tag:theconversation.com,2011:/us/topics/aemo-42196/articlesAEMO – The Conversation2024-02-26T18:59:49Ztag:theconversation.com,2011:article/2239642024-02-26T18:59:49Z2024-02-26T18:59:49ZIs there an alternative to 10,000 kilometres of new transmission lines? Yes – but you may not like it<figure><img src="https://images.theconversation.com/files/576945/original/file-20240221-20-pfrp3t.jpg?ixlib=rb-1.1.0&rect=0%2C17%2C5362%2C3970&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/engineering-working-on-highvoltage-tower-check-604767788">Aunging/Shutterstock</a></span></figcaption></figure><p>Building transmission lines is often controversial. Farmers who agree to host new lines on their property may be paid, while other community members protest against the visual intrusion. Pushback against new lines has <a href="https://www.abc.net.au/news/2024-02-02/distrust-anxiety-in-regional-communities-over-renewables/103419062">slowed development</a> and forced the government to promise more consultation. </p>
<p>It’s not a new problem. <a href="https://trove.nla.gov.au/newspaper/article/161024868?searchTerm=transmission%20line%20protest">Communities questioned</a> the routes of earlier transmission lines built during the 1950s-70s to link new coal and hydroelectric plants to the cities. </p>
<p>But this time, the transition has to be done at speed. Shifting from the old coal grid to a green grid requires new transmission lines. In its future system planning, Australia’s energy market operator sees the need for 10,000 kilometres of new transmission lines in the five states (and the Australian Capital Territory) which make up the <a href="https://www.aemc.gov.au/energy-system/electricity/electricity-system/NEM">National Energy Market</a>. </p>
<p>Do we need all of these new transmission lines? Or will the “<a href="https://www.abc.net.au/news/2024-02-21/rooftop-solar-cells-in-australia-to-outperform-demand/103489806">staggering growth</a>” of solar on houses and warehouses coupled with cheaper energy storage mean some new transmission lines are redundant? </p>
<p>The answer depends on how we think of electricity. Is it an essential service that must be reliable more than 99.9% of the time? If so, yes, we need these new lines. But if we think of it as a regular service, we would accept a less reliable (99%) service in exchange for avoiding some new transmission lines. This would be a fundamental change in how we think of power. </p>
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<h2>Why do we need these new transmission lines?</h2>
<p>The old grid was built around connecting a batch of fossil fuel plants via transmission lines to consumers in the towns and cities. To build this grid – one of the world’s largest by distance covered – <a href="https://aemo.com.au/en/energy-systems/electricity/national-electricity-market-nem/about-the-national-electricity-market-nem">required 40,000 km</a> of transmission lines. </p>
<p>The new grid is based around gathering energy from distributed renewables from many parts of the country. The market operator foresees a <a href="https://www.afr.com/policy/energy-and-climate/transmission-infrastructure-lagging-as-planners-seek-to-balance-local-needs-20230904-p5e1st#:%7E:text=More%20than%2010%2C000%20kilometres%20of,the%20Australian%20Energy%20Market%20Operator.">nine-fold increase</a> in the total capacity of large scale solar and wind plants, which need transmission lines. </p>
<p>That’s why the market operator lays out <a href="https://aemo.com.au/consultations/current-and-closed-consultations/draft-2024-isp-consultation">integrated systems plans</a> every two years. The goal is to give energy users the best value by designing the lowest-cost way to secure reliable energy able to meet any emissions goals set by policymakers. </p>
<p>To avoid having to build transmission lines everywhere, policymakers have opted to group renewables in “renewable energy zones” with good wind or solar resources, and build transmission lines just to the zones. </p>
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Read more:
<a href="https://theconversation.com/a-clean-energy-grid-means-10-000km-of-new-transmission-lines-they-can-only-be-built-with-community-backing-187438">A clean energy grid means 10,000km of new transmission lines. They can only be built with community backing</a>
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<p>According to the market operator, the major reasons why we need such a strong transmission network are: </p>
<p>– to harness flows of variable renewable power from different regions to make sure the system is reliable </p>
<p>– to cope with outages or shortfalls in supply. If a cloud band cuts solar farm output in one state, the grid can draw on solar from another state. </p>
<p>– boosting regional economies with advanced manufacturing and production of emerging green products and technologies.</p>
<p>So while 10,000 km sounds like a lot, it’s been kept to the minimum. </p>
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<a href="https://images.theconversation.com/files/576948/original/file-20240221-24-aep6rz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="transmission lines on farmland" src="https://images.theconversation.com/files/576948/original/file-20240221-24-aep6rz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/576948/original/file-20240221-24-aep6rz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/576948/original/file-20240221-24-aep6rz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/576948/original/file-20240221-24-aep6rz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/576948/original/file-20240221-24-aep6rz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/576948/original/file-20240221-24-aep6rz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/576948/original/file-20240221-24-aep6rz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Transmission lines are necessary – but people often don’t want them nearby.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/high-voltage-lines-power-pylons-flat-224476993">Ruud Morijn Photographer/Shutterstock</a></span>
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<h2>What if rooftop solar takes over?</h2>
<p>Even so, some <a href="https://reneweconomy.com.au/new-links-could-turn-victoria-into-energy-importer-solar-and-storage-would-be-cheaper/">energy insiders</a> question whether we need all these new transmission lines. </p>
<p>What if the growth of behind-the-meter energy resources such as rooftop solar, grid-connected home batteries and electric cars begin to cut demand from the grid? </p>
<p>About <a href="https://www.theguardian.com/environment/2023/nov/01/how-generous-subsidies-helped-australia-to-become-a-leader-in-solar-power#:%7E:text=Roughly%20one%20in%20three%20Australian,on%20a%20per%20capita%20basis.">one in three households</a> now have solar on their rooftops – the highest solar take up per capita in the world. And as more electric cars arrive in driveways, we will start using their large batteries as a backup power supply for our homes – or to <a href="https://www.afr.com/policy/energy-and-climate/these-ev-owners-are-making-thousands-selling-energy-back-to-the-grid-20231114-p5ejtw">sell the power</a> on the grid. Could it be that cities could make their own power, as Nationals leader David Littleproud has <a href="https://www.smh.com.au/environment/climate-change/you-re-gonna-eat-bugs-climate-fears-and-conspiracies-at-canberra-renewables-protest-20240208-p5f3e8.html">called for</a>?</p>
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Read more:
<a href="https://theconversation.com/unsexy-but-vital-why-warnings-over-grid-reliability-are-really-about-building-more-transmission-lines-212603">Unsexy but vital: why warnings over grid reliability are really about building more transmission lines</a>
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<p>Planners at Australia’s market operator do anticipate ever-greater levels of rooftop solar, batteries and electric vehicles. Their latest forecasts see these resources with enough capacity to power 30% of the grid by the end of the decade and 45% by mid-century. </p>
<p>These are substantial contributions, but not enough to power a nation. As we move to electrify everything, we will need to <a href="https://reneweconomy.com.au/a-near-100pct-renewable-grid-for-australia-is-feasible-and-affordable-with-just-a-few-hours-of-storage/">roughly double</a> how much electricity we produce. Electricity is a much more efficient way to power transport, for instance, but switching from petrol to electric vehicles will mean more grid demand. </p>
<p>Having said that, we cannot be certain. When we model ways of giving up fossil fuels and ending emissions, there is always major uncertainty over what shape the future will take. Some technologies may splutter while others surge ahead. </p>
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<a href="https://images.theconversation.com/files/576951/original/file-20240221-28-y35hct.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="recharging electric car with grid in background" src="https://images.theconversation.com/files/576951/original/file-20240221-28-y35hct.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/576951/original/file-20240221-28-y35hct.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/576951/original/file-20240221-28-y35hct.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/576951/original/file-20240221-28-y35hct.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/576951/original/file-20240221-28-y35hct.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/576951/original/file-20240221-28-y35hct.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/576951/original/file-20240221-28-y35hct.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Over time, more of us will use electric vehicle batteries to store power or to send it back to the grid.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/closeup-woman-recharge-ev-electric-car-2388670547">Owlie Productions/Shutterstock</a></span>
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<h2>We could trade new transmission lines for a less reliable supply</h2>
<p>At present, electricity is considered an essential service under <a href="https://www.aemc.gov.au/sites/default/files/2020-03/Reliability%20Standard%20Factsheet.pd">national electricity laws</a>. That means there has to be enough power 99.998% of the time. To meet that threshold, outages have to be kept to ten minutes in a year. </p>
<p>Making electricity an essential service is a choice. We could choose differently. If we decided electricity should be a regular service, where 99% reliability is OK (translating to outages of up to 87 hours a year), we would be able to get away with fewer new transmission lines. </p>
<p>That’s because wealthier households would likely respond to more outages by investing more in big solar arrays and batteries. Some would become energy self-sufficient and cut ties with the grid. </p>
<p>In this scenario, self-generation by the rich would mean a reduced demand on the grid, and we might be able to get away with building fewer new transmission lines. </p>
<p>But we should be careful here. If we took this approach, we would reshape society. The rich would be insulated while poorer households deal with the pain of power outages. The idea of the grid as a public good would begin to disappear. </p>
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<a href="https://theconversation.com/new-transmission-lines-are-controversial-for-nearby-communities-but-batteries-and-virtual-lines-could-cut-how-many-we-need-208018">New transmission lines are controversial for nearby communities. But batteries and virtual lines could cut how many we need</a>
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<img src="https://counter.theconversation.com/content/223964/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia’s main grid has 40,000 km of transmission lines. Building another 10,000 km quickly is proving hard.Magnus Söderberg, Professor & Director, Centre for Applied Energy Economics and Policy Research, Griffith UniversityPhillip Wild, Senior Research Fellow, CAEEPR, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2234942024-02-13T21:10:54Z2024-02-13T21:10:54ZA major blackout left 500,000 Victorian homes without power – but it shows our energy system is resilient<figure><img src="https://images.theconversation.com/files/575377/original/file-20240213-20-i4kmb1.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4181%2C2783&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Loy Yang power station </span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Half a million homes and businesses in Victoria were <a href="https://www.abc.net.au/news/2024-02-13/power-outage-victoria-loy-yang-a-down-storms-damage-transmission/103461222">left without power</a> late on Tuesday following a major power outage. The disruption occurred when severe winds knocked over several high-voltage electricity transmission towers, causing all four units of the Loy Yang A coal-fired power station to trip and go offline.</p>
<p>Victorian Energy Minister Lily D'Ambrosio <a href="https://www.9news.com.au/national/victoria-news-storms-bring-down-powerlines-and-rip-apart-backyards-in-victoria/3cdd39ee-9648-4c53-80f0-14f9043539e1">described</a> the blackout as “one of the largest outage events in the state’s history”. </p>
<p>The event has prompted questions about the reliability of the state’s electricity grid. But it’s important to note these extreme winds would have seriously disrupted any power system. It has little to do with the mix of renewable energy and conventional fossil fuels. </p>
<p>As climate change worsens, we have much work ahead to ensure our electricity grids cope with severe weather events. But in this case, the fact that a complete system blackout was avoided is testament to the resilience of the system.</p>
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<h2>A day of wild weather</h2>
<p>An extreme storm, including strong winds and lightning, tore through Victoria on Tuesday afternoon. It caused two transmission lines near Geelong to collapse, prompting several generators to disconnect from the grid and cutting power to parts of the network.</p>
<p>Other customers lost power after the Australian Energy Market Operator (AEMO) ordered “load shedding”. This involves temporarily cutting off electricity supply to some customers to keep the network stable and prevent damage.</p>
<p>According to <a href="https://aemo.com.au/newsroom/media-release/power-system-event-in-victoria">a statement from AEMO</a>, the storm also damaged hundreds of powerlines and power poles and restoring electricity to all customers “may take days if not weeks”</p>
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Read more:
<a href="https://theconversation.com/wholesale-power-prices-are-falling-fast-but-consumers-will-have-to-wait-for-relief-heres-why-222495">Wholesale power prices are falling fast – but consumers will have to wait for relief. Here's why</a>
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<h2>What happened at Loy Yang A?</h2>
<p>The disruption to electricity transmission caused AGL’s Loy Yang A generator to go offline. This was an automatic response known as a “fault ride-through” mechanism. It’s much like a fuse blowing if you have a short-circuit at home.</p>
<p>When large electricity loads are rapidly and unexpectedly removed from the system, electricity supply and demand are no longer matched. It’s a dangerous situation and means electricity generators can be badly damaged or even destroyed if they don’t disconnect from the network.</p>
<p>It appears that Loy Yang A was the first generator to disconnect. The effect was to reduce supply and help bring the system back into balance, preventing a system-wide outage. </p>
<p>All generators have protection systems that stop them from being damaged in these kinds of events. Loy Yang A tripped up to protect itself from permanent damage and in doing so actually kept the system stable. It did what the system is designed to do.</p>
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Read more:
<a href="https://theconversation.com/unsexy-but-vital-why-warnings-over-grid-reliability-are-really-about-building-more-transmission-lines-212603">Unsexy but vital: why warnings over grid reliability are really about building more transmission lines</a>
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<img alt="coal fired power station" src="https://images.theconversation.com/files/575379/original/file-20240213-22-ct0rma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/575379/original/file-20240213-22-ct0rma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/575379/original/file-20240213-22-ct0rma.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/575379/original/file-20240213-22-ct0rma.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/575379/original/file-20240213-22-ct0rma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/575379/original/file-20240213-22-ct0rma.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/575379/original/file-20240213-22-ct0rma.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The disruption to electricity transmission caused AGL’s Loy Yang A generator to go offline.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<h2>What part did renewables and coal play?</h2>
<p>When transmission lines fail, the whole system is affected. This includes all types of generators – wind, solar, gas, hydro and coal. The power outages on Tuesday were unrelated to the proportion of renewables and fossil fuels in the energy mix.</p>
<p>It’s possible that old coal power generators are more sensitive to transmission disruptions than newer technologies. But it’s far too early to say whether this had anything to do with Tuesday’s event.</p>
<p>Battery storage may have helped steady the grid. Batteries have ultra-rapid responses to these kinds of disuptions and can add or subtract power from the grid within milliseconds to keep the grid stable.</p>
<p>And looking ahead, one benefit of renewable energy systems is that they tend to be much more widely “distributed” geographically than coal generators. So when power lines go out, having a more distributed network actually provides more resilience.</p>
<h2>Lessons from South Australia</h2>
<p>In September 2016, wind storms in South Australia also blew over transmission lines. Cascading disconnections by generators meant the entire grid went black in a matter of seconds, causing a <a href="https://www.energyfactsaustralia.org.au/explainers/blackouts-explained/">statewide outage</a>. </p>
<p>It will take months to analyse all the data from the Victorian blackout. But it may well show that the lessons learned from SA blackout saved the Victorian grid.</p>
<p>For example, AEMO was <a href="https://reneweconomy.com.au/aemos-defence-of-we-didnt-know-underscores-case-for-change-39205/">reportedly unaware</a> about the exact settings of “fault ride-through” mechanisms on wind farms before the SA blackouts. This has since changed, and may have helped minimise the impacts in Victoria.</p>
<h2>A warmer future</h2>
<p>We know more severe weather events are predicted under climate change. It will manifest in many different ways: strong wind events, heatwaves, bushfires and floods.</p>
<p>All infrastructure, but especially energy infrastructure, is vulnerable under these conditions. It means all of us – researchers, the market operators, and generator operators – must work hard to make energy systems more resilient as we move into an uncertain future.</p>
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Read more:
<a href="https://theconversation.com/what-caused-south-australias-state-wide-blackout-66268">What caused South Australia's state-wide blackout?</a>
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<p class="fine-print"><em><span>Roger Dargaville receives funding from the RACE for 2030 CRC and the Woodside Monash Energy Partnership.
</span></em></p>The event has prompted questions about the reliability of the state’s electricity grid. But it’s important to note these extreme winds would have seriously disrupted any power system.Roger Dargaville, Director Monash Energy Institute, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2147122024-01-28T19:05:07Z2024-01-28T19:05:07ZDo we want a wind farm outside our window? What Australians think about the net zero transition<figure><img src="https://images.theconversation.com/files/557393/original/file-20231103-19-qqubic.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C1735%2C1796&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/man-in-white-dress-shirt-and-blue-denim-jeans-sitting-on-white-and-black-solar-panel-wmaP3Tl80ww">Bill Mead, Unsplash</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>A paradox lies at the heart of Australian public opinion about climate change. While there is clear general support for substantial government action to achieve net zero emissions by 2050, there is also strong concern about the local impacts of new renewable energy infrastructure. </p>
<p>The rise of protest groups in regional Australia objecting to the installation of wind farms and transmission lines, in particular, presents a serious challenge to the Albanese government in communicating the importance of the net zero transition to the public.</p>
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<p>In principle it seems that Australians strongly support this transition. In a poll for the Australia Institute’s <a href="https://australiainstitute.org.au/wp-content/uploads/2023/09/Climate-of-the-Nation-2023-Web.pdf">Climate of the Nation report</a> last year, two in three respondents went as far as to say our country should be a world leader in climate action.</p>
<p>Similarly, a 2020 <a href="https://bridges.monash.edu/articles/report/Australia_s_Clean_Technology_Future_Audience_Perceptions_and_Message_Framing/23896950">Monash University study</a> found eight out of ten Australians think the shift to renewable energy is inevitable, and two-thirds think we should be exporting renewable energy.</p>
<p>Studies also show <a href="https://doi.org/10.25919/fqbk-0y13">strong support</a> for renewable energy production through solar farms, with 90% of Australians prepared to live within ten kilometres of one, according to a 2021 CSIRO study. And a <a href="https://www.theguardian.com/australia-news/2023/oct/31/guardian-essential-poll-results-labor-net-zero-climate-change-renewables#:%7E:text=The%20poll%20found%2038%25%20of,height%20of%20black%20summer%20bushfires.">Guardian Essential poll</a> from October last year found about 70% of respondents supported solar farms and 60% supported both offshore and onshore wind farms.</p>
<h2>Local opposition to the net zero transition</h2>
<p>But at the same time the installation of these same wind farms has attracted strong local protests, especially in NSW and Victoria. There has also been <a href="https://theconversation.com/a-clean-energy-grid-means-10-000km-of-new-transmission-lines-they-can-only-be-built-with-community-backing-187438">significant community pushback</a> to the Australian Energy Market Operator’s plan to install 10,000 kilometres of overground transmission lines, which are key to carrying renewable energy to the electricity grid. Only 35% of respondents in the Guardian Essential poll supported them. </p>
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Read more:
<a href="https://theconversation.com/australian-homes-can-be-made-climate-ready-reducing-bills-and-emissions-a-new-report-shows-how-219113">Australian homes can be made climate-ready, reducing bills and emissions – a new report shows how</a>
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<p>In an equally serious challenge for the net zero transition, 70% of respondents felt renewable energy should not be developed “at the expense of local communities”.</p>
<p>In a bid to address these concerns, the Australian Energy Market Commission has drafted <a href="https://www.aemc.gov.au/news-centre/media-releases/final-community-engagement-rules-major-transmission-projects">new community engagement rules</a> to ensure communities are involved early in the process of designing the routes of transmission lines.</p>
<p>The changes seek to ensure all stakeholders get information about a project in a clear and timely fashion (including advice on how they can best play a role) and have opportunities to be regularly involved throughout the planning of projects.</p>
<h2>A more nuanced look at public opinion</h2>
<p>There might be an even bigger issue that helps to explain the tension between apparent general support for acting to arrest global warming and local opposition to specific renewable energy projects. <a href="https://www.sciencedirect.com/science/article/abs/pii/S2352154621000929?via%3Dihub">Segmentation studies</a>, first undertaken in 2008 by researchers at Yale and George Mason Universities in the United States, and replicated in many countries, including Australia, are valuable for explaining this apparent paradox.</p>
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<a href="https://theconversation.com/from-laggard-to-leader-why-australia-must-phase-out-fossil-fuel-exports-starting-now-219912">From laggard to leader? Why Australia must phase out fossil fuel exports, starting now</a>
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<p>These studies break down views on climate change into segments of the population with different levels of concern. The <a href="https://www.sciencedirect.com/science/article/abs/pii/S2352154621000929?via%3Dihub">original research</a> divided American popular opinion into six groups: Alarmed, Concerned, Cautious, Disengaged, Doubtful and Dismissive. </p>
<p>The spectrum ranges from those most worried about climate change and who tend to take the most action, both in their personal lives and politically, to those who either don’t accept climate change is happening, or feel it isn’t something we need to address.</p>
<p>A range of segmentation studies conducted in <a href="https://www.tandfonline.com/doi/full/10.1080/17524032.2022.2048407">2011, 2016, 2020</a> <a href="https://sunriseproject.org/compass/">and 2022</a> by researchers from both Australia and the US show Australians have become more worried over time. The Alarmed segment more than doubled between 2011 and 2022.</p>
<p>However, the studies show different segments of the population have different views of when we need to act to arrest climate change. </p>
<p>For example, the <a href="https://sunriseproject.org/compass/">2022 Climate Compass report</a> highlights that people in the Concerned segment — the largest group, comprising one in four Australians — feel climate change is a serious problem but that its impacts will be most felt by future generations. These Australians see cost of living as a much more urgent problem. </p>
<p>While the polling data do not show whether many protesters against renewable energy projects belong to the Concerned segment of the population, it remains essential to explore communication strategies that might move the large numbers of Australians who identify as Concerned into the Alarmed camp. One way to do this might be on the nightly TV news. </p>
<h2>Looking more closely at the weather</h2>
<p>From flooding to heat, many Australian extreme weather records <a href="https://climateextremes.org.au/stateof2022/">have been broken</a> in recent years. Some people feel that is part and parcel of living in Australia, and remain unaware of the connection between climate change and the increasing frequency and intensity of extreme weather. And it can be difficult to translate complex climate phenomena into terms the public can easily understand.</p>
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Read more:
<a href="https://theconversation.com/how-to-beat-rollout-rage-the-environment-versus-climate-battle-dividing-regional-australia-213863">How to beat 'rollout rage': the environment-versus-climate battle dividing regional Australia</a>
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<p>Yet while the research is not conclusive, there is <a href="https://theconversation.com/extreme-weather-events-are-exactly-the-time-to-talk-about-climate-change-heres-why-210412#:%7E:text=But%20research%20offers%20contrasting%20results,these%20effects%20are%20only%20temporary.">good evidence</a> that floods, fires and heat waves increase popular concern about global warming by exposing the connection between extreme weather and climate change. <a href="https://www.monash.edu/mcccrh/publications/reports/a-survey-of-australian-tv-audiences-views-on-climate-change">Research from our centre</a> argues that weather presenters can play a greater role in making this connection clearer. Australians see weather presenters, along with climate scientists, farmers and fire fighters, as the most trusted sources of information about climate change. </p>
<h2>Looking ahead</h2>
<p>Whether or not we fully understand the ways climate change is impacting our society, most Australians realise it’s only going to get worse unless we do something about it. We’ve now moved into the implementation phase of the net zero transition, but many doubt that we’ll achieve it in time. The Guardian Essential poll <a href="https://www.theguardian.com/australia-news/2023/oct/31/guardian-essential-poll-results-labor-net-zero-climate-change-renewables#:%7E:text=The%20poll%20found%2038%25%20of,height%20of%20black%20summer%20bushfires.">showed just 31% of respondents</a> felt it was “very” or “quite” likely Australia would achieve its net zero target.</p>
<p>Therefore, it is crucial that we ramp up action towards transforming our energy sector, but it’s equally important that communities be part of deciding how this is achieved. In doing so, we can improve public support, and bring net zero within reach. </p>
<img src="https://counter.theconversation.com/content/214712/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lucy Richardson has received funding from the Lord Mayor's Charitable Foundation for research on community attitudes to renewable energy. </span></em></p><p class="fine-print"><em><span>Ella Healy does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australians want government to act on climate change, but not necessarily now, or in their neighbourhood. How can governments resolve this dilemma?Lucy Richardson, Post Doctoral Research Fellow, Monash Climate Change Communication Research Hub, Monash UniversityElla Healy, Operations Manager, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2200502024-01-08T19:17:52Z2024-01-08T19:17:52ZAs Australia’s net zero transition threatens to stall, rooftop solar could help provide the power we need<p>Australia is not rolling out clean energy projects nearly fast enough to reach the Australian government’s target of 82% renewable electricity by 2030. A <a href="https://www.abc.net.au/news/2023-08-06/australia-likely-to-fall-short-of-82pc-renewable-energy-target/102689392">huge build</a> of solar and wind farms, transmission lines and big batteries is needed. But progress is challenged by the scale required, <a href="https://theconversation.com/how-to-beat-rollout-rage-the-environment-versus-climate-battle-dividing-regional-australia-213863">community resistance to new infrastructure</a> and connecting all that new renewable electricity to the grid.</p>
