, who will simply pass on the costs in the form of higher bills to consumers.

It is also possible that the federal government will legislate to force gas companies to guarantee supplies at a price that is not related to the spot price of LNG in Asia, as it is too volatile and too high and is likely to remain so given European demand. of gas while trying to give up Russian supplies.

Australia’s current problems require both short-term and long-term solutions.

Short-term calls for intervention to ensure that enough natural gas is provided at a low enough price to ensure that peak gas plant operators can at least cover the costs if they want to generate electricity.

In the long term, policies are required to ensure that investments in solar, wind and storage energy are coherent and effectively integrated into the grid, while ensuring that gas-fired installations have sufficient incentive to remain on the market, as aging coal-fired power plants are gradually leaving the system.

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