In the post A New Report on the possibility of Renewable Transition, I discussed the politics of the way the Australian National Energy Market was being designed (and restricted) to maintain reliability, stability and security, and whether fossil fuels were a necessary part of that design. One of the main players in the process was the Energy Security Board.
Another main player is the government. As the reader probably knows the government is in favour of massive investment in methane gas, which is probably not that economic, and will just lock us into high levels of methane emissions, but their plan for the electricity market seems to be centered on keeping gas going.
Methane, Methane and more Methane
Angus Taylor, the Minister for Energy and Emissions Reduction, has made the backing of methane, very clear. He said:
The Government backs the gas industry, backs Australians who use gas and it backs the 850,000 Australians who rely on gas for a job. The manufacturing sector alone relies on gas for over 40 per cent of its energy needs.
Gas is a critical enabler of Australia’s economy. It supports our manufacturing sector, is an essential input in the production of plastics for PPE and fertiliser for food production.
In 2019, we overtook Qatar to be the largest LNG exporter in the world, with an export value of $49 billion.
Australia’s energy future 29 October 2020
No mention that Australia received less than $2 billion in royalties from these sales between 2016 and 2018 under the petroleum resource rent tax (PRRT), whereas Qatar is estimated to have received $26 billion in royalties. In 2019, tax credits for oil and gas companies, taking Australian fossil fuels rose to $324 billion – that is there is $324 billion in tax the companies owe but do not have to pay [1], [2], [3]. I guess the idea is that taxpayers have to subsidise mining, and they have to keep methane gas going.
Taylor continues:
This Government will secure a future gas market that is attractive for gas development and investment. This will allow us to remain one of the top LNG exporters.
We will ensure that long-term domestic gas contract prices are internationally competitive to support our manufacturing and industrial sector.
We will ensure that there is sufficient new gas generation to maintain a reliable grid.
We have proven through the Snowy project at Kurri Kurri that the Morrison Government doesn’t bluff.
Our National Gas Infrastructure Plan will identify the major priorities for investment. If we don’t see the investment that we need to keep our gas market strong then we will act.
Australia’s energy future 29 October 2020
It is terrible when fossil fuels shut down, and the government will threaten to build methane gas powered energy, if other people will not.
ANGUS TAYLOR: What’s very clear is in the last few years, there hasn’t been enough investment in dispatchable generation [this means fossil fuels, even though coal is not ‘dispatchable’ because it is slow to ramp up or down], at the same time as we’ve seen big closures like we saw at Hazelwood in Victoria a couple of years back. So it’s that dispatchable generation, making sure there’s enough of that in the system is where it’s gone awry. Now, you know, we’re now saying to the big energy companies, if you don’t invest in that dispatchable generation, we will do it ourselves. That’s exactly what we’ve said we’ll do in the Hunter Valley at Kurri Kurri [with methane gas]. But it is true, there hasn’t been enough of that investment. Now, there has been some and it is increasing. I opened a gas generator in South Australia, for instance, around a year ago, which was has made a real difference in the South Australian grid. Helped to drive down prices, increased reliability [presumably unlike the batteries?]. But we need to see more of that. And if the private sector doesn’t do it, we’ll step in. That’s exactly what we said we’ll do in the Hunter Valley.
Interview with Luke Grant, 2GB, 5 January 2021
Conflict and Cancelling
The government argues that the closure of the Liddell power station…
will leave NSW 1000 megawatts short of electricity. Others dispute this, including the agencies tasked with regulating and maintaining the energy system: the Australian Energy Market Operator and the Energy Security Board.
KERRY SCHOTT, CHAIR, ENERGY SECURITY BOARD: The operator AEMO who keeps a close watch on the availability and what they need in the system, has said that there’s a gap when Liddell goes in 2023 of about 200 megawatts or so.
Fired Up. 4 Corners, 12 Apr 2021
This is a fair difference, and this perhaps sets the ESB, the AEMO and the government on a collision course.