<p>In the latest obstacle to expanding renewable energy capacity in the longer term, federal Environment Minister Tanya Plibersek <a href="https://www.afr.com/companies/energy/plibersek-delivers-massive-blow-to-victorian-wind-hub-20240108-p5evqq">knocked back</a> a plan by the Victorian government to build a sea terminal to service offshore wind farms, saying it posed “clearly unacceptable” environmental risks.</p>
<p>The roadblocks facing large projects present an opportunity to ramp up the contribution of small-scale technologies in the energy transition. Recently, federal and state energy ministers agreed on the need for <a href="https://www.cleanenergycouncil.org.au/news/energy-ministers-identify-key-areas-to-reinvigorate-australias-energy-transformation">a national roadmap</a> and a co-ordinated approach to integrating into the grid what they call <a href="https://reneweconomy.com.au/ministers-put-consumer-energy-on-agenda-is-this-a-turning-point-or-groundhog-day/amp/">“consumer energy resources”</a> (CER), which include batteries, electric vehicles and rooftop solar.</p>
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<p>More than <a href="https://apvi.org.au/wp-content/uploads/2023/07/National-Survey-Report-of-PV-Power-Applications-in-AUSTRALIA-2022.pdf">one in three</a> Australian houses have solar panels on their roofs. Australia <a href="https://www.abc.net.au/news/2023-10-31/how-rooftop-solar-panels-transformed-energy-in-australia/102987100">leads the world</a> in rooftop solar per head. During the past year these systems generated <a href="https://apo.org.au/sites/default/files/resource-files/2023-04/apo-nid322455.pdf">close to 10%</a> of our electricity. Several times over the past few months, they even provided enough electricity to <a href="https://reneweconomy.com.au/rooftop-solar-meets-all-of-south-australia-demand-in-major-new-milestone/">briefly meet all</a> South Australia’s electricity demand.</p>
<p>And the technology still has great potential to grow: although installed capacity has doubled in the last four years, these systems cover only about 10% of <a href="https://www.cefc.com.au/insights/market-reports/how-much-rooftop-solar-can-be-installed-in-australia/">Australia’s estimated usable roof area</a>. So, how large a share of our electricity needs might rooftop solar provide? The answers are not simple.</p>
<h2>Why rooftop solar presents a challenge for the grid</h2>
<p>In electricity systems, demand and supply must be balanced at all times. The <a href="https://aemo.com.au/en">Australian Energy Market Operator</a> (AEMO) runs the grid and keeps it secure to avoid blackouts in case of unexpected events such as the sudden disconnection of a transmission line. </p>
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<a href="https://theconversation.com/australian-homes-can-be-made-climate-ready-reducing-bills-and-emissions-a-new-report-shows-how-219113">Australian homes can be made climate-ready, reducing bills and emissions – a new report shows how</a>
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<p>To meet demand, every five minutes AEMO dispatches electricity from large-scale generators such as coal-fired power stations or large solar farms. As the grid operator, AEMO must also procure reserve capacity to balance any differences in demand and maintain security.</p>
<p>But AEMO does not dispatch power from rooftop solar, which is either used on site, or flows into the grid independently of AEMO’s control. This isn’t usually a problem, since AEMO keeps the grid balanced by forecasting how much rooftop solar is being generated.</p>
<p>However, if rooftop solar generates the majority of power in a particular region, there may not be enough dispatchable generation and reserves online to keep the grid balanced and secure. Grid security can also be challenged when <a href="https://aemo.com.au/en/initiatives/major-programs/nem-distributed-energy-resources-der-program/operations/der-behaviour-during-disturbances">unexpected events</a> trigger the safety settings of rooftop solar systems and <a href="https://doi.org/10.1016/j.apenergy.2019.114283">cause them to disconnect</a>.</p>
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Read more:
<a href="https://theconversation.com/hyped-and-expensive-hydrogen-has-a-place-in-australias-energy-transition-but-only-with-urgent-government-support-219004">Hyped and expensive, hydrogen has a place in Australia’s energy transition, but only with urgent government support</a>
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<p>The other big issue for grid balance is that the network businesses that manage the poles, wires and other infrastructure connecting generators to homes and businesses need to ensure that voltages remain <a href="https://www.researchgate.net/publication/341931377_Voltage_Analysis_of_the_LV_Distribution_Network_in_the_Australian_National_Electricity_Market_Available_at_httpsprod-energycouncilenergyslicedtechcomaulv-voltage-report">within defined technical limits</a> to avoid damaging equipment or appliances. When solar generates a lot of power at a time of low electricity demand, voltage can exceed the upper operational limit. Voltage can also go below the lower operational limit when too many people connect big appliances like air-conditioners. </p>
<p>So how are we managing the three challenges of rooftop solar: lack of controllability by the market operator, uncertain behaviour during unexpected grid events and impact on network voltage?</p>
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Read more:
<a href="https://theconversation.com/green-growth-or-degrowth-what-is-the-right-way-to-tackle-climate-change-218239">Green growth or degrowth: what is the right way to tackle climate change?</a>
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<h2>Ways to manage and expand rooftop solar</h2>
<p>Current Australian standards require solar to automatically disconnect when voltage gets too high. Network businesses also pre-emptively manage this problem by preventing customers in areas where voltage is an issue from connecting solar to the grid, or by limiting the size of solar systems they can connect or the amount of electricity they can export to the grid at any time. But this approach is potentially unfair to those customers who can’t connect or export.</p>
<p>The good news is that standards introduced in 2020 provide more sophisticated ways of managing solar through <a href="https://www.ceem.unsw.edu.au/sites/default/files/documents/CANVAS-Succinct-Final-Report_11.11.21.pdf">more gradual voltage response</a>, and by requiring systems to ride through major disturbances rather than disconnecting. Some networks have also developed <a href="https://www.sapowernetworks.com.au/your-power/smarter-energy/flexible-exports/fixed-v-flexible/">solar-friendly ways</a> to cut off surplus output “dynamically”, meaning only at times when they have to.</p>
<p>Thanks to these measures, solar customers face less constraint on exporting power to the grid. However, since solar sometimes now supplies most of the generation in South Australia, AEMO has also <a href="https://aemo.com.au/-/media/files/learn/fact-sheets/pv-rooftop-solar-consumer-fact-sheet.pdf">tested disconnection of solar</a> to increase its control of the grid in case of threats to system security.</p>
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Read more:
<a href="https://theconversation.com/is-nuclear-the-answer-to-australias-climate-crisis-216891">Is nuclear the answer to Australia's climate crisis?</a>
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<p>Some of these solar management tools are still quite blunt and <a href="https://onestepoffthegrid.com.au/solar-switch-off-how-aemo-took-control-of-rooftop-pv-and-why-it-didnt-need-to/">some commentators</a> worry they will be overused. While necessary in the short-term, if unchecked they will reduce our ability to realise our rooftop solar potential.</p>
<h2>Getting smarter about when we use power</h2>
<p>There is another way to use our solar systems more effectively: we can shift energy use to times when the sun is shining, and store energy – in batteries, electric vehicles and <a href="https://reneweconomy.com.au/electric-hot-water-is-a-hero-of-flexible-demand-where-does-it-stand-in-the-age-of-rooftop-solar/">hot water tanks</a> – <a href="https://ieefa.org/resources/saturation-der-modelling-shows-distributed-energy-and-storage-could-lower-costs-all">to use when it is not</a>.</p>
<p>To make such a change, consumer electricity prices are a potential lever. Solar customers already have an incentive to use electricity from their own rooftop systems, because they pay more for grid electricity than they are paid to sell solar back to the grid.</p>
<p>South Australia and some other network areas <a href="https://www.aer.gov.au/system/files/Ausgrid%20-%20Att.%208.1%20-%20Tariff%20Structure%20Statement%20compliance%20paper%20%20-%2031%20Jan%202023%20-%20Public.pdf">are introducing</a> low “solar soak” rates to encourage all customers to use electricity in high solar times, such as the middle of the day. Times of plentiful solar also tend to be the <a href="https://opennem.org.au/">cheapest times to buy wholesale electricity from the grid</a>, and innovative retailers like <a href="https://www.amber.com.au/">Amber Electric</a> are passing through these price signals to customers.</p>
<p>However, typical retail plans offered to customers don’t provide much incentive to change patterns of electricity use, especially since many customers are understandably not focused on their electricity bills or <a href="https://www.researchgate.net/publication/368464625_Engaging_households_in_electricity_flexibility_-_insights_from_the_UK">cannot easily shift</a> their power use.</p>
<p>In these cases orchestration schemes, often called “virtual power plants,” are an option. Under the schemes, a business will <a href="https://www.ceem.unsw.edu.au/publication/rewarding-residential-electricity-flexibility-customer-friendly-cost-reflective-tariffs">reward household customers</a> that allow it to operate their rooftop solar, batteries, appliances, electric vehicles and hot water systems in ways that reduce costs or grid impacts.</p>
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Read more:
<a href="https://theconversation.com/australias-new-dawn-becoming-a-green-superpower-with-a-big-role-in-cutting-global-emissions-216373">Australia's new dawn: becoming a green superpower with a big role in cutting global emissions</a>
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<p>Better management of electricity use through these schemes can make room for the grid to take on more solar.</p>
<p>Recent trials in Western Australia (<a href="https://www.wa.gov.au/government/announcements/project-symphony-paving-the-way-our-brighter-energy-future">Project Symphony</a>) and Victoria (<a href="https://aemo.com.au/initiatives/major-programs/nem-distributed-energy-resources-der-program/der-demonstrations/project-edge/project-edge-reports">Project EDGE</a>) prove orchestration can work. Nevertheless, <a href="https://www.sciencedirect.com/science/article/abs/pii/S2214629621003030?via%3Dihub">people will need good reasons</a> to hand over control of their solar, batteries and appliances, particularly if they bought expensive equipment such as batteries <a href="https://www.sciencedirect.com/science/article/pii/S2214629623003018?via%3Dihub">for back-up power or to increase their energy independence</a>.</p>
<p>It would be a major setback to the net zero transition if AEMO and network businesses, lacking better options for managing the grid, continue to cut back and switch off solar systems until people find it unattractive to purchase them.</p>
<p>The new <a href="https://switchedon.reneweconomy.com.au/content/finally-a-national-roadmap-for-decarbonising-homes-and-communities">CER roadmap</a> needs to provide clear guidance on how AEMO and network businesses can manage rooftop solar, and other technologies such as batteries and EVs. Good governance arrangements and meaningful stakeholder consultation are essential if Australia is to maintain the momentum of its people-powered energy transition.</p><img src="https://counter.theconversation.com/content/220050/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anna Bruce receives funding from the Australian Research Council, the Race for 2030 Cooperative Research Centre, the Australian Renewable Energy Agency and the Commonwealth Department of Climate Change, Energy, Environment and Water. She is a member of the Executive Committee of the Australian PV Institute.</span></em></p><p class="fine-print"><em><span>Baran Yildiz receives funding from the Australian Renewable Energy Agency (ARENA) and the RACE for 2030 Cooperative Research Australia. Baran is a member of International Energy Agency (IEA) Solar Heating & Cooling Programme Task 69.</span></em></p><p class="fine-print"><em><span>Dani Alexander receives funding from the Australian Renewable Energy Agency and the RACE for 2030 Cooperative Research Centre. Dani previously was the Business Program Leader for the RACE for 2030 CRC. </span></em></p><p class="fine-print"><em><span>Mike Roberts receives funding from the Race for 2030 Cooperative Research Centre, the Commonwealth Department of Climate Change, Energy, Environment and Water, and Essential Energy. He is a former director of the Australian PV Institute.</span></em></p>Australia leads the world in rooftop solar per head. Can this small-scale power source be the secret weapon to fire up our struggling transition to net zero?Anna Bruce, Associate Professor in the Collaboration on Energy and Environmental Markets and the School of Photovoltaic and Renewable Energy Engineering, UNSW SydneyBaran Yildiz, Senior Research Associate, UNSW SydneyDani Alexander, CEO, UNSW Energy Institute, UNSW SydneyMike Roberts, Senior Research Fellow in the Collaboration on Energy and Environmental Markets and the School of Photovoltaic and Renewable Energy Engineering, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2138632023-10-22T19:01:21Z2023-10-22T19:01:21ZHow to beat ‘rollout rage’: the environment-versus-climate battle dividing regional Australia<p>In August, Victoria’s Planning Minister Sonya Kilkenny <a href="https://www.planning.vic.gov.au/environmental-assessments/browse-projects/willatook-wind-farm">made a decision</a> that could set a difficult precedent for Australia’s effort to get to net-zero emissions by 2050.</p>
<p>In considering the environmental effects of the proposed $1 billion <a href="https://www.willatookwindfarm.com.au/">Willatook wind farm</a> 20km north of Port Fairy in southwest Victoria, the minister ruled that the developers, <a href="https://windprospect.com.au/">Wind Prospect</a>, had to build wider buffers around the wind turbines and observe a five-month ban on work at the site over each of the two years of construction. </p>
<p>Her reason? To protect the wetlands and breeding season of the <a href="https://www.wildlife.vic.gov.au/__data/assets/pdf_file/0024/91383/Brolga.pdf">brolga</a>, a native crane and a threatened species, and the habitat of the critically endangered <a href="https://www.environment.vic.gov.au/conserving-threatened-species/threatened-species/southern-bent-wing-bat">southern bent-wing bat</a>. </p>
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<p>The decision shocked many clean energy developers. Wind Prospect’s managing director Ben Purcell said the conditions imposed by the minister would reduce the planned number of 59 turbines <a href="https://www.abc.net.au/news/rural/2023-08-04/willatook-wind-farm-proposal-doubt-government-recommendations/102691028">by two-thirds</a> and make the project “<a href="https://www.abc.net.au/news/rural/2023-08-04/willatook-wind-farm-proposal-doubt-government-recommendations/102691028">totally unworkable</a>”. </p>
<p>Kilkenny acknowledged that <a href="https://www.planning.vic.gov.au/environmental-assessments/browse-projects/willatook-wind-farm">her assessment</a> might reduce the project’s energy output. However, she said “while the transition to renewable energy generation is an important policy and legislative priority for Victoria”, so was “protection of declining biodiversity values”.</p>
<p>The military uses the term “blue on blue” for casualties from friendly fire. In the environmental arena we now risk “green on green” losses, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4443474&utm_source=Sailthru&utm_medium=email&utm_campaign=Intelligencer%20-%20August%208%2C%202023&utm_term=Subscription%20List%20-%20Daily%20Intelligencer%20%281%20Year%29">and agonising dilemmas</a> as governments try to reconcile their responses to the world’s two biggest environmental problems: climate change and biodiversity loss. </p>
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<a href="https://theconversation.com/the-human-factor-why-australias-net-zero-transition-risks-failing-unless-it-is-fair-214064">The human factor: why Australia's net zero transition risks failing unless it is fair</a>
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<h2>The green vs green dilemma</h2>
<p>The goal of achieving net zero by 2050 requires nothing less than an economic and social transformation. That includes extensive construction of wind and solar farms, transmission lines, pumped hydro, critical mineral mines and more. </p>
<p>Australia needs to move fast – the Australian Energy Market Operator says <a href="https://www.abc.net.au/news/2023-09-17/aemo-maps-10,000km-of-high-voltage-transmission/102833156">10,000km of high-voltage transmission lines</a> need to be built to support the clean energy transition – but we are already <a href="https://www.afr.com/companies/energy/the-energy-transition-gridlocked-regulators-have-no-answers-20231009-p5eapd">lagging badly</a>. </p>
<p>The problem is that moving fast inflames what is often fierce opposition from local communities. They are especially concerned with the environmental impacts of vast electricity towers and lines running across land they love. </p>
<p>In southern New South Wales, <a href="https://www.theaustralian.com.au/nation/trandgrids-humelink-the-anguish-and-anger-behind-australias-clean-energy-plan/news-story/2a64de7aaffcd3462adaff39c9f5d485">organised groups are fighting to stop</a> the construction of a huge infrastructure project, <a href="https://www.transgrid.com.au/projects-innovation/humelink">HumeLink</a>, that seeks to build 360km of transmission lines to connect <a href="https://www.snowyhydro.com.au/snowy-20/about/">Snowy Hydro 2.0</a> and other renewable energy projects to the electricity grid. </p>
<p>Locals say the cities will get the power, while they pay the price. “No one should minimise the consequences of ‘industrialising’ Australia’s iconic locations – would we build power lines above Bondi Beach?” <a href="https://www.theaustralian.com.au/nation/trandgrids-humelink-the-anguish-and-anger-behind-australias-clean-energy-plan/news-story/2a64de7aaffcd3462adaff39c9f5d485">the Snowy Valleys Council asked</a> in a submission to a parliamentary inquiry.</p>
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Read more:
<a href="https://theconversation.com/why-australia-urgently-needs-a-climate-plan-and-a-net-zero-national-cabinet-committee-to-implement-it-213866">Why Australia urgently needs a climate plan and a Net Zero National Cabinet Committee to implement it</a>
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<p>Clean energy developers are caught in a perfect storm, <a href="https://www.abc.net.au/news/2023-09-22/michelle-grattan-uphill-road-angry-locals-renewables/102887426">at loggerheads with environmentalists and landholders alike</a> over environmental conditions, proper consultation and compensation, while grappling with long regulatory delays and supply chain blockages for their materials. </p>
<p>They see a system that provides environmental approval on paper but seemingly unworkable conditions and intolerable delays in practice. Does the bureaucracy’s left hand, they wonder, know what its right hand is doing?</p>
<p>Net zero, nature protection and “<a href="https://www.theaustralian.com.au/nation/politics/rollout-rage-power-struggle-and-a-shocked-minister/news-story/21aeebffca06cd116d6b077ca5a02624">rollout rage</a>” feel like a toxic mix. Yet we have to find a quick way to deliver the clean energy projects we urgently need. </p>
<h2>What is to be done?</h2>
<p>The major solution to climate change is to electrify everything, using 100% renewable energy. That means lots of climate-friendly infrastructure.</p>
<p>The major regulatory solution to ongoing biodiversity loss is to stop running down species and ecosystems so deeply that they cannot recover. Among other things, that means protecting sensitive areas, which are sometimes the same areas that need to be cleared, or at least impinged upon, to build new infrastructure.</p>
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Read more:
<a href="https://theconversation.com/made-in-america-how-bidens-climate-package-is-fuelling-the-global-drive-to-net-zero-214709">Made in America: how Biden's climate package is fuelling the global drive to net zero</a>
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<p>To get agreement, we need a better way than the standard project-based approval processes and private negotiations between developers and landowners. The underlying principle must be that all citizens, not just directly affected groups, bear the burden of advancing the common good. </p>
<p>As tough as these problems look, elements of a potential solution, at least in outline, are on the table. </p>
<p>These elements are: good environmental information, regional environmental planning and meaningful public participation. The government’s <a href="https://www.dcceew.gov.au/sites/default/files/documents/nature-positive-plan.pdf">Nature Positive Plan</a> for stronger environmental laws promises all three.</p>
<h2>The Albanese government’s plan</h2>
<p>Australia lags badly in gathering and assembling essential environmental information. Without it, we are flying blind. The government has <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_departments/Parliamentary_Library/Budget/reviews/2023-24/Environment">established Environment Information Australia</a> “to provide an authoritative source of high-quality environmental information.” Although extremely belated, it’s a start.</p>
<p>The Nature Positive Plan may also improve the second element – regional planning – by helping it deal with “green on green” disputes through <a href="https://www.kwm.com/global/en/insights/latest-thinking/federal-environmental-law-reform-what-you-need-to-know-in-2023.html#:%7E:text=Regional%20plans%20will%20be%20built,development%20will%20be%20largely%20prohibited">its proposed “traffic light” system</a> of environmental values. </p>
<p>Places with the highest environmental values (or significant Indigenous and other heritage values) would be placed in “red zones” and be protected from development, climate-friendly or not. </p>
<p>Development would be planned in orange and green zones, but require <a href="https://www.environment.nsw.gov.au/topics/animals-and-plants/biodiversity-offsets-scheme#:%7E:text=The%20Biodiversity%20Offsets%20Scheme%20is,gains%20through%20landholder%20stewardship%20agreements.">biodiversity offsets</a> in orange zones. </p>
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<a href="https://theconversation.com/too-hard-basket-why-climate-change-is-defeating-our-political-system-214382">Too hard basket: why climate change is defeating our political system</a>
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<p>The catch is that most current biodiversity offsets, which commonly involve putting land into reserve to compensate for land cleared, are environmental failures. </p>
<p>The government has promised to tighten these rules, but advocates ranging from <a href="https://www.smh.com.au/environment/sustainability/development-could-be-banned-in-certain-areas-amid-sweeping-recommendations-20230824-p5dz5t.html">former senior public servant Ken Henry</a> to the <a href="https://www.acf.org.au/what-the-governments-plan-to-overhaul-our-national-environment-laws-means-for-nature">Australian Conservation Foundation</a> are pushing for more. A strict approach would make offsets expensive and sometimes impossible to find, but that is the price of becoming nature-positive. </p>
<h2>The need for regional planning</h2>
<p>Good regional planning – based, say, on Australia’s <a href="https://nrmregionsaustralia.com.au/nrm-regions-map/">54 natural resource management regions</a> – would deal with a bundle of issues upfront. That approach would avoid the environmental “deaths of a thousand cuts” that occur when developments are approved one by one. </p>
<p>But regional planning will only succeed if federal and state governments allocate significant resources and work together. Australia’s record on such cooperation is a sorry one. Again, Environment Minister Tanya Plibersek is attempting a belated <a href="https://minister.dcceew.gov.au/plibersek/media-releases/regional-plans-transform-environmental-protection">fresh start</a>, but this will be a particularly rocky road.</p>
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<p>The third element – meaningful public participation – involves restoring trust in the system. This requires transparency, proper consultation, and the public’s right <a href="https://www.wilderness.org.au/news-events/epbc-act-must-enshrine-a-fair-say-for-community">to challenge decisions in the courts</a>. </p>
<p>Meaningful consultation requires time, expertise, and properly funded expert bodies that can build a culture of continuous improvement. Again, Australia’s record to date has been piecemeal and poor.</p>
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Read more:
<a href="https://theconversation.com/the-road-is-long-and-time-is-short-but-australias-pace-towards-net-zero-is-quickening-214570">The road is long and time is short, but Australia's pace towards net zero is quickening</a>
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<p>These reforms – better information, planning and public participation – will take time. In the meantime, the <a href="https://en.wikipedia.org/wiki/Precautionary_principle">precautionary principle</a> suggests a three-pronged approach to keeping us on track for net zero. </p>
<p>One, work proactively with developers to find infrastructure sites that avoid environmentally sensitive areas. </p>
<p>Two, speed up regulatory approvals. Fund well-resourced taskforces for both, as the gains will vastly outweigh the costs.</p>
<p>Three, be generous in compensating landowners where development is approved. Fairness comes at a cost, but unfairness will create an even higher one.</p>
<p>All this makes for a political sandwich of a certain kind. Why would government even consider it? </p>
<p>The answer lays bare the hard choice underlying modern environmental policy. We can accept some pain now, or a lot more later. The prize, though, is priceless: a clean energy system for a stable climate, and a natural environment worth passing on to future generations.</p><img src="https://counter.theconversation.com/content/213863/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Burnett is a member of the Biodiversity Council, which has the object of communicating accurate information on all aspects of biodiversity to secure and restore the future of Australia’s biodiversity.</span></em></p>If Australia is to meet its net zero targets it must move fast and build massive industrial infrastructure. But those projects are provoking fierce hostility. Is there a way through the green dilemma?Peter Burnett, Honorary Associate Professor, ANU College of Law, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2138662023-10-10T19:06:17Z2023-10-10T19:06:17ZWhy Australia urgently needs a climate plan and a Net Zero National Cabinet Committee to implement it<p>Australia has <a href="https://www.pm.gov.au/media/australia-legislates-emissions-reduction-targets">a legislated target</a> to reduce greenhouse emissions, a federal government with commitments <a href="https://www.energycouncil.com.au/analysis/the-82-per-cent-national-renewable-energy-target-where-did-it-come-from-and-how-can-we-get-there/#:%7E:text=A%20national%20renewable%20electricity%20target,Interconnected%20System%2C%20and%20the%20North">to increase the share of renewable electricity</a> and reduce power prices, and a globally important economic opportunity at its feet. </p>
<p>In the second half of the government’s current term, delivery looks hard across the board. All is not lost, but we must transform our economy to a timetable. The unprecedented scale and pace of the economic transformation, and the consequences of failure, demand an unprecedented response. </p>
<p>To get things on track requires the government to develop a plan with the right mix of political commitment, credible policies, coordination with industry, and support from communities. And, critically, the plan must be implemented. Too often targets have been set without being linked to policies to achieve them, or linked so poorly that the extra cost and delay sets back the climate transition.</p>
<p>By the middle of this year, Australia’s emissions were <a href="https://treasury.gov.au/policy-topics/measuring-what-matters/dashboard/emissions-reduction">25% below the 2005 level</a>. But the trend of steady reductions has stalled, and sectors such as <a href="https://www.climatechangeauthority.gov.au/sites/default/files/2021Fact%20sheet%20-%20Transport.pdf">transport</a> and agriculture have moved in the wrong direction. </p>
<p>Such ups and downs will continue in response to external events, as we have seen with COVID, droughts, and war on the other side of the world. Policies must be flexible if they are to remain broadly on course in the face of such events. </p>
<p><iframe id="tc-infographic-973" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/973/534c98def812dd41ac56cc750916e2922539729b/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
<h2>Trouble in the power department</h2>
<p>The detail matters: national emissions reductions <a href="https://www.dcceew.gov.au/sites/default/files/documents/national-greenhouse-gas-inventory-march-2023.pdf">have slowed</a>, as has <a href="https://www.energymatters.com.au/renewable-news/cec-australian-wind-and-solar-investment-slows-in-q2-energy-storage-booms/#:%7E:text=The%20slowdown%20in%20investment%20in,support%20from%20the%20federal%20government.">the growth in renewable generation</a> towards the government’s 2030 target of 82%. </p>
<p>At the same time, the government’s <a href="https://www.alp.org.au/policies/powering-australia">target of lower power bills</a> by 2025 looks out of reach, and electricity reliability is threatened as coal-fired generation closes without adequate replacement.</p>
