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How South Australia Won the Great Energy War

Tracey James - Wednesday, October 17, 2018

How South Australia Won the Great Energy War

While consumers and energy companies cry out out for leadership in Australia's energy crisis, our new PM responds with no federal energy policy at all. In this post, we chart how South Australia won the energy war in the face of federal government derision, insult and apathy. 

So Much Energy But So Little Vision

‘We have every energy resource you could want -- whether its old school or new school -- here in Australia. Yet, we have the most expensive power in the world. So to put it bluntly, it’s broken and it has to be fixed.’ Sanjeev Gupta, Liberty House Group.

For the last decade, energy companies and consumers have followed the political energy wars with disbelief. Before his party dispensed with his services, Prime Minister Turnbull’s final peace offer was the ‘National Energy Guarantee.’ Even that feeble policy, with 2020 targets so low they've already been met, wasn’t enough to save the member for Wentworth.

He should’ve listened to the advice SA premier Jay Weatherill gave him back in 2017: ‘What the PM needs to understand is this: You can’t do business with these people [the hard right of the party] … if you move away from the Emissions Intensity Scheme to the Clean Energy Target, then they’ll want to change that to allow coal in. If you gave them that, the next demand is “tear up Paris”, and if you tore it up, the next thing is they’d ask you to call a press conference and deny that you believe in climate change.’

Prescient advice, as it turned out. The irony is that the renewable energy boom we’ve seen across Australia makes our politicians look like a bunch of schoolboys fighting over seats on a train that left the station long ago. The Guardian has provided a timeline on video that chronicles the whole sad story from John Howard to Scott Morrison. The story makes a Greek Tragedy look plausible.

NEG: Obsolete Before Its Conception

This Financial Review article sums the situation up this way: ‘ … the capacity of wind and solar energy projects under construction, contracted or expected … already exceeds the amount expected to be built under the National Energy Guarantee (NEG) with the government's current emissions reduction target.'

These projects are expected to add some 10,000 megawatts of new capacity to the national electricity market by the early 2020s, according to a recent Green Energy Markets report. Prime Minister Morrison claimed in a radio interview that Australia was on target to meet its Paris climate accord commitments, adding that ‘the business-as-usual model gets us there in a canter.’

Meanwhile Resources Minister Matt Canavan told 2GB that the Paris Accord doesn’t prevent us from building more coal-fired power stations, and adds that the accord is not binding anyway. No wonder Katharine Murphy at The Guardian summed up the situation this way: ‘Scott Morrison needs a plan to cut emissions but all he has is a fairy tale.’

In another Guardian article, Greg Jericho put it more bluntly: ‘So utterly bereft of reason on the issue and so completely consumed by climate change denial, the government is now at the point where even the pretence of doing something to reduce emissions is viewed with distrust.’

Back to the Future

Canavan won’t find too many investors for his coal-fired power stations, given that both solar and wind power are either the same price or cheaper ‘than new fossil fuel capacity in more than 30 countries,’ according to The Independent. The World Economic Forum has described the change as a ‘tipping point’ that could put energy companies at the forefront of the fight against global warming.

Because of government inaction, Australia now faces the cost burden of coal-fired power stations, which are so far past their productive lives that they cannot be refurbished economically. ‘Within the decade,’ the Climate Council warned several years ago, ‘around half of Australia’s coal fuelled generation fleet will be over 40 years old.’

That’s why we saw the Hazelwood power station in the LaTrobe Valley close last year, and why we saw Malcolm Turnbull begging AGL to keep the Liddell power plant in the Hunter Valley going (with a few miles of gaffer tape presumably). The age of our coal-fired power stations also translates to ultra-high pollution levels.

Ideology and Idiocy

This is the same prime minister who used South Australia as a punching bag to detract from his failure to show leadership on the energy front. Premier Jay Weatherill fought back valiantly. He told the Sydney Morning Herald: ‘first we're told we can't build cars, then we're told we can't be trusted to build a canoe; and then we get told we can't keep the lights on.’

The premier accused the federal government of ‘bagging South Australia at every step of the way, and told Josh Frydenberg, ‘It's a disgrace the way in which your Government has treated our state. It is the most anti-South Australian Commonwealth government in living history.’

When the coalition government announced that it was scrapping the Clean Energy Target in 2017 – against the advice of chief scientist Alan Finkel, the premier told the press: ‘We have a Prime Minister who cannot deliver a Clean Energy Target and has now delivered a coal energy target.’

For his part, Malcolm Turnbull never missed a chance to blame South Australia’s power outages on the state’s foray into renewables, even when they were clearly caused by other events. At the state Liberal Party's Annual General Meeting in Adelaide, he described the premier’s renewable energy policy as ‘ideology and idiocy in equal measure’.

Tipping Point

Even the giant Tesla battery became the butt of jokes about the quixotic premier and his love of windmills. It worked, and Jay Weatherill lost the 2018 election. Malcolm Turnbull used the chance to put the boot in one last time, as he claimed the result vindicated the coalition’s energy reforms.