Last night the ABC program, 4 corners, reported that:
Four Corners understands the federal government became so frustrated with the Energy Security Board chief’s refusal to support their position on gas that the minister’s departmental secretary called Kerry Schott and urged her to resign.
KERRY SCHOTT, CHAIR, ENERGY SECURITY BOARD: It was a private discussion
MICHAEL BRISSENDEN, REPORTER: Right, so there was pressure on you though?
KERRY SCHOTT, CHAIR, ENERGY SECURITY BOARD: Oh, there’s always pressure on me.
Fired Up. 4 Corners, 12 Apr 2021
So no confirmation or denial from Schott.
MICHAEL BRISSENDEN, REPORTER: Why did your head of department call Kerry Schott and suggest she resign?
ANGUS TAYLOR, FEDERAL ENERGY MINISTER: Well, he didn’t. So I reject that, absolutely. But what I will say is that there was an independent review of the ESB that proposed and recommended the abolition of the ESB. Obviously, there was discussion about how best to respond to that recommendation. We’ve ultimately made the decision we want to support the ESB to completing the 2025 market design work. This is a crucial piece of work about the future of our electricity grid. And we strongly supported Kerry to lead that work.
Fired Up. 4 Corners, 12 Apr 2021
There were other stories of pressure
MICHAEL BRISSENDEN, REPORTER: Four Corners has also been told that last year the minister personally intervened to try to pressure the head of the Australian Energy Market Operator to change its forecasts, which were unfavourable to gas.
AEMO boss Audrey Zibelman refused to do so.
MICHAEL BRISSENDEN, REPORTER: AEMO’s Integrated Systems Plan published in July last year also makes a clear case that if gas is going to compete with batteries in electricity generation, the price will need to be well below $4 gigajoule by 2030 and beyond. And that battery charging costs would need to stop falling. Now, why did you feel it necessary to try to pressure Audrey Zibelman to change those conclusions?
ANGUS TAYLOR, FEDERAL ENERGY MINISTER: Well, look at the end of the day, there has to be a balance in the system and gas is part of that balance. Batteries can play a particular role over shorter durations, particularly in that period when you’ve got destabilization of the grid, we’ve seen batteries play an enormously important role, but the longer duration storage or the longer duration backup overnight or during periods when we’re getting less sunshine or wind, we actually need a source of energy … Can I just, is that me? Sorry, mate. I have no choice.
MICHAEL BRISSENDEN, REPORTER: The bells signaled a parliamentary vote and cut our interview with the Minister short.
Fired Up. 4 Corners, 12 Apr 2021
Market design in practice
The ESB’s Market Design Options Paper has now been handed to Angus Taylor. RenewEconomy comments:
there is serious concern about the lack of transparency in this process and [for] the creation of a new [market] structure that leaves Taylor in apparent sole arbiter of the process, acting for a government which has been opposed to wind and solar and which has mocked new technologies such as big batteries.
Vorrath. Taylor reportedly put pressure on Schott and Zibelman over gas plans RenewEconomy 13 April 2021
It is possible the States will object:
MATT KEAN, NSW ENERGY MINISTER: Let’s get the facts on the table: using gas to create electricity is a really expensive way to do it. If you’re interested in driving down electricity prices, then you’d be mad to use gas….
The cheapest way to now deliver electricity or energy, is a combination of wind, solar, pumped hydro, and renewable technologies. So it’s not fossil fuels, it’s now cleaner energy. Those people defending old technologies are the equivalent of defending Blockbuster in a Netflix world.
Fired Up. 4 Corners, 12 Apr 2021
DAN VAN HOLST PELLEKAAN, SA ENERGY MINISTER: We’ll use less and less gas over the time. We have four grid-scale batteries operating at the moment in South Australia, we have two more already established to, started construction, and we’ll get more and more of those.