<p>The production and use of natural gas <a href="https://grattan.edu.au/wp-content/uploads/2020/11/Flame-out-Grattan-report.pdf">contributes around 20%</a> of Australia’s emissions. The use of gas in industry will be covered by the <a href="https://www.cleanenergyregulator.gov.au/NGER/The-Safeguard-Mechanism#:%7E:text=The%20Safeguard%20Mechanism%20has%20been%20in%20place%20since%201%20July,must%20manage%20their%20excess%20emissions.">Safeguard Mechanism</a>, a policy designed by the Coalition and now revised by Labor, to drive down emissions from the country’s 200 biggest emitters. </p>
<p>Emissions from gas-fired power generation will fall with the growth of renewables. But there are no constraints on fossil gas use in other sectors, such as our homes. </p>
<p>Industrial emissions are <a href="https://theconversation.com/nearly-30-of-australias-emissions-come-from-industry-tougher-rules-for-big-polluters-is-a-no-brainer-190264">slowly growing</a>. The huge amount of hype about green hydrogen has so far proven to be little more than that: Australia continues to have lots of potential green hydrogen projects, but <a href="https://reneweconomy.com.au/australia-leads-world-in-green-hydrogen-hype-and-hope-but-not-in-actual-projects/">virtually none are delivered</a>.</p>
<p>Finally, we remain without <a href="https://www.infrastructure.gov.au/sites/default/files/documents/fuel-efficiency-standard-cleaner-cheaper-run-cars-australia-consultation-paper-april2023.pdf">constraints on vehicle emissions</a>, and with a large herd of <a href="https://www.publish.csiro.au/cp/CP22299#:%7E:text=In%20Australia%2C%2071%25%20of%20agricultural,by%20grazing%20sheep%20and%20cattle.">grazing cattle and sheep</a> whose emissions are determined more by the weather than the actions of our best-meaning farmers.</p>
<h2>The risk of swinging from naive to negative</h2>
<p>So, we are in a hard place. Naïve optimism about an easy, cheap transition to net zero is at risk of giving way to brutal negativity that it’s all just too hard. The warnings of early spring fires and floods in Australia and <a href="https://www.theguardian.com/world/2023/jul/17/extreme-temperatures-recorded-across-northern-hemisphere">extreme heat</a> during the most recent northern hemisphere summer will feed this tension.</p>
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<a href="https://theconversation.com/too-hard-basket-why-climate-change-is-defeating-our-political-system-214382">Too hard basket: why climate change is defeating our political system</a>
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<p>The federal government’s latest <a href="https://treasury.gov.au/publication/2023-intergenerational-report">Intergenerational</a> Report provides a deeply disturbing snapshot of the potential economic impacts if we fail to get climate change under control. Yet in a world 3 to 4 degrees hotter than pre-industrial levels, economic impacts could be the least of our worries.</p>
<p>The task is unparalleled outside wartime. Within 30 years we must manage the decline of fossil fuel extractive sectors, transform every aspect of our energy and transport sectors, reindustrialise much of manufacturing, and find solutions to difficult problems in agriculture.</p>
<p>What’s to be done?</p>
<h2>The need for a Net Zero National Cabinet Committee</h2>
<p>We should begin with leadership across the federal government, coordinated with the states and territories. The best structure might be a Net Zero National Cabinet Committee with two clear objectives – to develop and begin implementing a national net zero transformation plan by the end of 2024. </p>
<p>Modern governments are more than happy to set targets and announce plans to meet them. They seem to have lost the capacity or will to implement such plans. The <a href="https://www.pmc.gov.au/news/net-zero-economy-agency#:%7E:text=The%20Net%20Zero%20Economy%20Agency,of%20the%20net%20zero%20economy.">Net Zero Economy Agency</a>, created in July and chaired by former Climate Change Minister Greg Combet, could be charged with that task.</p>
<p>The first step is being taken – the <a href="https://www.climatechangeauthority.gov.au/">Climate Change Authority</a> is now advising on emissions reduction targets for 2035 and perhaps beyond. The government’s work to create pathways to reducing emissions in every economic sector must be used to build a comprehensive set of policies that are directly linked to meeting the targets.</p>
<h2>How to get electricity moving in the right direction</h2>
<p>The electricity sector can be put on track with three actions. One, drive emissions reduction towards net zero using a sector-focused policy such as the <a href="https://www.cleanenergyregulator.gov.au/RET/About-the-Renewable-Energy-Target">Renewable Energy Target</a> or the Safeguard Mechanism. </p>
<p>Two, implement the <a href="https://www.energy.gov.au/government-priorities/energy-supply/capacity-investment-scheme">Capacity Investment Scheme</a>, a policy intended to deliver dispatchable electricity capacity to balance a system built on intermittent wind and solar supply. </p>
<p>Three, set up a National Transmission Agency to work with the <a href="https://aemo.com.au/en">Australian Energy Market Operator</a> (AEMO) to plan the national transmission grid and with authority to direct, fund, and possibly own that grid.</p>
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Read more:
<a href="https://theconversation.com/made-in-america-how-bidens-climate-package-is-fuelling-the-global-drive-to-net-zero-214709">Made in America: how Biden's climate package is fuelling the global drive to net zero</a>
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<p>For heavy industry, the scale and pace of change demands a 21st-century industry policy, in three parts. Activities such as coal mining will be essentially incompatible with a net-zero economy. Activities such as steel-making may be able to transform through economic, low-emissions technologies. </p>
<p>Finally, activities such as low-emissions extraction and processing of critical energy minerals, which are insignificant today but which in time could help Australia to capitalise on globally significant comparative advantages. </p>
<h2>Create a plan – and stick to it</h2>
<p>The government has made a good start by revising the Safeguard Mechanism and the <a href="https://www.dcceew.gov.au/energy/publications/australias-national-hydrogen-strategy">Hydrogen Strategy</a> and developing a <a href="https://www.globalaustralia.gov.au/industries/net-zero/critical-minerals#:%7E:text=Australia's%20Critical%20Mineral%20Strategy%202023,raw%20and%20processed%20critical%20minerals.">Critical Minerals Strategy</a>. These should be brought together in an overarching policy framework with consistent, targeted policies linked to clear goals, developed and executed in sustained collaboration with industry. </p>
<p>The Safeguard Mechanism will need to be extended beyond 2030 and its emissions threshold for the companies it covers lowered to 25,000 tonnes of emissions per year.</p>
<p>Industry funding will probably need to expand, and give priority to export-oriented industries that will grow in a net-zero global economy. And the federal and state governments should phase out all programs that encourage expansion of fossil fuel extraction or consumption.</p>
<p>In transport, long-delayed emissions standards should be set and implemented. Finally, government-funded research, some of it already underway, should focus on difficult areas such as early-stage emissions reduction technologies in specific heavy industries, transport subsectors, and emissions from grazing cattle and sheep.</p>
<p>There is little new or radical in the elements of this plan. What would be new is a commitment to its design and implementation. This is what government needs to do now. The consequences of failure are beyond our worst fears, the benefits of success beyond our best dreams.</p><img src="https://counter.theconversation.com/content/213866/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tony Wood may have a financial interest in companies relevant to the article through his superannuation fund. </span></em></p>Australia’s move towards net zero emissoions by 2020 is in danger of stalling. If it is not to fail, the nation urgently needs a government plan, aligned with industry and with public support.Tony Wood, Program Director, Energy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2042812023-06-04T20:04:59Z2023-06-04T20:04:59ZUsing electric water heaters to store renewable energy could do the work of 2 million home batteries – and save us billions<figure><img src="https://images.theconversation.com/files/523358/original/file-20230428-28-izz5as.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5472%2C3612&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Australia’s energy transition is well under way. Some <a href="https://iea-pvps.org/snapshot-reports/snapshot-2022/">3 million households have rooftop solar</a> and <a href="https://www.theage.com.au/politics/federal/first-past-the-post-evs-race-to-front-in-sales-of-medium-sized-cars-20230420-p5d1yj.html">sales of medium-sized electric cars</a> are surging. But as we work towards fully electric households powered by renewable energy, have we overlooked a key enabling technology, the humble electric water heater?</p>
<figure class="align-right ">
<img alt="a smart electric water heater" src="https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529729/original/file-20230602-17-jsaz8u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">By storing solar energy as hot water, a smart electric heater can effectively act as a household battery.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>About <a href="https://www.energynetworks.com.au/resources/fact-sheets/reliable-and-clean-gas-for-australian-homes-2/">half of Australian households</a> use electric water heaters, while the rest use gas. So what’s so great about electric water heaters? </p>
<p>Electric water heaters offer a cheap way to store large amounts of energy, in the form of hot water. A heater with a 300-litre tank can store about as much energy as a second-generation Tesla Powerwall – at a fraction of the cost. </p>
<p><a href="https://www.uts.edu.au/isf/explore-research/projects/domestic-hot-water-and-flexibility">Our research</a> at the UTS Institute for Sustainable Futures has found Australians could use household electric water heaters to store as much energy as over 2 million home batteries of that kind. This could eventually save over A$6 billion a year on our energy bills while getting us closer to net-zero carbon emissions.</p>
<p><a href="https://www.uts.edu.au/sites/default/files/2023-06/Domestic%20Hot%20Water%20and%20Flexibility.pdf">Our report</a>, published today and funded by the Australian Renewable Energy Agency (ARENA), recommends that, to halve emissions by 2030 and reach net zero by 2050, we urgently need policies to rapidly replace gas water heaters with “smart” electric water heaters. Smart heaters can be switched on and off in response to changes in electricity supply and demand across the grid. </p>
<p>This means these heaters can soak up excess “off-peak” renewable energy, particularly from solar, and so help us solve two key problems at once. They can help reduce and eventually eliminate greenhouse gas emissions. And they can make our electricity grid more stable by providing flexible demand that helps balance out the fluctuating supply from renewable sources.</p>
<h2>Cutting emissions</h2>
<p>There are three main types of electric water heater. A conventional “resistance” heater uses electricity to heat water directly. Solar water heaters use sunlight and electricity, but have become less popular as newer “heat pump” units emerged. These collect heat from the air and “pump” it into water. A heat pump uses three to four times less electricity than a resistance heater. </p>
<p>Back in 2010, a resistance electric water heater typically produced around four times more emissions than its gas equivalent. Heat pump emissions were about the same as for gas. That’s because electric water heaters <a href="https://www.energy.gov.au/households/hot-water-systems">use a lot of electricity</a>, and most of it came from burning coal. </p>
<p>As we generate more electricity from renewables, this picture is changing dramatically. Australia’s energy market operator, AEMO, publishes regularly updated pathways to a clean-energy future. In the most likely outcome, the “<a href="https://aemo.com.au/en/energy-systems/major-publications/integrated-system-plan-isp/2022-integrated-system-plan-isp">step-change scenario</a>”, gas will become the most greenhouse-intensive water-heating option by 2030. </p>
<p>By 2040, once the transition to a renewable electricity system is largely complete, emissions from resistance and heat pump water heaters will be much lower than for their gas counterparts. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graph showing projected emissions from 3 kinds of water heaters: electric resistance, heat pump and gas" src="https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=416&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=416&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=416&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=523&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=523&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529733/original/file-20230602-25-jsaz8u.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=523&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">The projected emissions intensity of resistance and heat pump water heaters in NSW will soon be much lower than for their gas counterparts. Results for Queensland, Victoria and the ACT are similar to those for NSW.</span>
<span class="attribution"><span class="license">Author provided</span></span>
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<p>Water heaters can last 15 years or more. So the stock of heaters in our homes for the next two decades depends on what we install today. Replacing gas heaters with electric heaters should therefore be an immediate priority in our energy transition. </p>
<p><a href="https://www.uts.edu.au/sites/default/files/2023-05/Domestic%20Hot%20Water%20and%20Flexibility.pdf">Our work</a> explored a range of scenarios, each with a different mix of water-heating technologies. One was a business-as-usual baseline where gas water heaters remain prevalent. In alternative scenarios gas is phased out over the next 10–20 years. </p>
<p>We found that replacing gas with electric water heating would not only help us get to net-zero emissions sooner, it would save us money. </p>
<p>Gas is expensive and unlikely to get much cheaper. Abundant renewables offer an excess of cheap electricity that water heaters can help soak up. Embracing this opportunity could save over $6 billion a year on our energy bills by 2040.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graphs comparing stock of different water heater technologies across the NEM from 1990 to 2040" src="https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=340&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=340&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=340&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=427&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=427&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529735/original/file-20230602-23-u38b97.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=427&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">In our modelling of the National Electricity Market, business-as-usual policy (left) locks in costly and high-emissions gas units for decades to come. In our rapid electrification scenario (right), electric water heaters rapidly replace gas units.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>Boosting grid stability</h2>
<p>Solar and wind are now the <a href="https://www.un.org/en/climatechange/renewables-cheapest-form-power">cheapest technologies we’ve ever had for generating electricity</a>. But to maintain a stable electricity system, we need to match demand with the fluctuating supply from renewable sources. Batteries offer a partial solution, but are still relatively costly. </p>
<p>Electric water heaters offer a much cheaper way to store large amounts of energy and provide the demand flexibility the grid needs.</p>
<p><a href="https://www.uts.edu.au/isf/explore-research/projects/domestic-hot-water-and-flexibility">Our research</a> found that, compared to the business-as-usual baseline, a scenario that emphasises demand flexibility using smart electric water heaters could provide an extra 30GWh of daily flexible demand capacity. That’s the equivalent of over 2 million home batteries across the National Electricity Market, which supplies electricity to eastern and southern Australia. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1361120769548320770"}"></div></p>
<h2>Back to the future for water heating</h2>
<p>Since the 1950s, “off-peak hot water” has seen Australian electricity providers turning household water heaters off during the day and on at night to better match demand and supply. In return, customers received heavily discounted prices. </p>
<p>In recent decades we’ve moved away from off-peak electric hot water, as incentives dwindled and more homes <a href="https://www.energynetworks.com.au/resources/fact-sheets/reliable-and-clean-gas-for-australian-homes-2/">connected to natural gas</a>.</p>
<p>As we electrify our hot water, which technology should we embrace: resistance or heat pump? The answer is both. </p>
<p><a href="https://www.uts.edu.au/isf/explore-research/projects/domestic-hot-water-and-flexibility">Our research</a> explored the trade-off between highly flexible resistance water heaters versus highly efficient but less flexible heat pumps.</p>
<p>Heat pumps use less electricity and cost less to run. Where electricity prices are high or power flow is limited, using heat pumps makes sense. However, they have a higher upfront cost and are not suited to all homes. Many apartments, for example, lack access to suitable outdoor space. </p>
<p>And because they use less electricity, heat pumps offer less flexible demand. As renewables, particularly solar, increasingly power our grid, the ability of resistance electric heaters to soak up excess “off-peak” renewable energy is a big advantage.</p>
<p>With the right policies and market reforms, we will all benefit from a system that once again rewards customers with cheap off-peak electricity in exchange for network operators being able to switch our water heaters off and on as needed.</p><img src="https://counter.theconversation.com/content/204281/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Roche works for the Institute for Sustainable Futures, which received funding for this work from the Australian Renewable Energy Agency (ARENA).</span></em></p>A heater with a 300-litre tank can store as much energy as a home battery at a fraction of the cost. Being able to store surplus solar energy at the right times helps grid stability and cuts emissions.David Roche, Research Director - Strategic Energy Collaborations, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2057512023-06-02T04:01:59Z2023-06-02T04:01:59ZThink of solar panels more like apple trees – we need a fairer approach for what we use and sell<figure><img src="https://images.theconversation.com/files/529012/original/file-20230530-29-q3c6n7.png?ixlib=rb-1.1.0&rect=1%2C161%2C1048%2C713&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Pixabay</span></span></figcaption></figure><p>As we race to decarbonise by <a href="https://www.nytimes.com/interactive/2023/04/14/climate/electric-car-heater-everything.html">electrifying everything</a>, solar panels – now <a href="https://www.iea.org/data-and-statistics/charts/evolution-of-solar-pv-module-cost-by-data-source-1970-2020">cheaper per square metre than marine-grade plywood</a> – will do much of the heavy lifting. But if we don’t rethink how our rooftop panels plug into the grid, the transition will be unfair and costly – for both people who own solar panels (and electric cars and smart appliances) and people who don’t. </p>
<p>Australia has the <a href="https://reneweconomy.com.au/australia-again-tops-global-solar-per-capita-as-world-installs-240gw-of-pv-in-2022/#:%7E:text=The%20new%20report%2C%20which%20sources,of%20the%20Netherlands%20and%20Germany.">world’s highest solar installation rate per person</a>. When solar panels generate more energy than a household is using, the excess electricity can be exported to the grid. Rooftop solar regularly provides more than a <a href="https://reneweconomy.com.au/renewables-reach-record-68-7-per-cent-share-of-grid-power-in-australias-main-grid/">quarter</a> of daytime electricity across the National Electricity Market. At times it exceeds <a href="https://reneweconomy.com.au/rooftop-solar-meets-all-local-network-demand-in-south-australia-for-more-than-five-hours/">90%</a> in South Australia.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1581866199914192896"}"></div></p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Graph showing fall in solar panel prices since 1970 to a point that they're cheaper than marine plywood per square metre" src="https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=541&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=541&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=541&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=680&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=680&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529028/original/file-20230530-17-bktyo0.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=680&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Solar panel prices per square metre since 1970 (assuming 18% efficient modules).</span>
<span class="attribution"><span class="source">Data: IRENA Database. Graph: Niraj Lal</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>The amount of solar in our grids is affecting how the Australian Energy Market Operator (AEMO) and distribution businesses (which own the powerlines) keep the lights on. The measures in place are costing households that are generating solar power, but also non-solar owners and network operators. So how can we make the system fairer for all?</p>
<p>We suggest solar panels should be thought of a little more like apple trees. If you have a tree in your backyard you should be able to use as many apples as you produce. But selling apples for profit creates extra responsibilities, along with uncertainties about supply and the fair selling price. </p>
<p>Our new <a href="https://nirajlal.org/files/Lal_2023_TEJ_Give_a_little_to_get_a_little_DER_BoRR.pdf">research paper</a>, published in The Electricity Journal, outlines principles for fairness and proposes a <a href="https://images.theconversation.com/files/529706/original/file-20230602-29-v1dr3.png">bill of rights and responsibilities</a> for connecting to the grid. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/despairing-about-climate-change-these-4-charts-on-the-unstoppable-growth-of-solar-may-change-your-mind-204901">Despairing about climate change? These 4 charts on the unstoppable growth of solar may change your mind</a>
</strong>
</em>
</p>
<hr>
<h2>What’s not fair about the current system?</h2>
<p>At times, the amount of solar energy being exported can be too much for the network to handle. </p>
<p>That’s why inverters (the box on the side of a house with solar panels) have settings that automatically reduce exported electricity when network capacity is under strain. Other mechanisms are also being put in place to allow AEMO to occasionally curtail output from rooftop solar to maintain power system security.</p>
<p>However, such measures not only reduce how much electricity is flowing from a home to the grid, but the <em>entire output</em> of the home’s rooftop system. There aren’t any fundamental reasons for this, just that appropriate inverter and control settings haven’t been enabled. </p>
<p>But this means a household, at times, can’t use any of the electricity it’s generating. In South Australia, the annual cost to customers of this sort of curtailment is already between <a href="https://www.sciencedirect.com/science/article/abs/pii/S0960148121005322">A$1.2 million and A$4.5 million</a>. This isn’t fair.</p>
<p>But it also isn’t fair when solar owners get paid to export electricity when prices are <em>negative</em> – that is, when other generators must <em>pay</em> to keeping exporting to the grid. This is happening more often, totalling <a href="https://aemo.com.au/energy-systems/major-publications/quarterly-energy-dynamics-qed">more than half of all daytime hours</a> in SA and Victoria last quarter. </p>
<p>Nor is it fair for distribution businesses to build more poles and wires to accommodate everyone’s solar exports all the time. Or if the system operator has to buy more reserves to cover for the uncertainties of rooftop solar output.</p>
<p>In these instances, all customers foot the bill whether they own solar panels or not. But non-owners are hit hardest when the costs of such measures are passed on. People without rooftop solar are completely exposed to the <a href="https://www.abc.net.au/news/2023-05-25/australian-energy-regulator-market-offer-electricity-price-rise/102385284">20-25% electricity price rises</a> from July 1. </p>
<p>Some solar owners will hardly notice the increase.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-to-maximise-savings-from-your-home-solar-system-and-slash-your-power-bills-197415">How to maximise savings from your home solar system and slash your power bills</a>
</strong>
</em>
</p>
<hr>
<h2>It’s time to rethink the social contract for grid electricity</h2>
<p>Australia’s electrification will replace fossil fuels to run households, businesses, vehicles and industry. It’s expected <a href="https://aemo.com.au/en/energy-systems/major-publications/integrated-system-plan-isp">rooftop solar will increase five-fold</a>. How should households with these growing distributed energy resources interact with the grid in future?</p>
<p>We reckon the social contract for grid electricity needs to evolve from the pay-plug-play expectations dating from the 19th century to a two-way engagement to support fairness for all. </p>
<p>To return to the apple tree analogy, if you have a tree in your backyard you should be able to eat as many apples as you’d like, and make crumble, cider, whatever. But selling apples for profit comes with a responsibility not to carry codling moth. And selling crumble or cider is subject to food safety and licensing requirements. </p>
<figure class="align-center ">
<img alt="Person holding a crate of apples picked off a tree behind them" src="https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529029/original/file-20230530-19-vm7aep.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">If there’s an abundance of apples, you can’t expect to sell them for a high price.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>And the prices? That depends on the availability of trucks and local market value. Maybe you or our government could pay more for trucks for everyone to be able to sell apples all the time, but it probably wouldn’t be efficient or fair. </p>
<p>The main distinction we draw is between growing for yourself and selling for profit. The analogy obviously isn’t perfect. Apples aren’t an essential service, apple trucks aren’t a regulated monopoly, and the supply and demand of apples doesn’t need to be balanced every second. </p>
<p>However, the principles remain – especially for a future where apple trees (rooftop solar) and apple warehouses (home batteries and electric vehicles) are everywhere.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/batteries-are-the-environmental-achilles-heel-of-electric-vehicles-unless-we-repair-reuse-and-recycle-them-205404">Batteries are the environmental Achilles heel of electric vehicles – unless we repair, reuse and recycle them</a>
</strong>
</em>
</p>
<hr>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Table showing 8 principles for a bill of distributed energy resource bill of rights and responsibilities." src="https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=523&fit=crop&dpr=1 600w, https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=523&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=523&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=657&fit=crop&dpr=1 754w, https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=657&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/529209/original/file-20230530-15-8sf2sq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=657&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The principles guiding a bill of rights and responsibilities for distributed energy resources. CC-BY-NC-SA.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>A fairer balance of rights and responsibilities</h2>
<p>In our research <a href="https://nirajlal.org/research.html">paper</a> we distinguish between rights for passive use (using your own rooftop solar electricity) and responsibilities for active use (selling electricity). </p>
<p>No-one should be able to stop you using your own self-generated electricity (for the vast majority of the time). But making money from the grid will likely come with responsibilities to allow trusted parties such as network operators to manage your exports at times (a system known as flexible export limits).</p>
<p>If you’re charging and discharging batteries for profit, you will likely have a responsibility to provide some <a href="https://theconversation.com/how-closely-monitoring-households-energy-data-can-unleash-their-solar-outputs-and-possibly-make-them-more-money-196134">visibility of your expected use</a> to help the operator <a href="https://aemo.com.au/initiatives/major-programs/nem-distributed-energy-resources-der-program/der-demonstrations/project-edge">manage the grid</a>. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-closely-monitoring-households-energy-data-can-unleash-their-solar-outputs-and-possibly-make-them-more-money-196134">How closely monitoring households' energy data can unleash their solar outputs and (possibly) make them more money</a>
</strong>
</em>
</p>
<hr>
<p>In a country with lots of solar energy, prices for selling energy mightn’t be guaranteed all the time either.</p>
<p>We must think about this new social contract. If we don’t, electrifying everything will be harder, more expensive, less fair and more reliant on large-scale projects requiring new transmission lines, which are complex and costly to build. </p>
<p>The story of distributed electricity is incredible – the power is literally in our hands when we flick a switch, grab the wheel, buy a product. We have an opportunity now to make it work better and be fairer for all of us. </p>
<hr>
<p><em>You can see a summary of the DER Bill of Rights and Responsibilities <a href="https://images.theconversation.com/files/529706/original/file-20230602-29-v1dr3.png">here</a>.</em></p><img src="https://counter.theconversation.com/content/205751/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>This article was co-authored by Lee Brown Specialist – Market Design and Development at the Australian Energy Market Operator (AEMO), where he is leading Australia’s reforms of DER access and pricing. Niraj Lal and Lee Brown both work at AEMO, though the opinions in this article and associated research paper are solely those of the authors and not of AEMO.
