Consumers short-changed by Liddell closure plans

Consumers short-changed by Liddell closure plans

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Consumers should be doing a lot better out of the closure of Liddell – and the inevitable closure of other coal generators. But they need governments to act to encourage the efficient use of energy.

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AGL’s plans to close the Liddell coal plant and replace it with renewables, storage and gas peaking plant will deliver cost savings of around 20 per cent, but those savings could have doubled if more attention had been given to using energy in a smarter way.

Chris Dunstan, from the Institute of Sustainable Futures, says if energy efficiency measures had been used as a substitute for the ageing and increasingly decrepit Liddell coal generator, then the costs would have reduce to just $56/MWh, rather than $83/MWh in AGL’s proposal and $106/MWh if Liddell’s operations were extended for another five years.

“Consumers should do a lot better our of the Liddell closure than AGL’s plan,” Dunstan told RenewEconomy on Monday, adding a pure “clean energy package” would also remove all emissions.

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But he said the criticism should not be laid at the feet of AGL – even though its commitment to demand response initiatives and energy efficiency was minimal – but with an electricity market that gave little incentive to big utilities like AGL to be more efficient.

“It requires response from government – to ensure we have got the regulatory settings in the NEM (National Electricity Market) to deliver the least cost outcomes to consumers, because that is what missing,” Dunstan says.

“Cheaper options are simply being ignored because we don’t have a market that facilitates least-cost outcomes.”

It has long been accepted that the cheapest cost of energy, and the cheapest cost of abatement, is for the energy that is not used.

But Australia has long been a laggard in energy efficiency – in the energy market, in housing and in transport – and any schemes that do exist already have a “house full” sign on them, such as the ‘white certificate’ schemes in states like NSW and Victoria.

Dunstan was a lead author of an ISF report released last month, and commissioned by the Australian Conservation Foundation, that looked at alternatives for Liddell (See Beyond Coal: Alternatives for extending the life of the Liddell power station).

It noted, as AGL has concluded, that keeping the generator open was the most costly and least efficient option.

AGL has proposed to reduce those costs by building a scheme around 1.6GW of renewables, 750MW of gas peaking plant, 250MW of battery storage, and 300MW of demand response.

Around half of those initiatives are committed, but the fate of the other half rest in the response of other market players, and to the outcomes of government policy.

The ISF modelling showed that by far the cheapest options were based around a “clean energy package”, one with a minimal amount of renewables and a lot of energy efficiency and demand management, and one with extra investments in solar thermal and biomass.

The cheapest option of all was just using energy efficiency measures – 1,200MW in total.

Dunstan says that currently big generators have little incentive to ensure that prices go down (apart from the lingering threat of mass defection).

But this issue needs to be addressed – not just because of the continuing falls in battery storage and renewable energy costs, but also if grid prices continue to rise, or even if they fail to fall.

“The response to the proposed closure of Liddell Power Station should be linked to clear policy objectives around reliability, affordability, sustainability and minimising economic shocks for the local community and the nation,” the ISF report said.

And it also noted that it was not the responsibility of AGL to replace the capacity of Liddell – that would not encourage competition in the market.

“The Commonwealth government should adopt competitively neutral policies that treat all market participants fairly. Singling out one company to respond would not provide an effective government policy and framework to transition the whole electricity sector,” it says.

Dunstan, however, says there is a lot of work to be done to convince policy makers that energy efficiency, or even demand response, is a winning proposition – even if the savings are obvious.

“People don’t seem to be able to get their head around it,” Dunstan says.


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  1. Hettie 3 years ago

    Policy makers clearly *do not want* to be convinced about energy efficiency and demand management. Where is the opportunity to game the system or make obscene profits from those? Who will keep up the brown paper bags from such practices? No no! Keep them away from us.

  2. Malcolm M 3 years ago

    The challenge in accepting the energy efficiency option is whether it will reduce the annual peak by ~1300 MW.

    Another option not considered is upgrading transmission capacity, to access peaking capacity in neighbouring markets. For example in the heatwave in February 2017 NSW was only able to import 400 MW of power from Victoria because of limitations of transmission capacity NSW within from Tumut 3 to Bannaby. Within the NSW transmission development plan is an option to upgrade a 330 kV line to 500 kV. This could allow NSW to access about 2500 MW of peaking capacity from Victoria. One of these peaking stations is actually in NSW but in the Victorian market – the 1500 MW Murray power station. The Queensland inter-connector was also used to only half its thermal capacity of about 2000 MW. This is in case one of the 2 circuits trips, so the remaining circuit can maintain demand until more NSW generation can be dispatched. But why build an entire high voltage circuit just in case it’s required for a few minutes every few years ? Could this emergency capacity be provided more cheaply by batteries or instant demand response ? This would allow an extra 1000 MW of dispatchable generation from Queensland without building a new transmission line.