A few months later, with the coalition’s energy policy in tatters, we learnt that Tesla’s giant battery had reduced the cost of the grid service by 90%. When maintenance is needed on the grid, the Energy Market Operator calls for FCAS, Frequency Control and Ancillary Services such as gas generators and steam turbines kicking in to compensate for the loss of power.

Electricity prices can reach giddy heights during those FCAS periods, and the giant battery provides the same service much cheaper since it kicks in instantly and dramatically reduces the time taken for maintenance. Asa result, South Australia’s FCAS costs are down 90% and have saved the state $30 million in 6 months.

75% of Energy from Renewables

South Australia became a net electricity exporter for first time, the latest audit from The Australia Institute shows. ‘… the state is now taking advantage of its abundant resources of wind and solar radiation,’ the report says, ‘and the new technologies which have made them the lowest cost sources of new generation, to supply much of its electricity requirements.’

The remaining issue is a wholesale price which is the highest in Australia. The Australia Institute’s Report states that this ‘has nothing to with wind and solar, but the fact that [SA] has no low-cost conventional source and a peaky demand profile.’

South Australia’s new energy minister Dan van Holst Pellekaan sees price reduction as his biggest challenge, not the 75% power-from-renewables target by 2025 set by Jay Weatherill during the 2018 election campaign. At that time, then opposition-leader Steven Marshall vowed to scrap it, while then federal energy minister Josh Frydenberg painted Jay Weatherill as ‘a clean energy addicted gambler “doubling down to chase his losses”’.

The Gupta Revolution

The South Australian government received a huge helping hand at a desperate time: In 2016, the outlook for the town of Wyalla was dismal. The Arrium steel mill, the town’s major employer, closed its doors. Alinta Energy closed down its remaining coal-fired power plant. ‘Now it’s on the cusp of a wave of construction that investors and community leaders say should place the region at the vanguard of green innovation,’ reports The Guardian, ‘not just in Australia but globally.’

British ‘man of steel’ Sanjeev Gupta had bought the Arrium steel mill. Gupta has been buying failed steel mills in the UK, revitalising them and making them profitable. Now he’s doing the same in Wyalla, where the local paper talks about the Gupta Revolution.

Gupta told the paper: ‘If you talk about the kind of steel plants we could have here, the mining expansions that could happen, other projects that companies like Becker Helicopters are bringing here, renewable energy and tourism, if you take all these things and put them together there’s no doubt one day Whyalla will be bursting at its seams.’

Gupta has also bought a controlling interest in Ross Garnaut’s Zen Energy company. The two entrepreneurs plan to set up an array of renewable energy that will include solar, pumped hydro and batteries. They say the array will deliver clean power that's reliable at a much lower cost. ‘We're happy for the sceptics to watch what we do,’ Garnaut told the ABC, ‘and they'll learn what's possible.’

One of those sceptics is Tony Abbott, who told radio station 2GB in Sydney: ‘You can't run a steel plant on renewables, you can't run an aluminium smelter on renewables … a battery will not run a steel mill, a battery will not run an aluminium smelter.’

Land of Opportunity

Sanjeep Gupta had some advice for Mr Abbott and the rest of us: ‘Be braver. Be more entrepreneurial. Take risks … It’s very difficult to change things in Australia. Everyone is too stuck in their ways.’

This Guardian article outlines some of the exciting renewable energy projects that are taking shape in South Australia, including the gigantic Bungala solar photovoltaic power plant with a footprint the size of Melbourne’s CBD. The most exciting of them is the Aurora solar thermal power station from US developer SolarReserve.

It uses a field of mirrors to heat a molten salt system inside a 234-metre tower. It will generate electricity and store eight hours of energy that can be accessed via the grid when the sun isn’t shining. The $650m plant will provide 5% of the state’s energy needs, and will be the world’s largest solar tower with storage.

The Guardian cites SolarReserve vice-president, Mary Grikas, who says the plant will operate ‘just like a conventional coal or gas power station, reliably generating electricity day and night – except without any emissions.’Image Source: The Guardian

Courage and Conviction

Malcolm Turnbull and Jay Weatherill both lost their jobs over Australia’s energy crisis, for very different reasons. One was Prime Minister of Australia, the other Premier of South Australia. One left a divided government with a policy vacuum for renewable energy and the fight to stop global warming. The other left a legacy that will stand as an example of what a clear vision and the courage to turn it into reality can achieve in this great country.

NOTE: If you enjoyed this article, you'll most likely enjoy this one as well:

Effective Leadership: Learning from Turnbull’s Mistakes

Tracey

 


Tracey James
Chief Executive

I used to be a Biotech researcher but got sick of acid holes in my clothing. After switching to selling the equipment I'd used in the lab, I discovered marketing and loved it. I've been marketing technologies ever since - and still love it.


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