Niraj Lal is additionally an Academic Expert for the International Energy Agency PV Task 14. He has been awarded funding from a range of organisations including the UK Government, the Australian Renewable Energy Agency, and the Australian Broadcasting Corporation.</span></em></p>The need to limit output to the grid costs solar panel owners up to $4.5 million a year in South Australia alone. A bill of rights and responsibilities can make connecting to the grid fairer for all.Niraj Lal, Visiting Fellow at the ANU Centre for Sustainable Energy Systems, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2006472023-03-07T19:06:02Z2023-03-07T19:06:02ZFirst look at the new settlement rule of Australia’s electricity market, has it worked?<figure><img src="https://images.theconversation.com/files/513563/original/file-20230306-26-pelyme.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/clean-shiny-lightbulb-australia-glowing-wireseries-563609494">Per Bengtsson from shutterstock.com</a></span></figcaption></figure><p>You might not realise this when you flick your switch at home, but Australian electricity generators are forever locked in a bidding war. They compete for the right to supply electricity on the <a href="https://www.aemc.gov.au/energy-system/electricity/electricity-market/spot-and-contract-markets">spot market</a>. The cheapest bids win and electricity from those generators is supplied, or “dispatched”, to the grid in five-minute intervals. </p>
<p>This means that every five minutes, the electricity grid is rebalanced to ensure supply meets demand. Too little supply causes blackouts; too much causes tripping (and more blackouts). </p>
<p>But until recently, the price paid for wholesale electricity (the settlement price) on the Australian National Electricity Market (NEM) was averaged over six five-minute intervals (30 minutes). (Australia is unusual in this regard. Many grids elsewhere such as in Europe operate forward or day-ahead markets, where supply is planned in advance.) </p>
<p>That worked fine in the early days, but when supply started to fluctuate more wildly with the advent of intermittent renewable energy, so did the bidding war. Some generators starting gaming the system, pushing prices sky-high. Retailers complained. </p>
<p>So when the NEM finally introduced <a href="https://aemo.com.au/initiatives/major-programs/past-major-programs/five-minute-settlement/5ms-program-management/5ms-commencement">five-minute settlement</a> in October 2021, it was a big deal. There was a great deal of <a href="https://www.fluxfederation.com/blog/5-hot-minutes-keeping-pace-with-australias-5-minute-settlement-rules">excitement</a>. Most <a href="https://www.solarquotes.com.au/blog/nem-5-minute-settlement/">commentators</a> expected wholesale electricity prices to settle down, coal to lose market share, and batteries to boom. That’s mainly because the new system would be more efficient, rewarding cheap, nimble and flexible generators including batteries. </p>
<p>But what actually happened? <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4306687">Our analysis</a> reveals the average spot price went up, not down, in Tasmania, Queensland, and New South Wales. Black coal-fired generators made more money on the spot market, not less. Flexible generators, especially batteries, did well too. (In the other NEM states, South Australia and Victoria, there was no significant change). </p>
<p>We argue further changes are needed to achieve the desired effects. These include increasing competition in the market (reducing the power of the three biggest electricity generators), building the infrastructure needed to support a green grid, and investing in more flexible and fuel-efficient technologies. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australias-energy-market-operator-is-worried-about-the-grids-reliability-but-should-it-be-200355">Australia's energy market operator is worried about the grid's reliability. But should it be?</a>
</strong>
</em>
</p>
<hr>
<h2>Greening the grid</h2>
<figure class="align-center ">
<img alt="Man wearing a hi-vis vest and hard hat looking at solar panels with wind turbines in the background." src="https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=425&fit=crop&dpr=1 754w, https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=425&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/513567/original/file-20230306-28-kjs31d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=425&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The National Electricity Market is transitioning fast to renewable energy generation to meet Australia’s 2030 emissions reduction target.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/man-working-solar-panels-wind-turbines-1924726478">DisobeyArt from www.shutterstock.com</a></span>
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</figure>
<p>The NEM opened in 1998. The market adopted a <a href="https://www.energycouncil.com.au/analysis/five-minute-settlement-starts-tomorrow/#:%7E:text=A%20momentous%20change%20in%20the,own%20dispatch%20price%20(5ms)">30-minute settlement rule</a> at the time, because five-minute settlement would have pushed the limits of metering and data-processing capabilities.</p>
<p>But as the share of renewable energy grew, it became increasingly apparent that more flexible technology would be needed to cope with intermittent solar and wind power.</p>
<p>Problems included frequent price spikes, blackouts, power tripping, and <a href="https://reneweconomy.com.au/regulators-report-points-to-outrageous-gaming-of-south-australia-energy-market-77433/">“gaming” behaviours by major generators</a>. </p>
<p>Energy retailers became frustrated by this gaming behaviour in particular, and complained to the authorities, prompting the rule change. Previously, coal and gas generators could send dispatch prices through the roof in one interval, so that when prices were averaged over the 30 minutes, it made the final trading price high. One way of doing this was to create artificial scarcity of supply, by withdrawing generation to raise spot prices. </p>
<p>When a price spike occurred, generators would then <a href="https://reneweconomy.com.au/5ms-explainer-the-early-bidder-will-catch-the-worm/">pile in</a> by offering a lower price for the remainder of the 30-minute settlement period. </p>
<p>Five-minute settlement aimed to resolve these issues and better support the integration of wind and solar power into the electricity grid, ultimately making electricity more affordable for customers.</p>
<p>The new rule would also encourage investment in faster response technologies such as batteries. </p>
<p>Our <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4306687">study</a> adds to the understanding of early effects of this regulatory change in the NEM. This will support the transition to clean energy generation, and inform policy for future electricity markets that offer stability, security and lower prices. We also propose courses of action to facilitate more effective adaptation to the rule change.</p>
<h2>Did the new rule work?</h2>
<p>The market had <a href="https://aemo.com.au/-/media/files/electricity/nem/5ms/5ms-journey.pdf?la=en&hash=179A3EA8EC47A2D4BB6652FE06421378">four years to prepare</a> for the rule change, allowing generators to <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4306687">adjust their operations</a>.</p>
<p>When five-minute settlement came in on October 1 2021, there was no substantial immediate effect. </p>
<p>However, within the first eight months of the change, the market started to adjust. We found that five-minute settlement led to an <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4306687">average spot price increase</a> (not decrease) in Tasmania, Queensland and New South Wales. </p>
<p>That’s because generators no longer had a financial incentive to rebid at a very low price after a price spike, as they had done in a 30-minute trading interval. That was a strategy that caused <a href="https://reneweconomy.com.au/how-5-minute-settlements-changed-the-bidding-game-for-coal-gas-and-renewables/">significant fluctuation in the spot price</a>. </p>
<p>Promisingly, the implementation of five-minute settlement had no measurable impact on the intensity of electricity price fluctuations. That suggests the new rule may have been effective in maintaining price stability. </p>
<p>So, in these early stages of the rule change, wholesale electricity customers are actually paying more, but the price has been more stable. </p>
<p>The impact on retail prices remains uncertain. The <a href="https://www.aemc.gov.au/energy-system/electricity/electricity-market/spot-and-contract-markets">retailers’ costs</a> of buying electricity and managing price risks are one component of what costumers pay in their energy bills. In 2020–21, it accounted for about a third of their bill. So if these effects persist, there is a possibility these higher prices will be passed on to consumers as well.</p>
<p>We also found that variable and flexible generators, especially batteries, <a href="https://reneweconomy.com.au/big-batteries-score-early-gains-in-switch-to-five-minute-settlement/">took advantage of their flexibility</a> to capture more revenue from the spot market. Gas generators’ revenue barely changed, but that could be because less flexible gas generators are lumped in together with highly flexible gas generators. </p>
<p>Surprisingly, the revenue earned by black coal-fired generators also increased. We suspect generators changed their operations and <a href="https://reneweconomy.com.au/how-5-minute-settlements-changed-the-bidding-game-for-coal-gas-and-renewables/">bidding strategies</a> to align with the five-minute settlement rule. However, revenue for coal-fired generators is still likely to fall over the medium to long term. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="The Liddell Power Station, left, and Bayswater Power Station, coal-powered thermal power station are pictured near Muswellbrook in the Hunter Valley, Australia on Nov. 2, 2021." src="https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=366&fit=crop&dpr=1 600w, https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=366&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=366&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=460&fit=crop&dpr=1 754w, https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=460&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/513544/original/file-20230306-5027-5fsvwn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=460&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">AGL Macquarie, which includes the Liddell and Bayswater power stations shown here, is one of the largest electricity producers in Australia.</span>
<span class="attribution"><a class="source" href="https://photos.aap.com.au/">Mark Baker/AP</a></span>
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<h2>Three ways to improve five-minute settlement</h2>
<p>It will take time to see the full effect of the rule change on the wholesale and retail electricity markets. However, we think the following changes are needed to fully realise the benefits of five-minute settlement: </p>
<ol>
<li><p><strong>Market concentration</strong>. The NEM is a concentrated market. The three largest generators, <a href="https://www.aer.gov.au/system/files/State%20of%20the%20energy%20market%202021%20-%20Full%20report_1.pdf">AGL Energy, Origin Energy and Energy Australia</a>, hold a substantial market share. Together, they supply about 80% of the generated energy. Policies that promote competition are key to realising the benefits of five-minute settlement. </p></li>
<li><p><strong>Supporting infrastructure</strong>. Five-minute settlement is expected to increase the operational cost of generating coal-fired power. That’s because ageing power plants would need to be upgraded to be able to compete during periods of fluctuating demand. Renewable generators, on the other hand, have extremely low operating costs, largely due to having no fuel costs. Coal-fired generators are likely to lose revenue and leave the market much earlier than expected. Firming and flexible demand technologies such as energy storage systems (pumped hydro, batteries or solar thermal) can effectively respond to the new market conditions and fill the gap. </p></li>
<li><p><strong>Fuel-efficient and flexible technologies</strong>. Technologies such as batteries, pumped hydro and <a href="https://turbinetechnics.com/understanding-aeroderivative-gas-turbines">aero-derivative gas turbines</a> operate more effectively in a five-minute settlement design. The recent rise in gas prices also necessitates investment in flexible and fuel-efficient technologies, such as <a href="https://www.energy.gov/eere/amo/articles/reciprocating-engines-doe-chp-technology-fact-sheet-series-fact-sheet-2016#:%7E:text=Fuel%20Reciprocating%20engines%20can%20be,widely%20used%20in%20CHP%20applications.">reciprocating gas engines</a>. </p></li>
</ol>
<p>Without policies to address these three areas, we believe five-minute settlement is unlikely to offer substantial benefits to the market.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/5-policy-decisions-from-recent-history-that-led-to-todays-energy-crisis-185207">5 policy decisions from recent history that led to today's energy crisis</a>
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<img alt="" src="https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=1012&fit=crop&dpr=1 600w, https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=1012&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=1012&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1272&fit=crop&dpr=1 754w, https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1272&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/513858/original/file-20230307-20-dqr1v4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1272&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><a class="source" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4306687">SSRN/Australian Energy Regulator</a></span>
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</figure><img src="https://counter.theconversation.com/content/200647/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>How has the national electricity market responded to one of the biggest reforms in years, the introduction of five-minute settlement? Analysis reveals more than a few surprises.Christina Nikitopoulos, Associate professor, Finance Discipline Group, University of Technology SydneyMuthe Mwampashi, PhD Candidate, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2003552023-02-22T05:41:10Z2023-02-22T05:41:10ZAustralia’s energy market operator is worried about the grid’s reliability. But should it be?<p>The Australian Energy Market Operator (AEMO) this week <a href="https://aemo.com.au/newsroom/media-release/aemo-issues-nem-reliability-update">released an update</a> to its annual assessment of reliability, the so-called Electricity Statement of Opportunities. This has been reported as the market operator forecasting “<a href="https://www.smh.com.au/business/companies/east-coast-power-shortages-on-the-cards-without-new-projects-aemo-20230220-p5clwj.html">power shortages</a>”, or the network being “<a href="https://www.theguardian.com/australia-news/2023/feb/20/australia-at-risk-of-electricity-supply-shortages-as-renewable-projects-lag-behind-coal-plant-closures">at risk of supply shortages</a>”. </p>
<p>The market operator has certainly put up in lights its message that there’s an “urgent need for investment in generation, long-duration storage and transmission to achieve reliability requirements over the next decade”. Yet the reliability outlook has actually improved overall since AEMO’s previous statement last August. </p>
<p>At first pass, this seems counterintuitive. How can reliability be improving, yet still evidently cause for grave concern?</p>
<p>To interpret the report and statements fully, it’s important to understand how the analysis is prepared, and what is and isn’t included in the overall outlook.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/whats-a-grid-anyway-making-sense-of-the-complex-beast-that-is-australias-electricity-network-185127">What's a grid, anyway? Making sense of the complex beast that is Australia's electricity network</a>
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<h2>The Statement of Opportunities</h2>
<p>Every year, AEMO prepares a report that assesses the reliability of the National Electricity Market (NEM). Reliability is a measure of the power system’s ability to supply demand. A reliable power system has adequate resources – generation, demand response and transmission capacity – to supply customers. </p>
<p>In the NEM, the reliability of the system is reported in terms of “expected unserved energy”. This is essentially a measure of the expected amount of electricity <em>not</em> delivered to customers, as a result of inadequate capacity to meet the anticipated demand. </p>
<p>AEMO’s reliability assessment looks ahead ten years, to provide information to the electricity market more broadly on any potential gaps or shortfalls in supply that would put reliability at risk. This was intended to guide the private sector, by highlighting “opportunities” for new investment across the electricity system. Hence the report is named the <a href="https://aemo.com.au/en/energy-systems/electricity/national-electricity-market-nem/nem-forecasting-and-planning/forecasting-and-reliability/nem-electricity-statement-of-opportunities-esoo">Electricity Statement of Opportunities</a>. </p>
<p>But, importantly, the assessment does not actually forecast a market response or any other intervention in power generation or transmission. It generally only looks at “committed projects” – those that are all but guaranteed to be completed. </p>
<p>As such, it provides an estimate of the expected unserved energy over the next decade, if (and only if) there is no further investment or response. A consequence of this is that a large amount of potential investment and future capacity is not included. </p>
<h2>The update</h2>
<p>AEMO’s updated report was prompted by a range of “material generation capacity changes” since the August statement. This includes delays to the Kurri Kurri gas-fired power plant and the Snowy 2.0 hydro project. </p>
<p>However, it includes the addition of 461 megawatts of battery storage and 1,326MW of wind developments that have reached “committed” status since August. It also includes the <a href="https://www.energyco.nsw.gov.au/projects/waratah-super-battery">Waratah Super Battery</a>, which will effectively unlock additional capacity in the transmission system. </p>
<p>This is why the reliability outlook has improved. There are now no “supply gaps” projected in any region of the NEM, which covers Australia’s southern and eastern states, until 2025-26, where previously there were. </p>
<p>Besides these committed projects, more than 2,000MW of battery capacity is “anticipated” to be available. But, as it has not yet met the formal commitment criteria, it has not been considered in AEMO’s assessment. </p>
<p>The latest report also doesn’t include capacity that will supported by the <a href="https://www.energy.vic.gov.au/renewable-energy/victorian-renewable-energy-and-storage-targets/victorian-renewable-energy-target-auction-vret2">Victorian Renewable Energy Target</a> or the <a href="https://www.energy.nsw.gov.au/nsw-plans-and-progress/major-state-projects/electricity-infrastructure-roadmap">NSW Electricity Infrastructure Roadmap</a>. </p>
<p>Several transmission developments that are expected to significantly reduce projected reliability risks were also not included. One of these, the Victoria-New South Wales Interconnector West, received a significant boost just yesterday, with the Victorian government issuing orders to <a href="https://aemo.com.au/newsroom/media-release/government-order-supports-community-input-for-vni-west">accelerate the project</a>. Other schemes are still working their way through the regulatory process, and hence are also not yet included in AEMO’s statements. </p>
<p>So, while AEMO’s assessment projects supply gaps appearing from 2026 onwards, as various projects and other initiatives progress we can expect this outlook to continue to improve. This is, after all, how it’s supposed to work. The market operator highlights emerging gaps, and various actors respond to prevent those gaps becoming reality. </p>
<h2>Emerging risks</h2>
<p>This is certainly not to say everything is fine. There are some significant risks and challenges on the horizon. </p>
<p>The <a href="https://www.afr.com/companies/energy/crunch-time-looms-for-origin-on-eraring-closure-20230217-p5clb4">potential closure of Eraring power station</a> in just two-and-a-half years is a key risk to reliability in NSW in particular. In the shorter term, a return to hot summers in 2023-24 could give the system its harshest test in years. </p>
<p>The <a href="https://www.abc.net.au/news/2023-02-12/snowy-2-0-this-hole-is-above-a-stuck-tunnel-boring-machine/101957418">delay of Snowy 2.0</a> may also have significant impacts on the reliability of the system. Unfortunately, AEMO’s update doesn’t provide much meaningful information on the implications of this situation. </p>
<p>AEMO’s report does not include the transmission projects required to realise the benefits of Snowy 2.0, so the impact of a delay is rather a moot point. It is reasonable to assume, however, that the promised 2 gigawatts of firm supply would have a considerable impact on the reliability outlook. </p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/amid-blackout-scare-stories-remember-that-a-grid-without-power-cuts-is-impossible-and-expensive-102115">Amid blackout scare stories, remember that a grid without power cuts is impossible... and expensive</a>
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<p>As previously mentioned, there are plenty of projects – renewable, storage, transmission and demand response – that can mitigate these risks. But of course we have to actually deliver them. Supply-chain issues, skills shortages and community opposition are key challenges facing the delivery of new capacity. </p>
<p>At a federal level, the newly announced <a href="https://www.energy.gov.au/news-media/news/capacity-investment-scheme-power-australian-energy-market-transformation">Capacity Investment Scheme</a> may help bring more storage capacity online. The <a href="https://www.energy.gov.au/news-media/news/rewiring-nation-supports-its-first-two-transmission-projects">Rewiring the Nation</a> plan is intended to bring forward important transmission projects. A bevy of state government programs and interventions will also help bring new projects online. </p>
<p>Supply shortages can be assured if nothing happens beyond what is assumed in the assessment. Things are of course happening – but we do have to get cracking.</p><img src="https://counter.theconversation.com/content/200355/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dylan McConnell's current position is supported by the Race for 2030 CRC. </span></em></p>Are blackouts really looming by the middle of this decade? An AEMO report warns they might be – but there are plenty of projects on the drawing board that will help ease the squeeze on the grid.Dylan McConnell, Senior Research Associate, Renewable Energy & Energy Systems Analyst, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1879802022-08-04T05:52:15Z2022-08-04T05:52:15ZAvoiding a gas shortage is one thing, but what’s needed is action on prices<figure><img src="https://images.theconversation.com/files/477287/original/file-20220803-24-54pxzf.png?ixlib=rb-1.1.0&rect=0%2C532%2C3567%2C1975&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> </figcaption></figure><p>The Albanese government <a href="https://www.minister.industry.gov.au/ministers/king/media-releases/government-responds-accc-gas-shortage-report">has accepted</a> the Australian Competition and Consumer Commission’s recommendation to “initiate the first step” to trigger the controversial <a href="https://www.industry.gov.au/regulations-and-standards/securing-australian-domestic-gas-supply">Australian Domestic Gas Security Mechanism</a> to avert a supply crisis in eastern Australia.</p>
<p>What the competition watchdog hasn’t recommended is what to do about the gas price, which has little to do with supply.</p>
<p>In its latest <a href="https://www.accc.gov.au/publications/serial-publications/gas-inquiry-2017-2025/gas-inquiry-july-2022-interim-report">half-yearly report</a> on gas supply, the ACCC predicts that, without action, eastern Australia will suffer a domestic gas shortage in 2023, and is concerned that already-high prices will go even higher. </p>
<p>The report identifies several causes. One is Russia’s war against Ukraine, which has European buyers seeking alternatives to Russian gas. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=917&fit=crop&dpr=1 600w, https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=917&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=917&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1153&fit=crop&dpr=1 754w, https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1153&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/477284/original/file-20220803-1926-be9jto.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1153&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.accc.gov.au/system/files/ACCC%20Gas%20Inquiry%20-%20July%202022%20interim%20report%20-%20FINAL.pdf">Competition and Consumer Commission</a></span>
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<p>Australian liquefied natural gas (LNG) exporters have been keen to meet this demand and reap the high prices they are willing to pay. </p>
<p>But the report also makes clear there are significant problems with the Australian gas market itself, with ineffective competition between gas producers, poor compliance, and an apparent lack of real commitment by gas exporters to the agreement they made with the federal government to ensure affordable and sufficient gas for domestic users.</p>
<p>Frustratingly though, the report has little to say (beyond expressing concern) about the more immediate issue of escalating domestic prices.</p>
<h2>Looming shortage</h2>
<p>The report identifies an east coast gas supply of 1.98 billion gigajoules in 2023 – well in excess of domestic demand of 571 million gigajoules.</p>
<p>1.3 billion gigajoules of that supply is needed to meet long-term LNG export contracts. The ACCC has identified there will be a shortfall of 56 million gigajoules if the LNG producers export all of the 167 million gigajoules they will have in excess their contract obligations.</p>
<p>To avoid this shortfall, the ACCC has recommended the government take the first step in initiating the <a href="https://www.industry.gov.au/regulations-and-standards/securing-australian-domestic-gas-supply">Australian Domestic Gas Security Mechanism</a>. This involves determining if 2023 will be a “shortfall year”. Federal resources minister has said the government will take this step.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/the-gas-trigger-wont-be-enough-to-stop-our-energy-crisis-escalating-we-need-a-domestic-reservation-policy-188057">The 'gas trigger' won't be enough to stop our energy crisis escalating. We need a domestic reservation policy</a>
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<p>If the government finds it will be a shortfall year, it can require exporters to offer their uncontracted gas to the domestic market first.</p>
<p>Whether the government will need to do that will depend on negotiations with the exporters – in particular the three joint venture exporters and their associates the ACCC says have influence over close to 90% of proven and probable eastern Australian reserves. </p>
<p>The ACCC report expresses concern that some LNG exporters “not engaging with the
domestic market in the spirit” of an <a href="https://www.industry.gov.au/sites/default/files/2021-01/australian-east-coast-domestic-gas-supply-commitment-heads-of-agreement.pdf">agreement</a> they signed:</p>
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<p>Even if the behaviour could be proven to be technically compliant, we consider that some suppliers are not engaging with the domestic market in ways that are likely to result in supply agreements being reached and market conditions noticeably improving </p>
</blockquote>
<p>It is also concerned the joint venture operators might be breaching the Competition and Consumer Act by effectively engaging in joint marketing without ACCC approval. </p>
