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‘This place is mad’: As politicians bicker, China’s energy security is at risk

Dim prospects: The federal government is attacking state and federal Labor’s renewable energy plans. Photo: Phil Carrick”Energy security for all ns,” is the bold if now ironic promise that greets visitors to the homepage of the n Energy Market Operator.
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The 90,000 South n households that endured blackouts during the evening of a heatwave on February 8 might not feel particularly secure. Nor would workers at Tomago Aluminium in the Hunter Valley after AEMO ordered much bigger power cuts two days later at ‘s largest smelter to ensure grid stability as the record hot spell swept eastwards.

There, crews braved 50 degree-plus temperatures to deploy 12-foot timber poles to ensure the molten material in expensive potline-cells reheated properly once electricity was restored..

With the National Electricity Market (NEM) set to lose one of its largest power plants next month when the 1600-megawatt Hazelwood station in Victoria closes, remaining surplus capacity is about to shrink further. And if supply challenges weren’t enough to fret over, electricity has suddenly morphed into a rerun of the carbon tax political war, guaranteed to generate exaggerated partisan claims and short-term, costly partial fixes. So, just how bad is the problem?

“It’s serious,” Matt Howell, Tomago’s chief executive says after his smelter faced a second day of cuts last Saturday. “It’s an emergency and we need people to respond to it.”

Fortunately, barring a repeat of this month’s extreme heat, the NEM may not get another major challenge until next summer, although by then AEMO is predicting supply constraints for both Victoria and SA. And as last September’s freak storm event that blacked out the grid in SA showed, nature turbocharged with climate change can throw up nasty surprises.

But in a week marked by re-energised attacks by the federal government on state and federal Labor’s renewable energy plans, – even if intermittent solar and wind even helped ease the strains in coal- and gas-dependent NSW – there is dimming hope a multi-party political consensus can shore up our grid.

Labor didn’t help its cause, either, muffing its lines as it struggled to limit political fall-out for SA’s third major power incident in five months.

Among the most pessimistic is Danny Price, who sits on the government’s Climate Change Authority and, as managing director of Frontier Economics, advised Malcolm Turnbull when he was opposition leader on setting up an emissions intensity scheme.

That plan, since adopted by Labor but ruled out by Prime Minister Turnbull, would to help transform an ageing electricity industry towards the low-carbon future by using a market to price pollution.

“All the arrows are pointing in a very bad direction” even as ‘s power sector rapidly deteriorates to “Third World standards”, Price says.”This place is mad.” Will people invest in renewables?

Uncertainty generated by by political bickering means investment even in maintenance is being affected, leaving generation capacity more vulnerable to unplanned outages, he says.

Only the mandated Renewable Energy Target (RET) is driving spending on new large-scale generating capacity. Including the 2300 MW of new projects under way or expected to start in 2017, the RET will require $10.8 billion between now and 2020 in new investments, the Clean Energy Council estimates.

So-called high-efficiency, low-emissions coal-fired power plants would cost multi-billions of dollars to build, and many years too. Pricing in some cost of carbon – which investors all assume will be added one day – makes them “uninvestable” for commercial despite the Turnbull government talking them up.

Matthew Warren, chief executive officer of the n Energy Council, can’t comment on firms’ maintenance. He warns, though, that without bipartisan cooperation at state and federal levels, “we are likely to see a second decade of energy policy uncertainty, which would be catastrophic for the cost and reliability of energy in “.

“The ‘grid’ as we know it is degrading, firm generation is closing and is not being replaced,” he says. “n businesses and households are feeling the results of this dysfunction via higher prices and increased unreliability. That can be expected to continue to worsen.”

Alan Finkel, the chief scientist who is conducting a review in the future security of the NEM, is more circumspect, noting this week “the stability of the system is not as robust as when the NEM was designed” two decades ago.

He sees “no single villain” behind the recent outages, some of which have centred on South . Finkel, though, also underscores the shifting policy stances aren’t helping: “There’s no doubt that every investor group we’ve spoken to has said that the policy uncertainty is making it much less likely that they will invest.” Will the lights go out?

The NEM – which serves 80 per cent of ns through one of the world’s biggest interconnected electricity grids – sets an “expectation” demand will be met 99.998 per cent of the time.

While of little consolation for those sitting in blacked-out homes in Adelaide nor in NSW’s Port Macquarie (see Tweet below) during the heatwave, the recent outages will probably fall within that reliability range. The lights are out in port macquarie for over an hour. Lets hear from the Prime Minister on why. (LOTS SAID ABOUT SA, NOT NSW!!! )— Rob Oakeshott (@RobOakeshott1) February 12, 2017

Governments and AEMO also learnt from the SA outages, helping NSW dodge worse two days later.

