(Note: This story has been updated. See explanation below).
A damning new report from Australia’s Climate Council has suggested that the Energy Security Board has completely misdiagnosed problems at the heart of Australia’s electricity grid, and the proposed National Energy Guarantee will address issues that cause just minutes of outages a year.
Australia has the highest reliability requirement in the western world – 99.998 per cent from generation and transmission lines – but the overwhelming majority of the outages experienced by customers (98.15 per cent) are caused by failures in distributed networks, which are not addressed by the NEG.
Issues that are addressed by the NEG – the available of sufficient supply – account for just 0.24 per cent of outages; probably the equivalent of a minute or two of lost power per customer per year, according to the Climate Council.
The NEG has been roundly criticised by both the industry and activists for failing to address climate targets (although that bit is the fault of the government), and for proposing an unnecessarily complex and potentially expensive “reliability” guarantee.
There is growing disquiet that the NEG’s reliability guarantee, which remains poorly defined, is politically motivated; and that its focus on retailers and the use of contracts risks giving yet more market control to the handful of incumbents that already dominate the industry.
There is a fear – expressed at the recent ESB open forum – that the NEG will “gold-plate” generation in the same that networks “gold-plated their infrastructure in pursuit of Australia’s high reliability levels. Most believe this is over-kill.
Submissions to the ESB – before it presents a “high-level” idea of the NEG to state ministers next month – were due on Thursday.
The Smart Energy Council was dismissive, while consultancy Energetics, in a blog, described the environmental part as “pointless” and the reliability component as likely to favour incumbents.
A group of smaller retailers have written a joint letter than reportedly comes to a similar conclusion as the Climate Council: Namely that there is currently no forecast reliability gap and that “technology is likely to make today’s issues moot within five years.”
The best hope among many is that the ESB will recognise that reliability needs only a “light touch” – if any. The new report from the Climate Council, written by analysts including energy industry veteran Andrew Stock, suggests the reliability concern is completely misplaced.
“The design of the NEG’s reliability component is based on a series of false premises,” the report says.
“The vast majority – 98 per cent – of all interruptions to power supply are caused by events affecting distribution or transmission lines, not due to lack of sufficient generation from power plants.”
It says that in the National Electricity Market, electricity supply from generation and transmission is required to meet customers’ needs at least 99.998% of the time.
“Consumers do not experience this reliability, however, because of failures in the transmission and distribution systems that deliver the power to their homes and businesses, and system security issues.
“Virtually all outages customers experience have nothing to do with reliability in the context of electricity supply (from power stations) – the matter the NEG proposes to address.”
When the supply related outages do occur, they are commonly caused by the unreliability of ageing, inefficient coal and gas plants.
The Climate Council says the NEG’s proposed reliability measure not only ignores the fundamental problem facing supply – the unreliability of ageing, inefficient coal and gas power stations and the need to plan for their replacement – but it may lead to greater reliance on these antiquated power stations.
Consider, for instance, the federal government’s push for AGL to keep open its ageing Liddell generator in the Hunter Valley, despite a study that shows it would be more expensive and less reliable than renewable and storage alternatives.
To underline that vulnerability, two big coal units in Victoria – the Loy Yang A and Loy Yang B brown coal generators in Victoria – tripped simultaneously on Thursday morning, removing 1,065MW of supply in an instant.
It was the 43rd and 44th trip of a coal plant since the start of summer – read more here of this “pas-de-deux”, including Tesla big battery response – and confirms the AEMO assessment that the greater threat to grid security is the loss of a major fossil fuel generator: coal or gas.
The Climate Council noted reliability can be achieved through a range of approaches, such as building new flexible, dispatchable power plants; demand management (where electricity users adjust their demand for electricity); and adding energy storage (storing excess energy for use later).
Many of these are already taking place, particularly in South Australia, with the highest share of wind and solar (50 per cent), and which already has the Tesla big battery and numerous other battery, pumped hydro, solar thermal and hydrogen storage projects.
The Climate Council report notes that under current federal government policies – modelled under the NEG – renewable energy would barely grow over the decade from 2020 to 2030, reaching perhaps 36 per cent by the end of the decade.
It says the share of renewable energy should be twice that – and at least 50 per cent. “Australia must achieve a minimum of 50 – 70 per cent renewable energy across Australia by 2030,” it says.
As it is, the only state guaranteed of doing that is South Australia – already at 50 per cent and with the Labor government proposing a 75 per cent target by 2025 (and a 25 per cent renewable storage target) should it be re-elected. Even AEMO sees the share reaching 73 per cent by 2020/21
“A credible reliable climate and energy policy needs to encourage investment in new clean power supply – when and where needed – well in advance of coal closures, and not place reliability in the hands of ageing coal and gas generators,” the Climate Council says.
“(The NEG) won’t reduce greenhouse gas pollution from Australia’s electricity sector. Nor will it make electricity supply more reliable,” the Climate Council says. “But, it will add a layer of red tape and complication to an electricity market already soaked in complexity.”
It argues that Australia’s clean energy and storage sector is booming thanks to the backing of the 2020 Renewable Energy Target along with targets and policies from state and territory governments. But the NEG risks bringing this to a halt.
The Smart Energy Council said the NEG, as proposed, would curtail investment in renewable energy; fail to tackle climate change; decrease competition in the electricity market; and increase costs for all consumers.
It also accused the Coalition government of a “breach of faith” having been unleashed “via an expensive advertising campaign” promoting the NEG even while the initial consultation process is still underway.
“The advertising campaign proves that the National Energy Guarantee is a political solution to a political problem,” the Smart Energy Council says.
“It is an attempt by the Turnbull Government to appear to be doing something about energy security and affordability. It is a delaying tactic while actively obstructing the path to a cleaner, more reliable and cheaper energy system.”
We’ll have more on that advertising campaign on Friday.
Note: This story has been updated to reflect a reassessment by the Climate Council of the assumed loss of power. This follows clarification of the “reliability” rule of 99.998 per cent, which applies to generation and transmission only. As the original and updated story points out, most of the power lost is due to faults in the distribution network. The Climate Council says that the premise of their assessment – that the NEG “misses the point” holds, only that the lost time it is addressing is a matter of minutes rather than seconds.
Giles Parkinson is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the former editor of Climate Spectator.