<p>Another concern is the cost of transmission, with pipeline owners enjoying local monopolies. The ACCC has stopped short of recommending regulating the prices they can charge.</p>
<h2>Few clues on prices</h2>
<p>Where the recommendations fall short is on what to do about rising prices. Even before the looming shortfall, wholesale and retail prices to businesses have been climbing steadily for a year. The report says some prices have been doubled.</p>
<p>The ACCC has been operating on the superficially reasonable basis that domestic gas prices should be no higher than international ones. </p>
<p>It has been using “export parity prices” to indicate what the price would be if the federal government’s agreement with LNG exporters was functioning well.</p>
<p>On that metric, the agreement is functioning well. Domestic prices have largely followed international prices. But those prices have soared from A$3-10 per gigajoule to well above A$40.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-did-gas-prices-go-from-10-a-gigajoule-to-800-a-gigajoule-an-expert-on-the-energy-crisis-engulfing-australia-184304">Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia</a>
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<p>The result is windfall profits to producers and unaffordable prices for domestic users of the kind that cannot be accepted as a well-functioning market.</p>
<p>The report makes no recommendation to address this problem.</p>
<p>While there have been arguments for a <a href="https://theconversation.com/the-gas-trigger-wont-be-enough-to-stop-our-energy-crisis-escalating-we-need-a-domestic-reservation-policy-188057">domestic reservation policy</a>, a better way to address the price problem is a “windfall profit” tax on gas producers.</p>
<p>Even the threat of such a tax should be a brake on unfair domestic prices. The ACCC could set a price threshold to trigger the tax. It could be tailored to the specific circumstances and made defensible against claims of <a href="https://theconversation.com/hey-minister-leave-that-gas-trigger-alone-it-may-fire-up-a-fight-with-foreign-investors-185710">sovereign risk</a>.</p>
<h2>A windfall profits tax would be a start</h2>
<p>Most of the findings of the latest gas inquiry report are neither new nor surprising. Yet their impact on gas users is heavy, and will get worse if further action is not taken. </p>
<p>The government has most of the tools it needs. It should act on the ACCC’s recommendations to meet the possible 2023 shortfall and on joint marketing. </p>
<p>It should go further on pipeline regulation, and it should implement a windfall profit tax to avoid catastrophic consequences for Australian gas users.</p><img src="https://counter.theconversation.com/content/187980/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tony Wood owns shares in several energy and resource companies via his superannuation fund </span></em></p>Even with enough supply, local gas prices have been skyrocketing. The ACCC has squibbed on possible reforms such as a windfall profits tax.Tony Wood, Program Director, Energy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1857102022-07-31T20:05:40Z2022-07-31T20:05:40ZHey minister, leave that gas trigger alone – it may fire up a fight with foreign investors<figure><img src="https://images.theconversation.com/files/470976/original/file-20220626-7096-aivb3u.jpg?ixlib=rb-1.1.0&rect=0%2C532%2C4288%2C2137&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>With the Australian Energy Market Operator (AEMO) warning consumers of huge price hikes ahead, further calls for the federal government to pull its so-called “gas trigger” seem inevitable.</p>
<p>But that could be a very big mistake – leading to the type of trade dispute Australia fought for years against <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">Big Tobacco</a> over plain packaging laws.</p>
<p>The gas trigger (officially the <a href="https://consult.industry.gov.au/adgsm-extension">Australian Domestic Gas Security Mechanism</a>) was created by the Turnbull government in 2017 when there were fears of a gas shortage in eastern Australia. </p>
<p>It allows the federal resources minister to direct gas exporters to limit their gas exports or find new sources of gas to meet domestic demand instead of exporting gas overseas.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-did-gas-prices-go-from-10-a-gigajoule-to-800-a-gigajoule-an-expert-on-the-energy-crisis-engulfing-australia-184304">Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia</a>
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<p>To trigger the mechanism, however, requires predictions of insufficient supply, not just higher prices. It is therefore useless for dealing with the sort of short-term issues besetting eastern Australian gas markets, and has never been triggered. </p>
<p>The mechanism had been due to expire at the end of 2022. It was meant to be a temporary measure, not a permanent crutch in lieu of more sustainable solutions. But the government is keen to keep it. Resources Minister Madeleine King said it will be extended to 2030. </p>
<p>But should it?</p>
<p>There’s no doubt the trigger gives the government some leverage over the gas industry, in much the same way that pointing a gun at someone gets their attention. </p>
<p>Actually pulling the trigger, however, is a different matter. It may have serious unintended consequences, potentially breaching Australia’s commitments under various trade and investment treaties.</p>
<h2>How the gas trigger works</h2>
<p>An example of the extra regulatory leverage the gas trigger has given the federal government is its <a href="https://www.industry.gov.au/sites/default/files/2021-01/australian-east-coast-domestic-gas-supply-commitment-heads-of-agreement.docx">2021 agreement</a> with three major east-coast liquefied natural gas (LNG) plants: Australia Pacific LNG, Gladstone LNG and Queensland Curtis LNG.</p>
<p>Under this deal, the suppliers promised not to sell uncontracted gas internationally without first offering equivalent volumes to the domestic market. </p>
<p>What would happen if the gas trigger was actually pulled? </p>
<p>Then the mechanism becomes an export control measure, compelling gas companies to limit their exports or find new sources of gas to offset the shortfall. </p>
<p>In that circumstance, foreign-owned gas companies could use free-trade agreements to take Australia to a notoriously expensive “investor-state dispute settlement” process to claim compensation for what is known as indirect expropriation. </p>
<h2>What is indirect expropriation?</h2>
<p>Simply put, expropriation is any interference by governments with the rights and properties of foreign investors. </p>
<p>It can be direct, such as outright seizure of investors’ properties, or indirect, through enactment of laws or regulations that interfere with investors’ capacity to generate revenue or do business. </p>
<p>Australia has signed several investment treaties and free-trade agreements that contain investor-state dispute settlement provisions. If the government pulls the gas trigger, a foreign-owned gas company could seek compensation for interference with the company’s right to export gas to its overseas buyers. </p>
<p>That is a concern, given Australia’s LNG sector is 95.7% owned by foreign investors <a href="https://australiainstitute.org.au/post/lng-export-companies-95-7-foreign-owned-research-report/">according to the Australia Institute</a>. </p>
<p>For example, Malaysia’s Petronas and Korea’s KOGAS are major shareholders in Gladstone LNG. </p>
<p>These foreign companies have rights under international trade and investment rules, multilateral agreements such as the <a href="https://www.dfat.gov.au/trade/agreements/in-force/aanzfta/asean-australia-new-zealand-free-trade-agreement">ASEAN-Australia-New Zealand free trade agreement</a>, and bilateral free-trade agreements signed with <a href="https://www.austrade.gov.au/australian/export/free-trade-agreements/mafta#:%7E:text=Malaysia-Australia%20Free%20Trade%20Agreement%20%28MAFTA%29%201%20MAFTA%20Tariff,into%20account%20including%20culture%2C%20politics%20and%20business%20etiquette.">Malaysia</a> and <a href="https://www.austrade.gov.au/australian/export/free-trade-agreements/kafta">Korea</a>. </p>
<h2>The results won’t be pleasant</h2>
<p>Disputes involving indirect expropriation are expensive and time-consuming. </p>
<p>The classic example is Australia’s six-year defence of its tobacco plain-packaging laws against the global tobacco giant Philip Morris.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279">When even winning is losing. The surprising cost of defeating Philip Morris over plain packaging</a>
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<p>Among other things, Philip Morris <a href="http://classic.austlii.edu.au/au/journals/VicULawJJl/2017/9.html">claimed</a> the labelling regulations indirectly expropriated its brand assets, intellectual property and goodwill associated with its products. Australia eventually won the dispute, but at a <a href="https://theconversation.com/when-even-winning-is-losing-the-surprising-cost-of-defeating-philip-morris-over-plain-packaging-114279#:%7E:text=Australia%20scored%20a%20victory%20over,pay%20all%20of%20Australia's%20costs.">reported A$24 million cost</a> along with internal expenditures. </p>
<p>The risk of foreign gas investors making indirect expropriation claims is quite real. They have invested in extracting Australian gas to meet demand in markets such as South Korea and Malaysia. </p>
<p>For example, Santos, the lead developer of the Gladstone LNG project, signed a <a href="https://www.hydrocarbons-technology.com/projects/gladstone-project/">20-year agreement</a> with KOGAS in 2010 to supply 3.5 million tonnes a year of LNG. This amounts to 11% of Korea’s domestic LNG supply. </p>
<p>Electricity generators have already lodged <a href="https://www.abc.net.au/news/2022-07-29/aemo-reports-record-wholesale-power-price-customer-nightmare/101279554">claims for compensation</a> over AEMO interventions in the energy market. We shouldn’t expect gas suppliers to do less.</p>
<h2>So what now?</h2>
<p>We need a better solution to provide affordable gas and electricity prices along with reliable supply. </p>
<p>Some experts have <a href="https://theconversation.com/want-a-solution-for-the-energy-crisis-gripping-australias-east-look-west-185124">advocated</a> for a Western Australian-style gas reservation model to be implemented nationally. This model requires gas producers to reserve supplies for the local market before other transactions.</p>
<p>It will take time to introduce the model nationally without also inviting expropriation claims. Existing supply contracts will need to be exempt – and these, such as the Gladstone LNG contract to supply Korea, are often decades long. </p>
<p>But as new contracts are signed, the reservation model can eventually provide the benefits it now gives to West Australian consumers.</p>
<p>It’s not the short-term solution we’d all like. But it is a better solution than extending the gas trigger. The work to introduce it should begin now.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/3-key-measures-in-the-suite-of-new-reforms-to-deal-with-australias-energy-crisis-184554">3 key measures in the suite of new reforms to deal with Australia's energy crisis</a>
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<img src="https://counter.theconversation.com/content/185710/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Umair Ghori does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Australian Domestic Gas Security Mechanism may have serious unintended consequences if used, potentially breaching trade and investment treaties.Umair Ghori, Associate Professor, Bond UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1851242022-06-16T05:58:56Z2022-06-16T05:58:56ZWant a solution for the energy crisis gripping Australia’s east? Look west<figure><img src="https://images.theconversation.com/files/469158/original/file-20220616-12840-qzxsxw.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C5176%2C3430&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>You can thank Margaret Thatcher for the gas supply crunch Australia’s east coast has been plunged into. As UK prime minister, Thatcher <a href="https://www.ippr.org/juncture/ideology-in-politics-reflections-on-lady-thatchers-legacy">led the charge</a> to kick the government out of the economy and allow the market to rule. In Australia, governments took up the idea with enthusiasm through deregulation and privatisation. But when the market fails, what happens? The state has to step in, again and again. </p>
<p>Putting the interests of citizens first requires state leadership over market rule. We saw this clearly yesterday when Australia’s national electricity market operator, AEMO, moved to <a href="https://reneweconomy.com.au/impossible-to-operate-aemo-declares-suspension-of-electricity-spot-market/">suspend</a> the wholesale electricity market. This radical move allowed the government entity to manage pricing and control of power plants and prevent rolling blackouts.</p>
<p>To see the truth of this, look west. While energy on Australia’s east coast has been in the hands of the market for decades, Western Australia has learned from previous crises. In the 1980s, the isolated state – which is not part of the national electricity market or the eastern gas region – decided to reserve <a href="https://static1.squarespace.com/static/5b03b4bb506fbee0fac22788/t/5b84fa7ecd836608ac831d1d/1535441543265/DomGas_Facts_2011.pdf">15% of all gas produced</a> from the north west shelf for domestic use. Since then, WA has championed state intervention through its <a href="https://www.wa.gov.au/government/publications/implementation-of-the-wa-domestic-gas-policy">DomGas policy</a> to ensure continuous supply of gas for its gas power stations and industry. </p>
<p>As the east coast energy crisis worsens, one thing is clear. Any solution has to involve government action. It’s time for governments to take back power – in more ways than one.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/469155/original/file-20220616-12877-rltwyf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="LNG carrier" src="https://images.theconversation.com/files/469155/original/file-20220616-12877-rltwyf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469155/original/file-20220616-12877-rltwyf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469155/original/file-20220616-12877-rltwyf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469155/original/file-20220616-12877-rltwyf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469155/original/file-20220616-12877-rltwyf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469155/original/file-20220616-12877-rltwyf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469155/original/file-20220616-12877-rltwyf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Australia’s LNG exports are the highest in the world.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Letting the market lead is risky</h2>
<p>State intervention has <a href="https://www.abc.net.au/news/2022-06-08/energy-ministers-urged-to-look-to-wa-for-energy-crisis-solutions/101131588">shielded</a> West Australians from the east’s energy crisis. “The gas belongs to Australian citizens through their governments,” as former Western Australian premier Colin Barnett <a href="https://www.abc.net.au/news/2022-06-11/gas-belongs-to-us-say-former-western-australian-premiers/101143558?utm_campaign=abc_news_web&utm_content=linked-in&utm_medium=content_shared&utm_source=abc_news_web">has said</a>. </p>
<p>West Australian-style intervention came, in part, from necessity. The state lacks the east coast’s large coal reserves. The issue became urgent after the 2008 Varanus Island <a href="https://knowledge.aidr.org.au/resources/industrial-varanus-island-gas-explosion/#:%7E:text=At%20approximately%201.30pm%20on,were%20forced%20to%20close%20temporarily.">pipeline explosion</a>, where the state suddenly lost almost a third of its gas supply. To compensate, the state government was able to maintain availability through its legislated domestic gas requirements. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/australias-national-electricity-market-was-just-suspended-heres-why-and-what-happens-next-185136">Australia's National Electricity Market was just suspended. Here's why and what happens next</a>
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<p>Paying homage to the market has got us into this mess. State and federal governments moved to <a href="https://www.ceda.com.au/ResearchAndPolicies/Research/Government-Regulation/Growth-50-Privatisation-A-Review-of-the-Australian">privatise state assets</a> throughout the 1980s and 1990s. Since then, governments have largely refused involvement in energy availability. </p>
<p>When Queensland’s coal seam gas was <a href="https://www.csrm.uq.edu.au/media/docs/1386/1-s20-s1875510016300853-main.pdf">being developed</a> in the 2000s, the state government let the market lead. That led to major waste, when the three successful consortia spent more than $A32 billion on separate pipelines, ports and processing facilities before a molecule of gas was produced. That meant all gas extracted was committed to overseas export contracts to be able to secure investment – leaving none for domestic use. </p>
<p>Imagine if the Queensland government had required coordination and multi-company participation, just as WA did when developing the gas resources of the <a href="http://www.nwsssc.com/">Northwest Shelf</a>. With government leadership, companies could have been able to use shared infrastructure – and gas could have been reserved for domestic use. </p>
<h2>There’s no single silver bullet – but we do have three immediate solutions</h2>
<p>Where is the market today? Suspended by AEMO to ensure consumers and manufacturers have power. Reliance on the market meant we have no gas available for the east coast because producers had to secure long-term contracts with foreign buyers to make their projects viable. Ahead of the transition towards <a href="https://www.iea.org/fuels-and-technologies/hydrogen">hydrogen</a>, the east coast still relies on gas for manufacturing and industrial uses.</p>
<p>As we wrote in <a href="https://academic.oup.com/jwelb/article-abstract/11/6/465/5193043">2018</a>, there is no silver bullet to achieve energy security and overcome this crisis. But there are three linked solutions, which, as a package would provide short to medium term relief. </p>
<ol>
<li><p>Short-term, we need to transport Western Australia’s abundant gas to the east coast. It is deeply ironic a country handsomely endowed with gas and the world’s largest LNG exporter is suffering from critical shortages because of our geography. In the short term, that means shipping liquefied natural gas (LNG) from WA ports to to east coast ports. In these ports, LNG can be loaded onto <a href="https://www.marineinsight.com/types-of-ships/what-is-floating-storage-regasification-unit-fsru/">special ships</a>, where LNG can be stored, regasified as needed, and injected into the existing gas pipelines. This is what <a href="https://jpt.spe.org/finland-charters-fsru-from-lng-firm-excelerate-energy#:%7E:text=Finland%20has%20chartered%20a%20floating,to%20replace%20Russian%20gas%20supplies.">Finland</a> has turned to since deciding to cut all supply of Russian gas in May. </p></li>
<li><p>Medium-term, we need to connect the west’s gas pipeline network with the northern and eastern gas pipeline network. Five years ago, <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3430861">we recommended</a> a pipeline be built as a solution to what we saw was an inevitable energy crisis on the east coast. In addition, this pipeline will let us transport hydrogen in the future. For years, it has been seen as too difficult – not technically, but commercially, since most pipelines are privately owned. Here, too, the government should step up and build it given the importance of energy security. </p></li>
<li><p>Medium-term, we also need legally binding gas reservation policies. At present, there are no legally binding conditions for eastern state gas projects requiring producers to reserve a percentage of gas for the domestic market. While the planned Narrabri gas project in NSW has <a href="https://www.smh.com.au/politics/federal/nsw-will-need-narrabri-gas-resources-minister-20220614-p5atlb.html">been suggested</a> as a solution to the energy crisis, this won’t work. That’s because while Narrabri still requires <a href="https://www.afr.com/companies/energy/we-can-t-conjure-up-gas-magically-santos-ceo-20220602-p5aqgg">secondary approvals</a>, there are no legal requirements to reserve gas. Narrabri is also controversial, as it poses <a href="https://theconversation.com/a-contentious-nsw-gas-project-is-weeks-away-from-approval-here-are-3-reasons-it-should-be-rejected-144201">multiple threats</a> to the environment and surrounding community. </p></li>
</ol>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/469152/original/file-20220616-11-55aa1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Gas pipelines" src="https://images.theconversation.com/files/469152/original/file-20220616-11-55aa1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469152/original/file-20220616-11-55aa1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469152/original/file-20220616-11-55aa1q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469152/original/file-20220616-11-55aa1q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469152/original/file-20220616-11-55aa1q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469152/original/file-20220616-11-55aa1q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469152/original/file-20220616-11-55aa1q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Connecting the west’s gas pipelines to the east will help.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Never waste a good crisis</h2>
<p>Once the immediate crisis is over, we should look west again. Western Australia has given the east a blueprint on how to handle energy crises and the clean energy transition. </p>
<p>In 2022, as east coast states reel from fossil fuel price spikes, what’s WA doing? They’ve committed to quitting coal power <a href="https://reneweconomy.com.au/wa-to-close-remaining-state-owned-coal-generators-by-2030/">before 2030</a> and ruled out any new gas-fired power stations on the south-west grid after 2030. The state government will keep intervening in the energy market by directing billions of dollars into renewable energy and storage to ensure an orderly energy transition. In a similar approach to Germany, Western Australia will implement a “<a href="https://www.abc.net.au/news/2022-06-14/muja-power-station-to-close-in-coal-phase-out-as-renewables-rise/101150972">just transition</a>” program allowing workers to be retrained or re-employed. </p>
<p>To make sure this never happens again, governments involved in the national electricity market should step up and claw back control foolishly given to the market for far too long.</p><img src="https://counter.theconversation.com/content/185124/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tina Soliman Hunter has received funding from ACOLA and the AIEN. She is a member of the Education Board of AIPN, and a member of the Board of the Aberdeen Branch of the Society of Petroleum Engineers </span></em></p><p class="fine-print"><em><span>Madeline Taylor has received funding from ACOLA and the AIEN. She is a Climate Councillor for the Climate Council.</span></em></p>The energy crisis is hitting the east coast hard. But Western Australia is sailing through – because of government intervention in the market.Tina Soliman Hunter, Professor of Energy and Natural Resources Law, Macquarie UniversityMadeline Taylor, Senior Lecturer, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1852072022-06-16T05:17:45Z2022-06-16T05:17:45Z5 policy decisions from recent history that led to today’s energy crisis<p>If you aren’t a long-term energy policy news junkie, you’d be forgiven for thinking today’s <a href="https://theconversation.com/australias-national-electricity-market-was-just-suspended-heres-why-and-what-happens-next-185136">crisis</a> arrived fairly suddenly.</p>
<p>Indeed, Liberal leader Peter Dutton is framing it as a recent catastrophe, <a href="https://www.skynews.com.au/australia-news/dutton-accuses-labor-of-spooking-power-market-by-transitioning-to-renewables-too-quickly/news-story/b032bbccd5b4f0d236cba59cb06985fc">saying</a> it was caused by Labor “transitioning into renewables too quickly […] they are spooking the market.”</p>
<p>But this crisis hasn’t come out of nowhere.</p>
<p>We arrived here thanks to a series of policy decisions under previous governments – state and federal – that left Australia’s energy system ill-equipped to cope with the demands placed on it.</p>
<p>Here are five key policy moments that in part led to the power crisis engulfing Australia today.</p>
<figure class="align-center ">
<img alt="electricity infrastructure behind fence" src="https://images.theconversation.com/files/469174/original/file-20220616-15-ix44c7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469174/original/file-20220616-15-ix44c7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469174/original/file-20220616-15-ix44c7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469174/original/file-20220616-15-ix44c7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469174/original/file-20220616-15-ix44c7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469174/original/file-20220616-15-ix44c7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469174/original/file-20220616-15-ix44c7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The current energy market crisis hasn’t come out of nowhere.</span>
<span class="attribution"><span class="source">Jono Searle/AAP</span></span>
</figcaption>
</figure>
<h2>1. Privatisation of the electricity sector</h2>
<p>The 1990s saw a <a href="https://www.accc.gov.au/system/files/The%20Australia%20Institute%20%28attachment%29.pdf">trend towards privatisation</a> of government-owned assets, on the logic that industry would run the assets more efficiently. </p>
<p>The Kennett government in Victoria had a strong policy to privatise generators and transmission assets, with South Australia and New South Wales also privatising energy assets. </p>
<p>However, the actual focus of industry is not to be efficient but to maximise shareholder profit (which may involve being more streamlined, but not necessarily). And so the the primary role of the energy sector to provide <a href="https://theconversation.com/hazelwood-power-station-from-modernist-icon-to-greenhouse-pariah-75217">general benefits</a> to Australian residents and businesses has been lost.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/want-electricity-reform-start-by-giving-power-back-to-the-states-72965">Want electricity reform? Start by giving power back to the states</a>
</strong>
</em>
</p>
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<h2>2. The Gladstone gas terminal agreements</h2>
<p>Liquefied natural gas (LNG) <a href="https://www.afr.com/companies/energy/queenslands-boomtime-lng-scheme-faces-todays-harsh-reality-20151223-gltvb0">exports</a> began from the Gladstone LNG gas terminal in Queensland in 2015, during the Abbott-Turnbull-Morrison era, connecting the eastern states’ domestic gas markets to the international price. </p>
<p>But the journey began long prior, with construction of this terminal beginning in 2010 (in the middle of the Rudd-Gillard-Rudd era). It involved years of strategy discussion, policy design and agreements. </p>
<p>These agreements, forged between industry and various state (especially the Beattie Queensland Labor government) and federal governments (going as far back as the Howard era), created an LNG export industry.</p>
<p>Unlike Western Australia, there was no domestic reserve for gas set up as part of the agreements. So on the east coast, we are now exposed to international gas prices.</p>
<p>Of course, in the lead up to creating the LNG export industry, federal governments perhaps could not have been expected to predict Russia’s invasion of Ukraine over a decade later, driving up gas prices.</p>
<p>But the decisions made around the Gladstone gas agreements allowed Australian gas to be shipped offshore and have led to extremely high gas prices domestically.</p>
<figure class="align-center ">