Pleading by Don Harwin, the new NSW Energy Minister, for the state’s consumers to trim electricity consumption, including raising the thermostat on their conditioners to 26 degrees may have made a critical difference.

Thankfully, it’s improbable this summer will cast up another heatwave so extreme.

Not only did it match February heat records in SA, it also obliterated state-wide maximum temperature records in NSW two days in a row. (Background warming from climate change doubled the odds of such a scorcher, scientists say.) Mounting worries

Still, evidence is mounting of an emerging energy crisis, not least in the form of sharply higher electricity and gas prices.

Exhibit A from this month’s events include AEMO’s own report on the SA leg of the heatwave, while its follow-up review of the handling of the NSW component out next Wednesday will likely become Exhibit B.

The first report revealed the outage could have been avoided. SA had sufficient gas-fired capacity to meet demand even with a sharper drop-off of wind power than forecast, prompting Lily D’Ambrosio, Victoria’s Energy Minister to be among those seeking answers.

“What went wrong with AEMO’s demand and wind forecasts? Why didn’t AEMO contact Engie [the French-owned operator of the Pelican Point gas-fired power plant that operated at only half capacity] earlier?” D’Ambrosio says. “Clearly AEMO’s forecasting capabilities need to be reviewed.”

According to the report, AEMO was only told by Engie at 6.09 pm local time “that they don’t have the gas to run the unit”. Twenty-four minutes later, AEMO ordered load-shedding of 100 MW to “restore system security”. However, that cut then tripled in size to 300 MW because of a software glitch.

NSW enjoyed “uninterrupted electricity supply” during its event thanks to “efforts of NSW and ACT consumers” and Tomago’s “cooperation”, says Joe Adamo, an AEMO executive general manager.

Fairfax Media can reveal AEMO intervened at 5.58 pm AEDT on Friday February 10, to order Tomago to turn off its potline No. 3 within two minutes.

That dropped demand 290 MW, overlapping for 15 minutes the shutdown of potline No. 2 for a similar power saving that had already been ordered by Tomago’s supplier AGL.

AGL used its contract with Tomago to curb output at three potlines in sequence for a maximum of 75-minutes each even though AEMO sought only one hour each.

If Tomago’s potlines don’t get power restored after about 2.5 hours – as almost happened after a curtailment in January 2016 – the cells solidify and are destroyed. At risk are1800 direct and indirect jobs, and annual output of $1.5 billion, most of it exported.

AEMO is investigating why two big gas-fired power plants, Tallawarra and Colongra, were suddenly unavailable at the crucial peak period in NSW. With Tomago down almost 600 MW at one point, the curtailment was almost six times bigger than it asked for in SA. Why do prices keep rising?

Soaring gas and electricity prices are coming to consumers small and large, as wholesale prices keep rising.

During the recent events, NEM wholesale prices touched the maximum allowable $14,000 per MW-hour, compared with an average under $60 for all 2016 in NSW.

“It is for the n Energy Regulator to determine whether participant behaviour complies with the market rules, and we understand it will be investigating these matters,” Adamo says.

AEMO notes spot prices (see below) are continuing to rise, especially in 2017. Futures contracts in NSW for 2018 delivery have almost doubled from $47 to $89 per MW-hour in the past 12 months. Victoria lifted its retail prices about 10 per cent on January 1, and NSW will adjust its retail prices on July 1.

Hugh Saddler, an honorary associate professor at ANU, predicts troubles will intensify next year when summer peaks return. “There certainly could be a problem next summer with Hazelwood not there,” he says.

He sees much scope in so-called demand-side responses – seven years in the making – that would see willing businesses rewarded for reducing demand during peak periods. Pumped storage

Consumers want “dispatchable” electricity when they need it – rather “baseload” supplies. Solar and wind energy’s intermittent nature means it often needs back-up, with various forms of storage being examined.

One gaining Turnbull’s attention is so-called pumped storage, with a disused Kidston gold mine in northern Queensland offering a prospective 330 MW of flexible, rapidly dispatchable electricity. Water is pumped higher within the old mine during periods of surplus electricity elsewhere, and can then be released to supply a form of hydropower when the market is in short supply.

Victoria, meanwhile, announced on Friday plans for a 20 MW battery, the largest of its kind in , with more to come.

Alan Pears, an energy expert with RMIT University, says a whole host of building codes that currently reward heating benefits at the expense of cooling designs – hence the preponderance of black-tiled roofs – could be tweaked to reduce summer energy demands.

He says the SA government, for instance, could have done more to boost energy efficiency efforts. Shaving 10 per cent off the summer residential peak in the state would have avoided the need for any cuts last week.

Pears also predicts one outcome of the political paralysis will be an acceleration of the uptake of solar panels and batteries.

“The fundamental issue is that everything at the moment is undermining confidence [in the NEM],” he says. “And that supports the push for distributed solutions.”

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