  3. Peter G 3 years ago

    Giles, Australia does have some historically good form on EE. Howard’s energy Efficiency Opportunites Act for business (scrapped by blAbbot), and Brendon Nelson’s light-bulb mandate were both significant. I think that Rudd’s Home Insulation scheme was likely the most effective energy efficiency strategy every adopted in OZ it is a pity it has never been systematically quantified (both on peak general reduction) and general discussion of it descends into troll speak.

    • Andrew Roydhouse 3 years ago

      Actually there were at least two studies done and they both yielded very similar and extremely disappointing results.
      It was the old case that people do not value what they do not have to work for.

      Both studies showed that the majority of homes that took up the offer actually INCREASED their electricity and gas use after the insulation was put in.

      One of the studies then went back to a number of the participants and the common theme of the one-on-one interviews was that:
      1) Previously they felt it was a waste of money using heaters too much as the heat just disappeared. So they would often only heat one room. Now the house was insulated they felt the heat stayed there so they’d heat the whole house and the family could spread out.
      2) Similar to 1 but with using AC or portable AC in summer.
      3) As they saved so much money on not paying the full costs for insulation they felt they could afford to increase their power use (or gas heater use).

      One question – how many people do you know who would rather use the reverse cycle AC in winter at say 24 or 25 degrees instead of wearing a jumper inside?

      Given that people are rewarded with a lower per unit price the more electricity they use – the system is designed against efficiency not to encourage it,

      • Peter G 3 years ago

        Thanks Andrew do you have current the links to the studies? Both the The Insulation Council and Dept of Environment reports cited in Robert Crawford’s 2014 conversation article have disappeared?
        I recall there was work done with selected participants with those type of conclusions, but I understood this was not an attempt to empirically quantify the program, nor was data on energy consumption systematically collected.
        I accept there are compounding variables, but I am skeptical if a study that only looks selected behaviors immediately after the program can be extrapolated over time – particularly as there has been a subsequent conspicuous rise in tariffs.

        You are correct that gas is often sold with inclining block tariffs but domestic electricity is not, moreover insulation increases the effectiveness of using the building as a thermal store powered by solar PV. So there are incentives to reduced fossil energy in play as well.

        We have seen substantial change in consumer behavior following the tariff increases as evidenced by flat and declining demand – so the question might be ‘How much has the insulation of affected buildings facilitated this the reduction of fossil fueled energy over time?’ Unfortunately I am not aware that the information required to answer this has been collected.

        • Andrew Roydhouse 3 years ago

          If I can find them I’ll post them here.

          The studies, as my fading memory recalls, were done after the scheme had been abandoned and in at least one (if not both) was at least one year after the participants had the roof insulation installed so there were at least 4 directly comparable electricity bills for the before/after comparison.

          Unlike many studies or so-called analysis (such as the Tesla truck vs house demand not comparong like with like) I could not see any signs of methodological bias (unfortunately).

          Contrast electricity, gas or water rates with discounted rates for the greater volumes you use with the personal tax system.

          That really highlights the distorted system we have. Penalise those who use the least by charging them the highest effective per unit cost.

          How come the arguments in favour of higher tax rates for higher income do not hold for utilities?

  4. Charles Hunter 3 years ago

    First graphic has a broken link.

  5. Brunel 3 years ago

    Room heaters should have a 1 star efficiency label on it.

    I hate the idea of government regulating the electricity consumption of any appliance, but people should be informed that a heat pump is a much more efficient way of heating the room.

    • Ren Stimpy 3 years ago

      If the space has proper insulation.

  6. Ray Miller 3 years ago

    As has been pointed out by Alan Pears, Lovings and many others ‘mining’ energy efficiency is highly productive, and the more mining you do the better at it you become.

    The other issue is one of peak energy usage relating to temperature. This is a very significant issue, many of our electrical loads have an exponential temperature coefficient. The temperature sensitivities relate to thermodynamics, with increasing frequency of extreme temperatures throughout Australia the impact on our energy system is a massively expensive and risky one.
    So maybe we should be spend some of our limited resources not just adding extra expensive generating and transmission capacity but targeting that exponential temperature coefficient in our buildings? We may just stumble on a few gold nuggets in the mining process..

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