<img alt="four men watch as woman signs paper" src="https://images.theconversation.com/files/469171/original/file-20220616-18-ap881y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469171/original/file-20220616-18-ap881y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469171/original/file-20220616-18-ap881y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469171/original/file-20220616-18-ap881y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469171/original/file-20220616-18-ap881y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469171/original/file-20220616-18-ap881y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469171/original/file-20220616-18-ap881y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Then-prime minister Malcolm Turnbull during a 2017 signing ceremony with gas industry representatives. Various state and federal governments have influenced policy gas export policy.</span>
<span class="attribution"><span class="source">Lukas Coch</span></span>
</figcaption>
</figure>
<h2>3. Axing the price on carbon, watering down the renewable energy target</h2>
<p>Under former Prime Minister Tony Abbott, the then-Coalition government removed the price on carbon created by the Rudd-Gillard-Rudd government. This was arguably one of the most backward steps in the efforts to rein in Australia’s carbon emissions and did nothing to incentivise renewable energy production.</p>
<p>It also tried very hard to scrap the renewable energy target (RET) – eventually settling for just watering it down significantly.</p>
<p>The RET required energy retailers and large customers to ensure a share of their energy was derived from renewable sources.</p>
<p>An earlier form of the target was <a href="http://www.cleanenergyregulator.gov.au/RET/About-the-Renewable-Energy-Target/History-of-the-scheme">established in 2001</a> by the Howard Coalition government. The Rudd Labor government increased the target’s ambition in 2009.</p>
<p>In 2015 the Abbott Coalition government dramatically reduced the target, and it was easily met in 2019. Since then, there has been no additional hard incentive to build more renewables.</p>
<p>The reason renewables are still being built now is because they are cheaper than coal. </p>
<p>Investment would continue at a more rapid pace, except for problems renewable energy producers face in getting their power into the grid (more on that later).</p>
<figure class="align-center ">
<img alt="three men in orange vests in front of solar panels" src="https://images.theconversation.com/files/469172/original/file-20220616-8112-6s55tu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/469172/original/file-20220616-8112-6s55tu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=468&fit=crop&dpr=1 600w, https://images.theconversation.com/files/469172/original/file-20220616-8112-6s55tu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=468&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/469172/original/file-20220616-8112-6s55tu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=468&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/469172/original/file-20220616-8112-6s55tu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=588&fit=crop&dpr=1 754w, https://images.theconversation.com/files/469172/original/file-20220616-8112-6s55tu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=588&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/469172/original/file-20220616-8112-6s55tu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=588&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The Rudd Labor government increased the renewable energy target.</span>
<span class="attribution"><span class="source">Ray Strange/AAP</span></span>
</figcaption>
</figure>
<h2>4. An effective stop on investment in wind farms in Victoria</h2>
<p>In 2011, the Victorian Baillieu state government effectively put a stop to wind farm investment by <a href="https://www.theguardian.com/environment/southern-crossroads/2013/may/29/1">creating a 2km exclusion zone</a> around existing homes. </p>
<p>As researchers Lisa Caripis and Anne Kallies <a href="https://theconversation.com/victorian-wind-farm-laws-a-blow-to-australias-clean-energy-future-9163">wrote</a> in The Conversation in 2012, these laws:</p>
<blockquote>
<p>effectively give the owners of any dwelling within 2km of a proposed wind farm the power to decide whether or not the development should proceed. </p>
</blockquote>
<p>This decision, combined with the reduced RET, really slowed down investment in renewables. </p>
<p>These laws were <a href="https://reneweconomy.com.au/vic-labor-ditches-2km-wind-farm-restrictions-reforms-planning-laws-66306/">reformed</a> in 2015 by the Andrews government in Victoria.</p>
<h2>5. Lack of investment in transmission infrastructure</h2>
<p>This is not so much a policy moment, but a lack of one.</p>
<p><a href="https://theconversation.com/what-is-the-electricity-transmission-system-and-why-does-it-need-fixing-147903">Transmission infrastructure</a> is the wires, poles and other bits of the system needed to get electricity from power producers to households and businesses.</p>
<p>Most major transmission projects in Australia connecting coal, gas and hydro projects to the grid have been built by governments and then later privatised. Under the current privatised system, getting new transmission lines built is a complex process.</p>
<p>Renewables generation projects are often built at smaller scales in remote locations and new transmission infrastructure is needed to connect them to the grid. </p>
<p>Many renewable energy projects currently cannot connect to the grid because transmission infrastructure can’t securely absorb the extra capacity.</p>
<p>Both federal and state governments have failed to enact policies encouraging investment in transmission projects that can serve renewables generation. This has set the system up for the failure we’re seeing today.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-is-the-electricity-transmission-system-and-why-does-it-need-fixing-147903">What is the electricity transmission system, and why does it need fixing?</a>
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</em>
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<h2>A tough job ahead</h2>
<p>Of course, other policy decisions have also led to today’s crisis. For example, there’s been limited government policy encouraging the construction of batteries and pumped hydro in order to store renewable energy produced at times of lower demand. </p>
<p>The exception here is, of course, the tax payer funded Snowy 2.0 scheme, <a href="https://www.theguardian.com/australia-news/2022/jun/10/energy-market-turmoil-snowy-hydro-delayed-until-2028-while-coal-plants-run-at-half-capacity">recently revealed</a> to be running over time and over budget.</p>
<p>Without government intervention, it seems unlikely an orderly transition to renewables can be achieved.</p><img src="https://counter.theconversation.com/content/185207/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Roger Dargaville receives funding from the RACE for 2030 CRC and the Woodside Monash Energy Partnership. </span></em></p>We arrived at this moment thanks to a series of policy decisions under previous governments – state and federal - that left Australia’s energy system unable to cope with the demands placed on it.Roger Dargaville, Senior lecturer & Deputy Director Monash Energy Institute, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1851362022-06-15T08:47:41Z2022-06-15T08:47:41ZAustralia’s National Electricity Market was just suspended. Here’s why and what happens next<p>Australia’s energy market operator has <a href="https://aemo.com.au/newsroom/media-release/aemo-suspends-nem-wholesale-market">just suspended</a> the National Electricity market. That means instead of the price for wholesale electricity being set competitively, the market operator (AEMO) sets fixed prices and will take a greater role in directing which power stations generate energy and when. </p>
<p>This is the first time the market has been suspended across all states, and reflects the depth of the price and supply crisis plaguing Australia’s biggest electricity grid.</p>
<h2>How did we get here?</h2>
<p>All electricity on Australia’s east coast is traded through the National Electricity Market (NEM), a wholesale market where generators are paid for the electricity they produce. Prices are set by an auction between generators held every five minutes. </p>
<p>Prices typically average around $A80/MWh (per megawatt hour), but can vary between -$1000/MWh (where generators actually pay to stay online) and $15,100/MWh. Retailers buy the energy from this auction and manage the price risk on behalf of households and energy-using businesses. </p>
<p>Over the past week, wholesale prices surged due to two main factors: high coal and gas prices (driven by the Russian invasion of Ukraine) and roughly 25% of coal power stations being out of action. The coal power stations are unavailable because of maintenance as well as the sudden exit of 3,000 MW of power due to breakdowns (unplanned outages). </p>
<p>This led AEMO to trigger a pricing “safety net” and capping prices at $300/MWh (much less than the normal cap of $15,100/MWh). </p>
<p>Unfortunately, $300/MWh is currently less than the cost of generating power from gas power stations and possibly even some coal power stations. Some generators subsequently withdrew their availability from the market, leading to further shortfalls. </p>
<p>The low price cap also meant there were weaker price signals as to when power stations with limited “fuel” should use it. This includes some diesel generators as well as batteries and hydro.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/if-the-opposition-wants-a-mature-discussion-about-nuclear-energy-start-with-a-carbon-price-without-that-nuclear-is-wildly-uncompetitive-184471">If the opposition wants a mature discussion about nuclear energy, start with a carbon price. Without that, nuclear is wildly uncompetitive</a>
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</em>
</p>
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<figure class="align-center ">
<img alt="Power lines" src="https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/371892/original/file-20201130-15-1d3xz5t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The electricity wholesale market has been suspended.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>All this makes it much harder for AEMO to operate the market. On Tuesday, AEMO was forced to direct power stations when to run and when not to run. This intervention applied to roughly 20% of demand yesterday, or 5,000 megawatts. </p>
<p>AEMO has now decided suspending the market will make it simpler to operate the grid during this crisis. Generators will now provide their availability and AEMO will tell generators when to run to ensure secure supply. Market prices are then fixed at the average of the past 28 days for that hour of the day - between $150/MWh and $300/MWh across the day. </p>
<p>If generation costs are higher, power station owners will be able to apply for <a href="https://aemo.com.au/en/energy-systems/electricity/emergency-management/guide-to-market-suspension-in-the-nem">additional compensation</a>, which will be later recovered from consumers.</p>
<p>Although this is the first time it has been done nationally, AEMO has previously suspended the market in individual states such as in <a href="https://www.aemo.com.au/-/media/files/electricity/nem/market_notices_and_events/market_event_reports/2022/preliminary-report-sa-market-suspension.pdf">South Australia</a> this year when control systems failed.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1536955611304558592"}"></div></p>
<h2>What’s likely to happen next?</h2>
<p>AEMO will continue to monitor the system, and will restart the market when it is appropriate.</p>
<p>This has been a perfect storm of factors – high input costs, significant capacity being unavailable, and a cold snap with high demand. It’s not clear any market would have been able to handle these extreme conditions unless the generation in the market is more modern and less susceptible to breaking down. </p>
<p>What this does point to is that, longer-term, it may be time to buy some insurance for the energy market, as energy ministers have <a href="https://theconversation.com/3-key-measures-in-the-suite-of-new-reforms-to-deal-with-australias-energy-crisis-184554">proposed</a>. This would help manage periods like this when so much capacity is unexpectedly offline. </p>
<p>Although coal owners are advocating for <a href="https://theconversation.com/paying-australias-coal-fired-power-stations-to-stay-open-longer-is-bad-for-consumers-and-the-planet-160083">additional payments</a>, it’s clear this would not have helped avoid the current crisis. As AEMO CEO Daniel Westerman <a href="https://www.youtube.com/watch?v=-ljN2KE8wGI">pointed out</a>, coal plant reliability is “slowly declining”. </p>
<p>This crisis shows we need to make sure we have modern new plant (like batteries and gas turbines), not ageing coal power stations. We also need reserves for when coal unexpectedly breaks down and for other extreme events. This means investing in new flexible capacity which is ready for when we need it.</p>
<figure class="align-center ">
<img alt="A coal fired power station" src="https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/371893/original/file-20201130-21-1p3kr49.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The very high cost of coal and gas is driving up energy bills.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>What does it mean for energy users?</h2>
<p>These extreme prices in the National Electricity Market will ultimately impact on energy consumers, particularly larger energy users. Households are already being hit by up to a <a href="https://www.abc.net.au/news/2022-05-26/benchmark-power-prices-electricity-bills-to-soar-australia/101098128">20% rise</a> in bills next month due to the <a href="https://theconversation.com/4-reasons-our-gas-and-electricity-prices-are-suddenly-sky-high-184303">very high cost</a> of coal and gas.</p>
<p>Given the stresses on the grid, however, it’s sensible for Australians on the east cost to conserve energy if safe to do so, particularly during the peak hours of 5-8pm. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/if-youre-renting-chances-are-your-home-is-cold-with-power-prices-soaring-heres-what-you-can-do-to-keep-warm-184472">If you're renting, chances are your home is cold. With power prices soaring, here's what you can do to keep warm</a>
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</em>
</p>
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<img src="https://counter.theconversation.com/content/185136/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joel Gilmore is an Associate Professor at Griffith University and General Manager Energy Policy & Planning at Iberdrola Australia, which develops renewable projects and batteries.</span></em></p><p class="fine-print"><em><span>Tim Nelson is an Associate Professor at Griffith University and the EGM, Energy Markets at Iberdrola Australia, which develops renewable projects and batteries.</span></em></p>Australia’s energy market operator has suspended the National Electricity Market, due to a perfect storm of coal plants going offline and a spike in fossil fuel prices.Joel Gilmore, Associate Professor, Griffith UniversityTim Nelson, Associate Professor of Economics, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1849382022-06-14T06:05:02Z2022-06-14T06:05:02ZAustralia already has a UK-style windfall profits tax on gas – but we’ll give away tens of billions of dollars unless we fix it soon<p>The really bizarre thing about calls for a UK-style <a href="https://www.awu.net.au/national/news/2022/06/17338/awu-calls-for-action-on-australias-gas-crisis/">windfall profits tax</a> on gas is that Australia’s already got one.</p>
<p>Gas prices have soared to levels never envisioned in the lead-up to 2015, when three resource giants spent <a href="https://images.theconversation.com/files/468380/original/file-20220613-22566-2puhkk.png">A$80 billion</a> building terminals in Queensland with the potential to export <a href="https://www.rba.gov.au/publications/bulletin/2021/mar/understanding-the-east-coast-gas-market.html">three times</a> the east coast gas Australia had been using.</p>
<p>At the time, the “netback” international gas price (net of the cost of liquefying and shipping) was barely <a href="https://www.accc.gov.au/regulated-infrastructure/energy/gas-inquiry-2017-2025/lng-netback-price-series">A$10 a gigajoule</a>, and wasn’t expected to climb <a href="https://cdn.theconversation.com/static_files/files/2135/ProQuestDocuments-2022-06-13.pdf">much higher</a>. </p>
<p>Suddenly, in the space of a year, it has jumped to three times that level. Local industrial customers are now being asked to pay a barely-credible <a href="https://www.afr.com/companies/energy/wholesale-gas-prices-capped-in-apocalyptic-energy-market-20220530-p5apqf">$382</a> a gigajoule – and gas suppliers were about to ask for $800, before the energy market operator stepped in and capped prices at a still “<a href="https://theconversation.com/4-reasons-our-gas-and-electricity-prices-are-suddenly-sky-high-184303">crippling</a>” $40 a gigajoule.</p>
<h2>Gas generators aren’t keen to power up</h2>
<p>So expensive is gas that on Monday, when almost a quarter of Australia’s coal-fired power generating units were out of action and it looked as if NSW and Queensland would be plunged into darkness, gas generators were sitting on their hands <a href="https://cdn.theconversation.com/static_files/files/2136/correspondence-to-market-participants-clare-savage-14-june-2022_0.pdf">rather than powering up</a>. </p>
<p>They only acted when <a href="https://reneweconomy.com.au/bonkers-queensland-and-nsw-energy-supply-crunch-underlines-farce-of-broken-market/">ordered to</a> by the energy market operator.</p>
<p>In Britain, where export gas prices have climbed just as high (and one of the same companies, Shell, is involved) Prime Minister Boris Johnson has imposed a 25% <a href="https://www.reuters.com/world/uk/uk-must-pay-household-support-without-deterring-investment-minister-2022-05-26/">windfall profits tax</a> on oil and gas producers. </p>
<p>The special tax will help fund support for households struggling with high bills, and will be phased out when oil and gas prices return to normal. </p>
<h2>Australia already has a special tax on gas</h2>
<p>There are precedents here for singling out an entire industry for an extra tax. Scott Morrison did it in 2017 with a <a href="https://images.theconversation.com/files/468625/original/file-20220613-13-26eghr.JPG">special tax on big banks</a>, which continues to this day.</p>
<p>The Rudd and Gillard governments tried it with a short-lived 40% <a href="https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/BudgetReview201011/TaxationRSPTax">super-profits</a> tax on the mining industry, which was based on … well, it was based on the longstanding 40% resource rent tax applying to the <a href="https://www.ato.gov.au/Business/Petroleum-resource-rent-tax/">oil and gas industry</a>.</p>
<p>That’s right. Australian oil and gas producers have had to shell out 40% of their profits in tax, in addition to 30% company tax on profits, for years. </p>
<p>That’s a total big enough to ensure the windfall profits resulting from Russia’s invasion of Ukraine are well and truly taxed along the lines announced in the UK, allowing Australia’s government to grab most of the windfall and use it to support households suffering from high energy prices. Or so you would think.</p>
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Read more:
<a href="https://theconversation.com/in-the-midst-of-an-lng-boom-why-are-we-getting-so-little-for-our-gas-131461">In the midst of an LNG boom, why are we getting so little for our gas?</a>
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<p>And yet the amount collected is tiny: <a href="https://budget.gov.au/2022-23/content/bp1/download/bp1_bs-4.pdf">$2.4 billion</a>, which is no more than was collected in 2005. At times, it has fallen as low as <a href="https://treasury.gov.au/sites/default/files/2019-03/R2016-001_PRRT_final_report.pdf">$1 billion</a>. In the words of the Grattan Institute’s <a href="https://www.abc.net.au/radionational/programs/themoney/monetary-policy-energy-costs-and-who-is-the-better-economic-ma/13920726">Tony Wood</a>, himself a former energy executive, it is a “rather strange thing to have a tax that nobody pays”.</p>
<p>Australian Institute analysis of Tax Office data suggests that <a href="https://australiainstitute.org.au/wp-content/uploads/2022/05/APPEA-members-who-pay-no-income-tax.pdf">none</a> of the big three Queensland gas exporters has paid any income tax since their projects began in 2015, except for $3 billion paid by Santos, once, on revenue of $5.3 billion.</p>
<h2>Designed for oil, used for gas</h2>
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<a href="https://images.theconversation.com/files/468681/original/file-20220614-16-dndp4w.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/468681/original/file-20220614-16-dndp4w.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/468681/original/file-20220614-16-dndp4w.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=968&fit=crop&dpr=1 600w, https://images.theconversation.com/files/468681/original/file-20220614-16-dndp4w.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=968&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/468681/original/file-20220614-16-dndp4w.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=968&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/468681/original/file-20220614-16-dndp4w.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1216&fit=crop&dpr=1 754w, https://images.theconversation.com/files/468681/original/file-20220614-16-dndp4w.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1216&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/468681/original/file-20220614-16-dndp4w.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1216&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Former treasury official Michael Callahan.</span>
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<p>In 2016 Morrison commissioned retired public servant Michael Callaghan to inquire into why the minerals resource tax was raising <a href="https://images.theconversation.com/files/468658/original/file-20220614-15-qaznnr.JPG">so little money</a>.</p>
<p>Callahan found it well designed for oil, which it was set up to tax in 1988, but poorly designed for gas.</p>
<p>One of the two biggest problems was “<a href="https://treasury.gov.au/sites/default/files/2019-03/R2016-001_PRRT_final_report.pdf">uplift</a>”. Profits are taxed after deducting earlier losses. These losses are carried forward using an uplift rate. </p>
<p>For oil projects, the uplift rate on losses doesn’t much matter because they start making profits fairly soon. </p>
<p>Gas projects are much more expensive and take many more years to produce a return, making the uplift rate significant.</p>
<p>Australia applies two uplift rates: the long-term bond rate plus 5% (for general losses), and the long-term bond rate plus 15% (for exploration losses). </p>
<p>So much can the long-term bond rate plus 15% grow over time that Callaghan found it allowed exploration deductions to </p>
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<p>almost double every four years, which means that a moderate amount of exploration expenditure can grow into a large tax shield</p>
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<p>And firms hang on to the high-uplift deductions, using the low-uplift ones first.</p>
<p>The second big problem is that, whereas with oil it is easy to tell when the oil has been mined and the profit should be taxed, with integrated liquidated natural gas projects, it is hard to tell when the mining stops and the liquefaction starts.</p>
<h2>Taxing in the dark</h2>
<p>Without an observable final price for the gas before it is liquified, three methods are used – two of them complex and one a private agreement with the tax office.</p>
<p>Callaghan found that if the simpler “netback” method was used, the tax would raise an extra <a href="https://treasury.gov.au/sites/default/files/2019-03/R2016-001_PRRT_final_report.pdf">$89 billion</a> between 2023 and 2050 including a “particularly strong” extra $68 billion between 2027 and 2039 at the prices then prevailing. </p>
<p>In his 2018 response Treasurer Josh Frydenberg cut the uplift rates and asked the treasury to review the method of calculating the transfer price. It was to report back “<a href="https://treasury.gov.au/sites/default/files/2019-03/p2018-t339508-govt-response-PRRT.pdf">within 12 to 18 months</a>”.</p>
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Read more:
<a href="https://theconversation.com/4-reasons-our-gas-and-electricity-prices-are-suddenly-sky-high-184303">4 reasons our gas and electricity prices are suddenly sky-high</a>
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<p>For all we know, the treasury did report back, perhaps <a href="https://thenewdaily.com.au/opinion/2022/06/11/michael-pascoe-gas-tax/">two years ago</a> in May 2020. </p>
<p>It’s a fair bet our new government will be keener than the old to actually raise more than a couple of billion from the petroleum resource rent tax, especially given the amount now available to tax.</p>
<p>If the extra tax was used to provide relief from high energy prices, Australia’s government could no more be criticised than could Boris Johnson’s in the UK. </p>
<p>And if it merely said it was thinking of properly applying the tax we’ve got, it might find Australia’s gas exporters suddenly more co-operative.</p><img src="https://counter.theconversation.com/content/184938/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia already imposes a super-profits tax of 40% on gas producers, but very little is paid. Yet we know how to simplify the system, so we’re not gifting billions to multinational companies.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1749622022-06-08T11:46:42Z2022-06-08T11:46:42ZAustralian Energy Market Operator to have power to acquire gas for emergencies<p>The Australian Energy Market Operator will be given the power to procure and store gas for release in emergency situations. </p>
<p>This was one of a range of measures federal and state energy ministers decided at their Wednesday meeting to discuss the gas crisis. </p>
<p>The ministers also agreed to the preparation of a national transition plan for the bumpy road to a clean energy economy. </p>
<p>And work on a “capacity mechanism” is to be advanced as a priority. This mechanism would provide incentives for dispatchable power to improve reliability as the system moves to renewables. </p>
<p>It was not clear whether coal and gas would be excluded from the mechanism.<br>
Federal energy minister Chris Bowen said the meeting, which included Labor, Liberal and Greens ministers, was marked by consensus and team work. </p>
<p>But he stressed there was “no silver bullet” for the current crisis. “We need more transmission, we need more renewables, we need more storage,” he said.</p>
<h2>Gas reservation policy not discussed</h2>
<p>The ministers only discussed initiatives involving federal and state governments. This ruled out consideration of an east coast reservation scheme, which would be a matter for the federal government alone. </p>
<p>The meeting received briefings from market regulators and operators on prices and volatility in the energy sector and potential actions that could be taken. </p>
<p>The ministers agreed their governments must be ready to implement further measures, but said they must be consistent with domestic and international commitments. </p>
<p>They expressed their trust in the energy market bodies who operate and regulate the system. </p>
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Read more:
<a href="https://theconversation.com/4-reasons-our-gas-and-electricity-prices-are-suddenly-sky-high-184303">4 reasons our gas and electricity prices are suddenly sky-high</a>
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<p>The Australian Energy Market Operator is to provide an urgent update on the east coast gas supply and demand situation, identifying any market constraints. It will advise the energy ministers’ July meeting on further actions needed. </p>
<p>That meeting will receive advice from the Australian Energy Market Commission on improving resilience in the system and better managing retailers’ failures.</p>
