Let the chickens come home to roost!

A rock and a hard place, so the saying goes. It is hard to see a more appropriate aphorism for the position the gov finds itself in the energy debate now raging.  To some extent it is problem of its own making, but completely so. Once a report is commissioned it is incumbent on the government to review and decide which parts it will accept.

It made a mistake by accepting 49 of the 50 recommendations. Leaving the CET out on its own meant it was going to receive increasing pressure to address it.

Yet the pressure is on. All the vested interests smell blood,. The pro renewables commentariat expect that government will be loathe to kibosh the key recommendation of their own report. So even if they compromise and put some coal-including limit on the target they will have won. So they are pushing for a quick decision

My advice to the government is to let the chickens come home to roost. If they can stand the pressure the coming summer with blackouts and  load-shedding will help to form a more objective assessment of the balance between intermittent renewables and base-load necessity. The real energy debate has really only just started, with many anti-RET only now putting their arguments. While the RET advocates are quick to blame the right wing of the LNP, the Nationals, the climate deniers, painting all opposers to renewables as troglodytes, this is not really biting. The electorate is painfully aware of high and rising energy prices and is fearful of load-shedding. Over time these factors will further move public opinion against tokenistic emissions targets. The government has time on its side.

I am sure Frydenberg is scrambling to find a solution that waters down the RET, or CET or whatever name you choose to give it, to what is acceptable to Turnbull. I guess there's the rub. On the one hand Tunbull must still have nightmares about his last energy policy fiasco that saw him sacked, but at the same time pride prevents him from acquiescing to Abbot-esque policies. As for this renaming option, with apologies to the great bard, a CET by any other name would still smell.

My advice to the government is to take their time. There is no reason for a quick decision on the CET. Let the debate continue to fester, let power shortages, black-outs, generate some realism into the energy debate. Energy policy could win the next election

Baseload Equivalence Test

Putting political issues to one side, 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.

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.

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.

Time to scrap RET

Today's article in The Australian by Maurice Newman "The ever-receding mirage of cheap renewables just faded from view" provides a sobering review of the consequences of ideological climate action. The consequences of decisions made when Climate Change was the "greatest moral challenge of our time".

The results of policies enacted just a few years ago are having some inconvenient consequences. In Europe and Worldwide the hysteria that led to aggressive retirement of fossil fuels in favour of renewables has gone into reverse with some 1500 coal fired plants planned or under construction today.

For Australia there is a stark reality; higher energy costs and blackouts. South Australia the champion and trailblazer of renewables has had a rude awakening. Without sufficient base-load power there will be blackouts. Even if the inter-connector could magically provide back up base-load power whenever it was required, the cost would always be high. Suppliers would always charge a premium giving priorty to their long term contracts, and only surplus energy would be made available to the 'spot' market. Given the intermittent nature of renewables this rise in costs was predictable and inevitable. Perhaps battery storage will, over time, help to address this, but it is very much at an experimental stage, while South Australia needs real solutions today.

Australia was once the envy of the world, with abundant cheap energy to power its industry and even to export. Today with its national Renewable Energy Target (RET) as well as even more ambitious, ie fool hardy, state government targets, this has all changed. The RET has distorted our energy markets. It is no longer economic to maintain or invest in new fossil fuel generation if no one is willing to commit to long term supply contracts. Our aging coal fired plants are being phased out, decreasing base-load capacity and increasing prices. The impact is on all industry through higher costs and uncertainty of supply. All this for no measurable reduction in global CO2 emissions. Australia is crippling its economy for symbolism.

It is time the government bit the bullet and scrapped the national RET and let the markets operate to provide the abundant low cost energy that gave Australia its kick-start in the industrial era.