Fired Up. 4 Corners, 12 Apr 2021
And that methane gas might be replaced with hydrogen
DAN VAN HOLST PELLEKAAN We in South Australia actually have the largest hydrogen electrolyzer in the nation operating at the moment in Tonsley, in the Southern suburbs of Adelaide. It’s actually a relatively small one at 1.25 megawatts, but it’s the largest in Australia. We are right at the leading edge of that, and it’s all operating from renewable energy. So we are determined to deliver, well, we’re determined to produce, and to consume, and to export green hydrogen in South Australia.
Fired Up. 4 Corners, 12 Apr 2021
Another view on whether methane gas is useful for leading recovery
A Grattan Institute report argues that:
Far from fuelling the recovery from the COVID recession, natural gas will inevitably decline as an energy source for industry and homes in Australia…
The east coast has already burned most of its low-cost gas, and will not go back to the good old days of low prices…
Even if the Government could significantly reduce gas prices, the benefits to manufacturing are overstated. The companies that would benefit most contribute only about 0.1 per cent of gross domestic product, and employ only a little more than 10,000 people. And much of this gas-intensive industry is in Western Australia, which has low gas prices already.
Flame out: the future of natural gas. Grattan Institute 15 November 2020
They suggest that gas has a role as:
a ‘backstop’ for the power system – used for relatively short bursts to maintain reliability…, [but this] contrasts strongly with the idea of gas as a ‘transition fuel’…
This [backstop] role doesn’t need lots of gas or cheap gas, but it does require flexible gas. The Federal Government’s recently announced policies focus on supporting new gas production and pipelines…., but these require relatively constant gas demand to keep average costs as low as possible
https://grattan.edu.au/wp-content/uploads/2020/11/Flame-out-Grattan-report.pdf
A later report from the same organisation claims:
moving to a system with 70 per cent renewable energy – and closing about two-thirds of today’s coal-fired power plants – would not materially increase the cost of power but would dramatically reduce emissions….
The economic modelling suggests that moving to a system with 90 per cent renewable energy – and no coal – could also be reliable. But some additional costs – such as more generation, transmission, and storage – would be necessary to ensure supply…
Gas is likely to play the critical backup role, though not an expanded role. Australia will make a gas-supported transition to a net-zero emissions electricity system – but not a ‘gas-led recovery’ from the COVID recession.
Go for net zero: A practical plan for reliable, affordable, low-emissions electricity. Grattan Institute, 11 April 2021
Gas and modernising the grid
The determination to force more methane gas on to Australia, to counter predicted declines, is probably the reason that Angus Taylor has been so hostile to the idea that the electricity grid needs modernising and expanding, to deal with the energy transition and the kinds of ‘solar traffic jams‘ we have discussed before.
The Australian Energy Market Operator’s offered a 20-year blueprint, known as the ‘Integrated System Plan’ (ISP) and the Labor party pledged $20 billion to modernise the grid to support the the plan [2].
Taylor tweeted that:
The ISP had been recommended by the Finkel Review and endorsed by all governments at the Coag Energy Council which Taylor chairs.
AEMO has made it clear that these upgrades are essential to modernise the grid, and improve reliability and security, with the happy bonus that it will cut emissions and keep down prices.
Parkinson. “Lines to nowhere:” Taylor mocks ISP and Labor’s $20bn grid plan. RenewEconomy, 8 October 2020
So it seems clear the government, at this moment, do not want the grid improved so that the transition can work better. This may be because they don’t want to do anything to help further the decrease of fossil fuels, because they don’t to risk public money on something constructive, or they just don’t believe there is a climate problem and we can keep on with fossil fuels endlessly.
Conclusion
The question then is whether politics can hamper and disrupt supposed ‘economic reality’. I’d argue it can. It has mainly been politics that has delayed response to climate change, and which makes it hard to expect that we can now solve the problem before facing major disruption, and that has continually involved weirding markets to favour the old ways.
Tags: economics, neoliberalism, politics, technology
Climate, technology and chaos Blog 
Leave a comment