<p>The Australian Competition and Consumer Commission will also provide a report to the ministers.</p>
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Read more:
<a href="https://theconversation.com/why-did-gas-prices-go-from-10-a-gigajoule-to-800-a-gigajoule-an-expert-on-the-energy-crisis-engulfing-australia-184304">Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia</a>
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<p>Bowen told a news conference on Wednesday evening the meeting was never designed to solve all problems but it gave the regulators “more tools to do the work that is necessary”.</p>
<p>Treasurer Jim Chalmers earlier again ruled out a super-profits tax on gas producers benefitting from soaring international prices. </p>
<p>He also dismissed calls for Australia to consider developing nuclear energy, saying the economics didn’t stack up.</p><img src="https://counter.theconversation.com/content/174962/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>State and federal energy ministers have agreed to give the regulator more powers but say it won’t solve all the problems.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1828492022-05-11T05:37:24Z2022-05-11T05:37:24ZElectricity prices are spiking, ten times as much as normal. Here are some educated guesses as to why<figure><img src="https://images.theconversation.com/files/462401/original/file-20220511-25-pn6746.png?ixlib=rb-1.1.0&rect=425%2C221%2C2892%2C1700&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Electricity prices in the short-term (“spot”) wholesale markets in Australia are surging again.</p>
<p>As I first drafted this, at 11.30pm on Tuesday, while electricity demands were not high, the prices quoted for each five-minute interval in Queensland, NSW, Victoria and South Australia were around <a href="https://www.aemo.com.au/energy-systems/electricity/national-electricity-market-nem/data-nem/data-dashboard-nem">A$250 per megawatt-hour</a>, roughly ten times what they would normally be. </p>
<p>So far this year, average spot prices have been about 50% higher than last year in Victoria, South Australia and Tasmania, about 80% higher in NSW, and 150% higher in Queensland. </p>
<p>If it keeps up (which is likely), retail electricity prices will be on the rise again. </p>
<p>That effect is likely to be big. In NSW and Queensland, it could mean increases as high as 50% for large customers and as high as 20% for households.</p>
<p>Why is it happening? At first glance, it’s hard to say. The minute-by-minute readout comes without explanations.</p>
<p>One reason would be that coal and gas prices are surging. Newcastle “spot” coal is trading at <a href="https://tradingeconomics.com/commodity/coal">five times</a> its price over the past three years.</p>
<h2>Gas and coal prices are spiking</h2>
<p>Queensland spot gas costs five times what it did before the invasion of Ukraine.</p>
<p>A second reason might be that electricity producers are making hay while the sun shines by withholding generation capacity.</p>
<p>Steven Percy and I examined the electricity price surges that followed the closure of Victoria’s Hazelwood coal-fired generator in 2017, and found that one firm <a href="https://www.vepc.org.au/_files/ugd/cb01c4_fb2fe6a7db544b97be4907a4cc13666a.pdf">withheld capacity from the market</a>, driving up prices. </p>
<p>Subsequently the government introduced so-called “<a href="https://www.afr.com/companies/energy/big-stick-energy-laws-unlikely-to-be-ever-used-20190917-p52s3a">big stick</a>” legislation that imposes <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/government-taking-action-lower-power-prices">penalties</a> for manipulating prices, although it has yet to be used.</p>
<p>We do not yet know whether manipulation can explain some of what we see now. It will require detailed study, and such analyses are contested.</p>
<h2>The price of sunlight is not</h2>
<p>The best way to restrain price surges in the medium term is to increase the penetration of low-cost energy from the wind and sun, and to back it with storage. </p>
<p>South Australia shows what can be done. The Rann and Weatherill Labor governments, and then the Marshall Liberal government, have all pushed the switchover to renewables.</p>
<p>By 2021, more than two-thirds of SA’s electricity came from variable renewable generation, more than in any developed economy we know of. </p>
<p>For most days in 2021, there was no need for any other kind of generation between 10am and 5pm.</p>
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Read more:
<a href="https://theconversation.com/labor-says-power-prices-are-going-up-the-coalition-says-not-whos-right-182234">Labor says power prices are going up, the Coalition says not. Who's right?</a>
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<p>This has had a big impact on prices. From having long had the highest wholesale prices in the National Electricity Market, by 2021 SA had almost the lowest. </p>
<p>Conversely, Queensland, which has long had the least renewable generation, now has the highest prices. In the year to date, Queensland’s average wholesale <a href="https://www.aemo.com.au/energy-systems/electricity/national-electricity-market-nem/data-nem/data-dashboard-nem">price</a> has been twice SA’s.</p>
<h2>When inputs get cheap, prices fall</h2>
<p>The reason, backed by <a href="https://www.vepc.org.au/_files/ugd/cb01c4_1e9c944ea9524f38b3d1d392e08e94c0.pdf">econometric analysis</a> is that when a free resource (wind and sun) displaces an expensive resource (coal and gas), prices fall. </p>
<p>Each state government now accepts this and is rapidly moving to decarbonise its supply, which is leading to a new problem. The states that get there quickly are less keen on sharing their cheaper power than they used to be.</p>
<p>Why would SA want to strengthen its interconnection to NSW, only to have its electricity prices dragged up to those of NSW by trade along that wire?</p>
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Read more:
<a href="https://theconversation.com/20-years-on-the-national-electricity-market-is-on-the-way-out-and-its-ok-151018">20 years on, the national electricity market is on the way out, and it's OK</a>
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<p>The newly elected SA government <a href="https://www.abc.net.au/news/2019-02-13/sa-nsw-electricity-interconnector-proposal-to-reduce-bills/10806376">opposed</a> the interconnector currently under construction while in opposition. From SA’s point of view, the current high prices in NSW lend weight to its position.</p>
<p>We have reached the end of the beginning of the decarbonisation of Australian electricity. With the fossils-vs-renewables argument now over other than on the fringes, the argument has moved to whether the National Electricity Market can <a href="https://theconversation.com/20-years-on-the-national-electricity-market-is-on-the-way-out-and-its-ok-151018">hold together</a> and the best way the Commonwealth can help states get as much sunlight, wind and batteries into their systems as soon as possible.</p><img src="https://counter.theconversation.com/content/182849/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Mountain does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>What’s pushing up coal and gas prices is pushing up electricity prices, but some states have better shields than others.Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1777202022-02-24T04:13:19Z2022-02-24T04:13:19ZWhy the Australian government should welcome Mike Cannon-Brookes’ plan to takeover AGL<p>Prime Minister Scott Morrison has flatly opposed the bid led by tech billionaire Mike Cannon-Brookes to buy Australia’s biggest energy company AGL and spend A$20 billion switching it to renewables. This includes closing its coal power stations by 2030. As Morrison <a href="https://www.pm.gov.au/media/press-conference-relbia-tas">stated</a> this week: </p>
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<p>We need to ensure that our coal-fired generation of electricity runs to its life, because if it doesn’t, electricity prices go up, they don’t go down. </p>
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<p>Likewise, AGL <a href="https://www.theguardian.com/business/2022/feb/23/agl-open-to-higher-takeover-bid-but-says-cannon-brookes-plan-to-close-coal-by-2030-is-unrealistic">has dismissed</a> the plan as “unrealistic”. But are they right? Would closing AGL’s three coal power stations by 2030 push up prices and bring chaos to the National Electricity Market (NEM)?</p>
<p>No. In fact, there’s already chaos in the NEM due to increasingly early and disorderly coal retirements. The government should welcome the plan to takeover AGL, because it addresses failures in the market and entails a more orderly tranformation process. </p>
<h2>There’s already chaos</h2>
<p>The bid, made alongside Brookfield Partners, came just days after Origin Energy brought forward the closure date of Eraring, Australia’s largest coal station, by seven years. It was the latest in a string of early <a href="https://theconversation.com/australias-largest-coal-plant-will-close-7-years-early-but-theres-still-no-national-plan-for-coals-inevitable-demise-177317">coal closure announcements</a>, and yet there remains no national plan to manage early retirements like this. </p>
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<a href="https://theconversation.com/australias-largest-coal-plant-will-close-7-years-early-but-theres-still-no-national-plan-for-coals-inevitable-demise-177317">Australia's largest coal plant will close 7 years early – but there's still no national plan for coal's inevitable demise</a>
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<p>Instead, it’s up to each commercial entity to decide when to close. This means coal generators have no obligation to guarantee reliability beyond providing notice of retirement plans over the short term – five years in <a href="https://www.sbs.com.au/news/article/vic-coal-plants-five-year-closure-warning/vc4rodvns">Victoria</a>, or three and a half years <a href="https://www.aemc.gov.au/rule-changes/generator-three-year-notice-closure">elsewhere</a> in the NEM.</p>
<p>As the Australian Energy Market Operator (AEMO) has <a href="https://aemo.com.au/-/media/files/electricity/nem/planning_and_forecasting/operability/2020/2020-system-strength-and-inertia-report.pdf?la=en">pointed out</a>, owners can technically comply with the notice period while withdrawing generation capacity from the market. Even more chaotically, generators can run down maintenance spending when they’re getting ready to close down, which further reduces reliability.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/447701/original/file-20220222-19-1dqilv8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/447701/original/file-20220222-19-1dqilv8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/447701/original/file-20220222-19-1dqilv8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/447701/original/file-20220222-19-1dqilv8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/447701/original/file-20220222-19-1dqilv8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/447701/original/file-20220222-19-1dqilv8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/447701/original/file-20220222-19-1dqilv8.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/447701/original/file-20220222-19-1dqilv8.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Eraring coal plant’s closure has been brought forward by seven years.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>The NEM was designed to be an “energy only market” – the market signal that retirements are due is supposed to encourage investors to build new generators. Unfortunately, this market design has failed.</p>
<p>Part of the failure stems from the NEM’s design, and partly from the federal government’s failure to implement either a strong climate policy or a coal retirement plan. This adds up to an environment of bad investment. </p>
<p>For example, in its latest update of the <a href="https://aemo.com.au/-/media/files/electricity/nem/planning_and_forecasting/generation_information/2022/nem-generation-information-feb-2022.xlsx?la=en">NEM database</a>, AEMO lists 130 gigawatts of prospective solar, wind and solar projects, but only 6.6 gigawatts of these are committed for development in the next 10 years.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-australias-geology-gave-us-an-abundance-of-coal-and-a-wealth-of-greentech-minerals-to-switch-to-173988">How Australia's geology gave us an abundance of coal – and a wealth of greentech minerals to switch to</a>
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<p>The Brookfield/Cannon-Brookes plan addresses some of these market failures.</p>
<p>First, it provides a notice period of closure of about eight years, longer than is required by law. That gives a signal to the market and improves energy planning by governments and AEMO. </p>
<p>Second, the new AGL would carry all the risk because it must continue to supply electricity to millions of customers. The new owners of AGL would have to provide enough electricity to cover this load, in real time, or they’ll have to buy that supply from their competitors.</p>
<p>This incentive will mean the owners will build new generation. More renewable energy, which has zero marginal cost, will help reduce the wholesale electricity price, not just for those customers but for all consumers. </p>
<h2>Can renewables fill the gap so quickly?</h2>
<p>The short answer is yes. Coal generators provide around three quarters of the electricity in NSW alone, so replacing it entails a transformation of the grid. There are plans to do exactly that, at the intergovernmental and NSW levels. </p>
<p>So it’s strange the prime minister seems not to have confidence in these plans, given his government has agreed to and funded them both.</p>
<p>First, there’s a nationally agreed <a href="https://aemo.com.au/consultations/current-and-closed-consultations/2022-draft-isp-consultation">Integrated System Plan</a>, which is designed by AEMO with extensive consultation across government and industry. The latest draft plan <a href="https://theconversation.com/the-end-of-coal-is-coming-3-times-faster-than-expected-governments-must-accept-it-and-urgently-support-a-just-transition-173591">predicts Australia is on track</a> to see 14 gigawatts of coal retire by 2030 and all coal gone by 2040. </p>
<p>AEMO doesn’t predict any shortfall of supply over that time, as long as new transmission is built to carry the electricity from the new fleets of solar, wind, hydro and batteries.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-end-of-coal-is-coming-3-times-faster-than-expected-governments-must-accept-it-and-urgently-support-a-just-transition-173591">The end of coal is coming 3 times faster than expected. Governments must accept it and urgently support a 'just transition'</a>
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</p>
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<p>Second, NSW has its own plan: the <a href="https://www.energy.nsw.gov.au/government-and-regulation/electricity-infrastructure-roadmap">Electricity Infrastructure Roadmap</a>. This will accelerate construction of Australia’s first Renewable Energy Zone, and is <a href="https://www.energy.nsw.gov.au/government-and-regulation/electricity-strategy/memorandum-understanding">co-funded</a> by the federal government. </p>
<p>One of the key challenges is to replace the “security” gap as coal retires. Coal power stations maintain the frequency and voltage of the grid. These security services can be thought of as the “quality” of the electricity purchased. You need sufficient quantity and quality of supply to run our devices, from laptops to smelters. Still, <a href="https://australiainstitute.org.au/post/batteries-and-renewables-to-provide-secure-energy-future-new-report/">Australia Institute research</a> last year confirmed that batteries and renewable energy can provide such security services, and do it cost effectively.</p>
<p>Solar, wind and battery projects can be built much faster than conventional generators. Elon Musk famously built the <a href="https://www.smh.com.au/business/companies/huge-tesla-battery-in-south-australia-primed-for-big-upgrade-20191119-p53byo.html">biggest battery</a> in the world in South Australia, within 100 days in 2017.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/448225/original/file-20220224-32682-ovawi2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/448225/original/file-20220224-32682-ovawi2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/448225/original/file-20220224-32682-ovawi2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/448225/original/file-20220224-32682-ovawi2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/448225/original/file-20220224-32682-ovawi2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/448225/original/file-20220224-32682-ovawi2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/448225/original/file-20220224-32682-ovawi2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/448225/original/file-20220224-32682-ovawi2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Australia’s rooftop solar is the world’s cheapest.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>What might be in store for a new AGL? Self-reliance</h2>
<p>We don’t yet know what new resources the new AGL would invest under a Brookfield/Cannon-Brookes ownership. I believe the most exciting and innovative part of the bid might well be that much of the new investment is in consumer assets.</p>
<p>Australian households could lead the world in decarbonisation by doing it themselves, according to <a href="https://www.rewiringaustralia.org/castles-and-cars">research</a> supported by <a href="https://www.afr.com/policy/energy-and-climate/mike-and-annie-cannon-brookes-pledge-1-5b-to-limit-global-warming-20211019-p591d7">Cannon-Brookes</a>, published last year by Dr Saul Griffith and Rewiring Australia.</p>
<p>Houses can generate a quarter of what they need with rooftop solar. In Australia, rooftop solar in Australia is the <a href="https://www.theguardian.com/australia-news/2021/apr/25/insanely-cheap-energy-how-solar-power-continues-to-shock-the-world">cheapest</a> in the world, at a couple of cents per kilowatt-hour. Batteries allow them to soak up excess solar during the day and use it at night. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/4-ways-to-stop-australias-surge-in-rooftop-solar-from-destabilising-electricity-prices-173592">4 ways to stop Australia's surge in rooftop solar from destabilising electricity prices</a>
</strong>
</em>
</p>
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<p>If households also replace their car with an electric vehicle and replace gas appliances with electric ones, it’s possible to reach zero emissions and do it this decade. </p>
<p>The research found it becomes cost effective for households to electrify by around 2025. Mike Cannon-Brookes has already made investments in companies working in this electrification space.</p>
<p>What this might mean for a modern AGL is that much of the A$20 billion it would invest to replace coal might be finance packages to pay for households to ditch fossil energy entirely, and become partially self-reliant from their own solar. </p>
<p>If the new AGL could align the interests of its consumers and the climate, it would achieve more than just shutting old coal clunkers. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-battle-for-agl-heralds-a-new-dawn-for-australian-electricity-177530">The battle for AGL heralds a new dawn for Australian electricity</a>
</strong>
</em>
</p>
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<img src="https://counter.theconversation.com/content/177720/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Daniel J Cass is Senior Advisor to the Clean Energy Investor Group.</span></em></p>The plan would address failures in the National Electricity Market, and would see a more orderly transformation process from coal to clean energy.Daniel J Cass, Research Affiliate, The University of Sydney Business School, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1773172022-02-17T04:45:10Z2022-02-17T04:45:10ZAustralia’s largest coal plant will close 7 years early – but there’s still no national plan for coal’s inevitable demise<figure><img src="https://images.theconversation.com/files/446883/original/file-20220217-22-z3qs25.jpg?ixlib=rb-1.1.0&rect=0%2C40%2C5447%2C3590&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>In a major step forward for Australia’s clean energy transition, the country’s biggest coal-fired power station Eraring is set to close seven years early in 2025, Origin Energy <a href="https://www.originenergy.com.au/wp-content/uploads/HY22_Investor-Pres_FINAL.pdf">announced this morning</a>. </p>
<p>Eraring has been operating for 35 years in the central coast of New South Wales. Last year, it alone was responsible for around 2% of Australia’s greenhouse gas emissions, based on calculations from <a href="https://opennem.org.au/facility/au/NEM/ERARING/?range=1y&interval=1w">electricity market</a> and <a href="https://www.industry.gov.au/data-and-publications/national-greenhouse-gas-inventory-quarterly-update-june-2021">emissions</a> data.</p>
<p>The fundamental reason for its early closure is the brutal impact the growth of renewable energy is having on the profitability of coal plants. Origin has announced it will be building a large, 700 megawatt battery on-site in its place to store renewable energy.</p>
<p>This announcement follows the acceleration of other major coal plant closures: Liddell power station is scheduled to close in 2023, <a href="https://theconversation.com/the-death-of-coal-fired-power-is-inevitable-yet-the-government-still-has-no-plan-to-help-its-workforce-156863">Yallourn’s closure</a> was brought forward to 2028, and only last week AGL Energy <a href="https://www.theguardian.com/australia-news/2022/feb/10/agl-brings-forward-closure-date-of-two-largest-coal-fired-power-plants-as-market-shifts-to-renewables">edged forwards</a> the scheduled closure of two more coal plants. </p>
<p>This is a welcome step with transition planning by Origin – but also underlines the risks of Australia’s clean energy transition accelerating without a national plan for the exit of coal. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1494084585734696960"}"></div></p>
<h2>Why is this happening?</h2>
<p>Old power stations are excellent sites for batteries due to their existing connections to transmission lines and lots of electricity capacity. This has also been announced for the closed <a href="https://www.afr.com/companies/energy/hazelwood-to-be-reborn-as-big-battery-site-20211201-p59dp6">Hazelwood</a> and <a href="https://www.lithgowmercury.com.au/story/7087215/wallerawang-could-be-home-to-one-of-the-biggest-battery-hubs-in-australia/">Wallerawang</a> coal power stations.</p>
<p>Over the past 12 months, the market share of renewable energy has increased to <a href="https://opennem.org.au/energy/nem/?range=1y&interval=1w">over 30%</a>. In particular, the rapid growth of rooftop solar and solar farms in the <a href="https://theconversation.com/4-ways-to-stop-australias-surge-in-rooftop-solar-from-destabilising-electricity-prices-173592">middle of the day</a> has sent daytime wholesale electricity prices crashing.</p>
<p>To stay open, coal plants are using a variety of coping strategies. This includes cycling their output down on sunny days and ramping back up for higher prices as the sun sets and demand increases at the end of the day. However, this places stress on ageing plants and breakdowns are <a href="https://aemo.com.au/-/media/files/major-publications/qed/2021/q4-report.pdf?la=en&hash=CD6B71C8573830867349B6A9570E9D22">becoming more common</a>.</p>
<p>Something has to give. Electricity market <a href="http://greenmarkets.com.au/images/uploads/Coal-Plant-Profitability-Is-Eroding_February-2021.pdf">analysis last year</a> found Eraring was the coal plant most exposed to the growth of renewable energy and likely to lose significant money by 2025 – so the writing was on the wall for Eraring. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1494103368989822976"}"></div></p>
<p>As Origin CEO Frank Calabria, <a href="https://www.originenergy.com.au/about/investors-media/origin-proposes-to-accelerate-exit-from-coal-fired-generation/">stated</a>: </p>
<blockquote>
<p>the reality is the economics of coal-fired power stations are being put under increasing, unsustainable pressure by cleaner and lower-cost generation, including solar, wind and batteries.</p>
</blockquote>
<p>In announcing the closure, Origin also cited its commitment to net-zero emissions by 2050, and the recommendation of the International Energy Agency that advanced economies close coal plants by 2030. </p>
<h2>What will happen to the market and workforce?</h2>
<p>When the Hazelwood coal power station closed in 2017 with just a few months notice, power prices spiked for several years afterwards and many workers were unable to <a href="https://ccep.crawford.anu.edu.au/sites/default/files/publication/ccep_crawford_anu_edu_au/2020-11/ccep20-10_wiseman_workman_fastenrath_jotzo_after_hazelwood.pdf">find alternative work</a>. </p>
<p>Origin, however, has given three-years notice in accordance with electricity market rules brought in after the shockwaves from Hazelwood’s closure, and announced it will develop a transition plan for its workforce. This includes training, redeployment and prioritising site employees for long-term operational roles.</p>
<p>Origin presented figures showing the energy and capacity gap will be filled by a combination of new storage, Snowy 2.0, a new transmission line to move power between South Australia and NSW, and new renewable energy infrastructure scheduled for NSW.</p>
<p>Consequently, the impact on prices is likely to be modest compared to the Hazelwood closure.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/446926/original/file-20220217-27-6s7oxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Hard hats on a gate" src="https://images.theconversation.com/files/446926/original/file-20220217-27-6s7oxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/446926/original/file-20220217-27-6s7oxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/446926/original/file-20220217-27-6s7oxo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/446926/original/file-20220217-27-6s7oxo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/446926/original/file-20220217-27-6s7oxo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/446926/original/file-20220217-27-6s7oxo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/446926/original/file-20220217-27-6s7oxo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">When Hazelwood Power Station closed in 2017, workers hung their hard hats on the gate.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>Eraring’s closure may provide other coal plants some breathing space. Coal plant owners have effectively been playing a game of chicken, holding on and hoping another plant shuts to tighten supply and increase prices.</p>
<p>But as Origin’s figures illustrate, there’s a lot more renewable energy projects in the pipeline, and its figures don’t include the tremendous growth of rooftop solar, which last year <a href="https://reneweconomy.com.au/new-rooftop-solar-milestone-as-australia-tops-3gw-in-2021/">saw over 3,000 megawatts installed</a>. </p>
<p>So this is unlikely to be the last of the coal plant closures in our near future. Indeed, in the draft <a href="https://aemo.com.au/energy-systems/major-publications/integrated-system-plan-isp/2022-integrated-system-plan-isp">2022 Integrated System Plan</a> (a “roadmap” for the electricity system), the Australian Energy Market Operator <a href="https://theconversation.com/the-end-of-coal-is-coming-3-times-faster-than-expected-governments-must-accept-it-and-urgently-support-a-just-transition-173591">projects as much as</a> 60% of coal plant capacity could be gone by 2030.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1494071156415942658"}"></div></p>
<h2>We still don’t have an exit plan for coal</h2>
<p>Even though coal plants are shutting up shop faster, Australia still doesn’t have an exit plan for coal. That’s unlikely to change, given neither major party is going to want to “own” the closures in an election year. </p>
<p>As a result, this pattern seems likely to continue: renewable energy will continue to grow as the <a href="https://www.csiro.au/en/news/news-releases/2021/csiro-report-confirms-renewables-still-cheapest-new-build-power-in-australia">cheapest form of electricity generation</a>, governments will put in place policies to accelerate its growth, and it will be left to the market and asset owners to make decisions on closures without a policy framework. This is extremely risky.</p>
