Put Energy Security first !

Once again the Turnbull government is in a mess largely of its own making. It needs to decide on how it will react to the Finkel report ( Blueprint for the future:Independent Review into the Future Security of the National Electricity Market), a report it commissioned. It can either accept the key recommendation to establish  CET (Clean energy target) of some 42.5% (much greater than the current 24% RET) and accept the already high an dlikely increasing energy costs as well as the instability in supply or it can reject the key recommendations reneging on its emission reduction commitments and renewable energy targets and in effect rejecting the recommendations of its own report. With passions high in both sides there is no doubt there are electoral consequences to this decision. 

However I can see no way of avoiding conflict and with vocal proponents of each side it is likely to be loud. 

Avoiding Finkel's poisoned chalice

So lets just put the political issues to one side and consider the energy equation. The three critical factors are ; 

• Energy security - electrical energy must be available whenever and in whatever quantity required on a continuous basis for both industry and for households.
• Energy costs- must be as low as possible to ensure the quality of life of individuals and households and to make industry productive
• Emissions - Energy generation should as much as possible ensure emissions of GHG are minimal.

Finkel's report is grossly inadequate. By focusing on Emissions targets and how existing global commitments may be met, the report sacrifices the other two critical factors.

Finkel does recognize energy security as a key issue and sensibly proposes that suppliers of intermittent renewable energy be required to provide base-load power as a backup. However by limiting the backup power required to a mere 90 minutes his proposal does not provide anywhere near adequate cover. In effect he papers over this very real limitation of the most popular renewables, solar and wind. 90 minutes is totally inadequate should a South Australia style event recur.

Real energy security requires continuous supply. Anything less is not acceptable to Australia, or indeed any country worth its salt in the 21st century.

Hence all suppliers of energy should be required to meet a Base-load Equivalence Test, BET.

BET requires every energy supplier to provide continuous supply. For example for solar, in a region where daily sunshine can provide the equivalent of 6 hours of supply (averaged over normal climatic conditions) the supplier would have to source an additional 18 hours of base-load power per day. Only by adding this base-load power could the energy supply for intermittent energy sources be regarded as 'equivalent'  to continuous supply alternatives.

Suppliers of intermittent energy such as solar or wind could meet the BET by battery or pumped hydro, or by sourcing base-load power from other suppliers. Where such supply was externally sourced it would have to be backed by formally agreed long term supply contracts. No doubt this would add to the cost of intermittent renewables, but without BET any energy supply management process, such as Finkel's CET or the older RET, is flawed.

Frydenberg's get out of jail card...

Given the potential political consequences it is no wonder that the government has been vacillating on their response to Finkel.

By putting Energy security first there is a sensible path through this dilemma   

Step 1: Clearly state that of the 3 conflicting needs identified by Finkel, Energy security is the first priority.

Step 2: In order to ensure all energy supply alternatives are comparable when it comes to energy security, all new supply will have to meet the Base-load Equivalence Test to provide 100 percent continuous energy. Solar and wind will have to either purchase base-load power from other suppliers or add their own battery, pumped hydro or other base-load power solutions hydro.

Step 3: Reject CET, retain the RET, accept the possibility that the current emissions reductions and renewable energy targets may not be met, but argue that Australia cannot afford to jeopardize energy security.

While the above three address the immediate problem, they do not re-build the shortage of base-load power following closures of coal fired generators over the past decade. Nor is it likely, given the current political environment, that commercial operators will build new base-load power generators. So the government needs to step in with Step 4.

Step 4: Commit federal funds to building new base-load power stations to compensate for closures over the past decade. The government would supply this energy at commercial rates and in competition with other suppliers, and be willing to sell the asset once it was proven to be competitive. Given current electricity prices and the re-balancing of demand due for base-load power due to the need to meet BET, in all probability these power stations will be able to be sold off at a profit.

Look to the electorate

Any proposal that is willing to sacrifice Australia's commitments to GHG reduction or indeed the RET is likely to receive widespread condemnation by the Chatterati. However Australian Industry and households will accept it as a fair compromise. This is especially so given that Australia's contribution to global warming is minimal and any effort we could make is dwarfed by the increasing emissions by China and India.