<p>Origin has done the right thing by giving three-years notice, committing to a transition plan for its workforce and investing in battery storage.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-end-of-coal-is-coming-3-times-faster-than-expected-governments-must-accept-it-and-urgently-support-a-just-transition-173591">The end of coal is coming 3 times faster than expected. Governments must accept it and urgently support a 'just transition'</a>
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</em>
</p>
<hr>
<p>But energy market players don’t consider the penalties for not complying with notice requirements an effective deterrent, compared to the financial incentive to hang on and hope for a price uplift when other plants close. </p>
<p>This means we’re left relying on the owner’s goodwill, enlightened self-interest and fear of reputational damage to act responsibly.</p>
<p>Maybe Australia will muddle through like this. But without a plan, we’re at risk of a rush of closures in future years with disastrous impacts on electricity prices, regional economies and livelihoods in coal communities.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1494119314924138496"}"></div></p>
<h2>We need policy commitments</h2>
<p>A <a href="https://theconversation.com/how-australia-can-phase-out-coal-power-while-maintaining-energy-security-152747">variety of models</a> for an orderly exit from coal have been proposed and national agreements have been negotiated to phase out coal in other nations such as Germany and Spain.</p>
<p>While the <a href="https://aemo.com.au/en/energy-systems/major-publications/renewable-integration-study-ris">Australian Energy Market Operator has noted</a> there are technical challenges in the clean energy transition, it considers they can be addressed. There’s no lack of alternative generation and storage to fill the energy gap from retiring coal plants. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-australia-can-phase-out-coal-power-while-maintaining-energy-security-152747">How Australia can phase out coal power while maintaining energy security</a>
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<p>Just this week, the NSW government received expressions of interest from renewable energy and storage projects worth over A$100 billion. The government observed that this was equivalent to the electricity output of ten coal-fired power stations in the <a href="https://www.abc.net.au/news/2022-02-16/renewable-energy-zone-for-hunter-valley-coal-region/100832774">Hunter Valley Renewable Energy Zone</a>.</p>
<p>Hopefully on the other side of the election there’ll be a political and policy commitment to an orderly exit from coal - a plan that can manage impacts on our electricity system and support coal power station workers through the inevitable transition.</p><img src="https://counter.theconversation.com/content/177317/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The Institute for Sustainable Futures has received funding for research on projects related to coal transition including the Clean Energy Council (large-scale survey of renewable energy employment), Infrastructure Australia (electricity employment projections) and Global Compact Network/Westpac (implications of just transition for financial institutions and corporate sector).</span></em></p>Eraring is the latest in a string of announcements for early coal plant closures. The fundamental reason is the brutal impact of renewables on coal’s profitability.Chris Briggs, Research Director, Institute for Sustainable Futures, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1735922022-01-18T19:07:28Z2022-01-18T19:07:28Z4 ways to stop Australia’s surge in rooftop solar from destabilising electricity prices<figure><img src="https://images.theconversation.com/files/440570/original/file-20220113-23-cghsbp.jpg?ixlib=rb-1.1.0&rect=26%2C44%2C5933%2C2823&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Last year saw Australians install rooftop solar <a href="https://reneweconomy.com.au/new-rooftop-solar-milestone-as-australia-tops-3gw-in-2021/">like never before</a>, with <a href="https://www.pv-magazine-australia.com/2021/11/02/40-increase-in-rooftop-solar-installations-from-2020/">40% more</a> installed in 2021 than in 2020. Solar system installations now make up <a href="https://www.minister.industry.gov.au/ministers/taylor/media-releases/record-3-million-rooftop-solar-energy-installations">7% of the energy</a> going into the national electricity grid.</p>
<p>Alongside the greater uptake of utility-scale solar (such as solar farms), this means cheaper and cleaner electricity is fast becoming a reality, putting the country on track to meet international climate targets. </p>
<p>But such a dramatic surge in solar output also poses challenges for Australia’s power system for two main reasons.</p>
<p>It results in increased periods of large oversupply when weather conditions favour solar energy. This leads to energy being wasted due to the need for solar <a href="https://theconversation.com/solar-curtailment-is-emerging-as-a-new-challenge-to-overcome-as-australia-dashes-for-rooftop-solar-172152">curtailment</a> – when a solar system shuts down or stops exporting energy to the grid to counter the energy spike. </p>
<p>On the other hand, there is little solar generation during peak demand hours in the morning and evening. This requires more expensive generators to run. </p>
<p>These are huge problems from a market operations perspective, as the pressure on the system may result in blackouts and disruptions. It also creates large price swings for retailers, which then can increase costs for consumers. As a result, we may see it become more expensive to decarbonise the national energy market. </p>
<p>We propose four ways to combat this growing, volatile issue, according to findings from <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3960422">our recent research</a>.</p>
<h2>Renewables investment is exploding</h2>
<p>Investment in solar has increased significantly since 2018 as it became the <a href="https://www.carbonbrief.org/solar-is-now-cheapest-electricity-in-history-confirms-iea">cheapest form of</a> new power-generation technology. </p>
<p>In fact, the Australian Energy Market Operator’s latest <a href="https://aemo.com.au/-/media/files/major-publications/isp/2022/draft-2022-integrated-system-plan.pdf">Integrated System Plan</a>, released last month, predicts coal plants to close <a href="https://theconversation.com/the-end-of-coal-is-coming-3-times-faster-than-expected-governments-must-accept-it-and-urgently-support-a-just-transition-173591">three times faster</a> than industries had expected.</p>
<p>Australia has one of the highest per-capita rooftop solar installation rates in the world, with rooftop and utility-scale solar already meeting over 100% of demand <a href="https://reneweconomy.com.au/solar-meets-all-of-south-australia-demand-and-more/">in South Australia</a>. </p>
<p>By 2050, <a href="https://aemo.com.au/-/media/files/major-publications/isp/2022/draft-2022-integrated-system-plan.pdf">we expect to see</a> five times more rooftop solar capacity.</p>
<hr>
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Read more:
<a href="https://theconversation.com/the-end-of-coal-is-coming-3-times-faster-than-expected-governments-must-accept-it-and-urgently-support-a-just-transition-173591">The end of coal is coming 3 times faster than expected. Governments must accept it and urgently support a 'just transition'</a>
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<h2>How does this challenge price stability?</h2>
<p>As solar generation is so cheap, traditional coal and gas generators are <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3960422">getting pushed out</a> as a source of base-load electricity supply. </p>
<p>This is especially acute in the middle of the day, when solar generation is greatest as the sun is shining at its peak. This results in low prices, or even in negative prices, which financially penalises any generators making power at those times. Curtailment is then used to offset any oversupply or negative prices. </p>
<p>Electricity demand, however, tends to peak during the morning and evening when most people are home. Prices skyrocket during these periods as gas and coal-fired power stations benefit from the reduced competition from solar energy. </p>
<p>For retailers, these huge price swings are extremely inefficient. And this inefficiency in the market may eventually be reflected in consumer prices. What’s more, too much solar curtailment can hurt the rooftop solar owner because it reduces the amount of generation coming from their systems. </p>
<p>This price variability can also undermine the stability of the power system. This is because solar systems, both large and small, do not inherently provide certain services needed to keep the lights on, such as “<a href="https://aemo.com.au/-/media/files/electricity/nem/system-strength-explained.pdf">system strength</a>” and “<a href="https://www.nrel.gov/news/program/2020/inertia-and-the-power-grid-a-guide-without-the-spin.html">inertia</a>”. </p>
<p>Such services are currently largely provided by coal and other thermal plants, whose very existence is under threat by additional solar. </p>
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<strong>
Read more:
<a href="https://theconversation.com/solar-curtailment-is-emerging-as-a-new-challenge-to-overcome-as-australia-dashes-for-rooftop-solar-172152">Solar curtailment is emerging as a new challenge to overcome as Australia dashes for rooftop solar</a>
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<p>Utility-scale solar output looks very different to rooftop PV output over the course of a day, as the utility-scale solar panels rotate to track the sun. On the other hand, rooftop solar systems are generally fixed in orientation. </p>
<p><a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3960422">We found</a> this difference in output leads to different price impacts. Utility-scale solar output reduces price variability, while rooftop solar output increases it. This means we have a greater need for managing rooftop solar.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/440574/original/file-20220113-17-v25ffb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Two men installing solar panels on a rooftop" src="https://images.theconversation.com/files/440574/original/file-20220113-17-v25ffb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/440574/original/file-20220113-17-v25ffb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/440574/original/file-20220113-17-v25ffb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/440574/original/file-20220113-17-v25ffb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/440574/original/file-20220113-17-v25ffb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/440574/original/file-20220113-17-v25ffb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/440574/original/file-20220113-17-v25ffb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The price variability of rooftop solar can undermine the stability of the power system.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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</figure>
<p>Our research proposes four ways we can better align solar output with electricity demand. This can reduce both the level and volatility of electricity prices, benefiting consumers without undermining the stability of the power system.</p>
<p><strong>1. More battery storage</strong> </p>
<p>Australians with rooftop solar should be eligible for government grants, rebates, and loans to support their systems with batteries. This will enable owners to store extra power generation during the day and export it to the national grid later in the evening to meet the peak demand.</p>
<p><strong>2. Flexible management of energy exported to the grid</strong></p>
<p>The Australian Energy Market Operator should design dynamic and flexible export management measures to absorb excess rooftop generation. This will efficiently control the generated energy going into the grid by taking into account demand and supply conditions in real time, improving the system security. </p>
<p>The operator has recently developed such measures for <a href="https://aemo.com.au/en/newsroom/media-release/solar-pv-curtailment-initiative-by-sa-government-supports-the-nem">South Australia</a>, but they’ll also be useful to other regions. </p>
<p><strong>3. Paying rooftop solar owners dynamic tariffs</strong> </p>
<p>Currently, people who own rooftop solar are paid a fixed or “flat-rate” tariff for the electricity they provide to the grid, regardless of time of the day. </p>
<p>Instead, we need to <a href="https://www.iaee.org/en/publications/newsletterdl.aspx?id=911">transition from fixed to dynamic</a> tariffs. These dynamic “feed-in” tariffs would be lower during the day and higher in the morning and evening peaks to incentivise rooftop owners to inject their electricity into the grid when it’s more valuable. </p>
<p><strong>4. We need a two-sided market</strong> </p>
<p>Australia’s energy market is heavily one-sided, with suppliers having the flexibility to, for example, set prices and dispatch energy. </p>
<p>A two-sided market will allow both supply and demand sides to participate in the dispatch and price setting process. This will enable electricity demand to be more flexible, and better align energy usage with solar and wind generation. </p>
<p>Such a market will allow increased output of renewables to be translated to lower electricity prices. </p>
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<strong>
Read more:
<a href="https://theconversation.com/we-mapped-every-large-solar-plant-on-the-planet-using-satellites-and-machine-learning-170747">We mapped every large solar plant on the planet using satellites and machine learning</a>
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<p>We rely on solar energy as a key technology to help Australia decarbonise the energy market <a href="https://www.industry.gov.au/data-and-publications/technology-investment-roadmap-first-low-emissions-technology-statement-2020">by 2050</a>. To maximise the benefits of solar generation, Australia urgently needs a coordinated response from policymakers, energy providers and consumers. And crucially, it will enable Australia to achieve net-zero emissions by 2050.</p><img src="https://counter.theconversation.com/content/173592/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors gratefully acknowledge the important contributions of Dr Otto Konstandatos to this research and the writing of this article.</span></em></p><p class="fine-print"><em><span>Alan Rai and Muthe Mwampashi do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia has one of the highest rooftop solar installation rates in the world, which is great news for our efforts to reduce emissions. But can the grid keep up?Christina Nikitopoulos, Associate professor, Finance Discipline Group, University of Technology SydneyAlan Rai, Adjunct professor, University of Technology SydneyMuthe Mwampashi, PhD Candidate, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1735912021-12-13T02:09:20Z2021-12-13T02:09:20ZThe end of coal is coming 3 times faster than expected. Governments must accept it and urgently support a ‘just transition’<figure><img src="https://images.theconversation.com/files/437076/original/file-20211213-19-1yekojl.jpg?ixlib=rb-1.1.0&rect=12%2C38%2C4254%2C2412&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Coal is likely to be completely gone from Victoria’s electricity system by 2032 with most other parts of Australia not far behind, a report from the Australian Energy Market Operator (AEMO) declared last week. </p>
<p>The report, called the <a href="https://aemo.com.au/-/media/files/major-publications/isp/2022/draft-2022-integrated-system-plan.pdf?la=en">2022 Integrated System Plan</a>, confirmed what many of us in energy policy have long known: the end of coal is coming, and the pace may take some industries and governments by surprise. </p>
<p>The <a href="https://aemo.com.au/en/energy-systems/major-publications/integrated-system-plan-isp/2022-integrated-system-plan-isp">Integrated System Plan</a> (ISP) is effectively the planning “blueprint” the market operator publishes to help industry and policy makers assess how Australia’s electricity system might evolve. It’s an incredibly important document for guiding where and when investment is needed to unlock new renewable resources to meet demand.</p>
<p>Given ISP’s prediction for the rapid closure of coal-fired power stations, it’s critical governments don’t stick their heads in the sand. Continuing to deny the impending end of coal-fired generation is simply not in the interest of coal workers and their communities, who urgently need support. </p>
<h2>What is AEMO predicting?</h2>
<p>The most important aspect of the ISP is that what used to be called the “step change” has now become the “central scenario”. For the first time, this central scenario is consistent with Australia’s commitment under the Paris Agreement and limiting global temperature rise to under 2°C. </p>
<p>The ISP is forecasting that huge volumes of coal will be retired in the next ten years, including all brown coal and two-thirds of black coal, and significant investments in new renewables and “firming technologies” (such as batteries, gas, and pumped hydro) will take their place. </p>
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<a href="https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/437079/original/file-20211213-13-1ax2nxg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">‘Firming’ technologies like pumped hydro are critical to ensure Australians have electricity when wind and solar aren’t available.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>Around 14 gigawatts (GW) of coal is now assumed to be exiting the National Electricity Market this decade – more than three times the amount of coal retirements the industry has announced. </p>
<p>Effectively, AEMO is saying (yet again) that the <a href="https://reneweconomy.com.au/agl-hit-by-huge-losses-as-it-scrambles-to-catch-up-with-switch-from-baseload/">incumbent industry is likely to be caught by surprise</a> by the speed of the transition.</p>
<p>It’s not just an explosion of renewables investment that AEMO predicts. Around 9GW of gas-fired generation and an extra 620GW hours of storage (provided by batteries or pumped hydro) will be required to provide backup generation capacity when solar and wind are unavailable. </p>
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<em>
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Read more:
<a href="https://theconversation.com/coal-plants-are-closing-faster-than-expected-governments-can-keep-the-exit-orderly-172150">Coal plants are closing faster than expected. Governments can keep the exit orderly</a>
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<p>Electricity demand is expected to surge out to 2050 and will double to at least 350 terrawatt hours. This includes from electric vehicles uptake, converting natural gas heating and hot water to electric in homes, and electrifying many industrial processes such as low-emissions steel and aluminium. </p>
<p>All these developments will require a major overhaul of the grid. The ISP states around A$12.5 billion in transmission spending needs to occur to unlock $29 billion in investment benefits.</p>
<h2>Why is coal being left behind?</h2>
<p>There are two main drivers for this significant substitution of coal for new technologies. </p>
<p>First, the <a href="https://www.csiro.au/en/news/news-releases/2020/renewables-still-the-cheapest-new-build-power-in-australia">cost of these technologies</a> continues to fall rapidly and <a href="https://businessrenewables.org.au/state-of-the-market-report-2020/">consumers are voting with their feet</a>. Some of Australia’s largest and most iconic businesses are increasingly buying 100% of their energy from renewable resources, including Woolworths, BHP and Coles. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/solar-curtailment-is-emerging-as-a-new-challenge-to-overcome-as-australia-dashes-for-rooftop-solar-172152">Solar curtailment is emerging as a new challenge to overcome as Australia dashes for rooftop solar</a>
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<p>Second, state governments have filled the void left by the lack of a nationally consistent energy and climate policy, and are now implementing ambitious policies to drive the uptake of renewable energy and firming. </p>
<p>The most ambitious of these policies is the <a href="https://www.energy.nsw.gov.au/government-and-regulation/electricity-infrastructure-roadmap">NSW government’s 12GW energy roadmap</a>, which effectively prepares for the retirement of ageing coal-fired power stations by facilitating investment in new capacity.</p>
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<a href="https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Tesla charging station" src="https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/437081/original/file-20211213-17-kk73zk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Electricity demand is expected to surge out to 2050.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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</figure>
<h2>So what should governments be doing?</h2>
<p>It is critical governments focus on a “just transition” to these new technologies, and provide support to <a href="https://www.actu.org.au/our-work/climate-change/the-need-for-a-just-transition">communities and workers</a> most impacted, such as those in the Hunter and Latrobe Valleys. </p>
<p><a href="https://journals.sagepub.com/doi/abs/10.1177/0269094214562171">Structural adjustment policies</a> such as job placements, relocation assistance, or financial support to transition local economies are vital to secure opportunities for these regions. Retraining ahead of closures will help workers transition to <a href="https://australiainstitute.org.au/wp-content/uploads/2020/12/P881-Getting-Off-Coal-WEB.pdf">new or related industries</a>. </p>
<p>Everyone who uses energy must be afforded access to the clean energy transition. At present, the biggest barrier to participating in the solar and battery revolution is owning your own home. </p>
<p>Governments have been absent from this important policy debate. Australian <a href="https://www.sciencedirect.com/science/article/pii/S0301421521005395">low-income and rental households should be prioritised</a> in any future policies that support adoption of solar and battery storage. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Roofs with solar panels" src="https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=290&fit=crop&dpr=1 600w, https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=290&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=290&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=364&fit=crop&dpr=1 754w, https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=364&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/437078/original/file-20211213-25-px87nl.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=364&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Rental homes have been left out of policy debates on renewables.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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</figure>
<p>Governments must also ensure the private sector (rather than consumers) wear the risk of poor investments. Governments are increasingly taking on very significant risk (on behalf of consumers) through underwriting renewable energy and firming investments of large multi-national energy businesses. </p>
<p>Some economists (including us) have been providing <a href="https://onlinelibrary.wiley.com/journal/14678489">alternative models</a> for governments to achieve the same objectives, but with greater focus on reducing risks to consumers. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/economists-back-carbon-price-say-benefits-of-net-zero-outweigh-costs-169939">Economists back carbon price, say benefits of net-zero outweigh costs</a>
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<p>Given the surge in households and businesses voluntarily buying renewable energy, it’s important consumers know what they’re getting. The Clean Energy Regulator is doing some interesting work in this space by developing an emissions and renewable energy <a href="http://www.cleanenergyregulator.gov.au/Infohub/Markets/cert-report">transparency register</a> as part of the national greenhouse and energy reporting framework. </p>
<p>If governments really wanted to help, they could introduce a <a href="https://theconversation.com/economists-back-carbon-price-say-benefits-of-net-zero-outweigh-costs-169939">carbon price</a>. Such a policy is considered political poison, but a carbon price would result in us reaching this future in a much less costly and more orderly way.</p>
<h2>The end of the coal age</h2>
<p>The ISP is forecasting a better and cleaner future. Australia has great opportunities from moving beyond the coal age and into the age of efficient renewable energy, as we’re blessed with some of the best renewable resources on the planet</p>
<p>With global leaders increasingly focused on rapidly reducing emissions, we have a lot to gain through new industries, such as green hydrogen and mineral processing. Both <a href="https://theconversation.com/labors-2030-climate-target-betters-the-morrison-government-but-australia-must-go-much-further-much-faster-173066">major political parties</a> at the national level have targets that don’t really push beyond what AEMO now thinks is the status quo. </p>
<p>The stone age didn’t end because of a lack of stones. And the coal age is ending despite an abundance of it – whether governments believe it or not. </p>
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Read more:
<a href="https://theconversation.com/labors-2030-climate-target-betters-the-morrison-government-but-australia-must-go-much-further-much-faster-173066">Labor’s 2030 climate target betters the Morrison government, but Australia must go much further, much faster</a>
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<img src="https://counter.theconversation.com/content/173591/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tim Nelson is an Associate Professor of Economics at the Centre for Energy Economics and Policy Research at Griffith Universtiy and the EGM of Energy Markets at Iberdrola Australia. </span></em></p><p class="fine-print"><em><span>Joel Gilmore is an Associate Professor at Griffith University and the GM, Energy Policy & Planning at Iberdrola Australia, that develops renewable projects and firming assets.</span></em></p>A new report predicts an incredibly rapid closure of coal-fired power stations. Continuing to deny this is simply not in the interest of coal workers and their communities.Tim Nelson, Associate Professor of Economics, Griffith UniversityJoel Gilmore, Associate Professor, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1519212020-12-24T21:24:34Z2020-12-24T21:24:34ZWhat’s the best way to boost the economy? Invest in high-voltage transmission lines<figure><img src="https://images.theconversation.com/files/374399/original/file-20201211-13-ubi99p.jpg?ixlib=rb-1.1.0&rect=701%2C215%2C3296%2C1660&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source"> Bohbeh/Shutterstock</span></span></figcaption></figure><p>When, in the midst of the pandemic, the Economic Society of Australia invited 150 of Australia’s keenest young thinkers to come up with “brief, specific and actionable” proposals to improve the economy, amid scores of ideas about improving job matching, changing the tax system, providing non-repayable loans to businesses and accelerating telehealth, two proposals stood out.</p>
<p>They were actually the same proposal, arrived at independently by two groups of “hackers” in the society’s annual (this time virtual) “<a href="https://esacentral.org.au/latest-news-item/39616/virtual-policy-hackathon/">hackathon</a>”.</p>
<p>I was one of the judges.</p>
<p>The mentors who helped test and guide the proposals were some of the leading names in economics, among them Jeff Borland, John Quiggin, Gigi Foster, Deborah Cobb-Clark, Peter Abelson and John Hewson.</p>
<p>The proposal is to fast track the 15 or more projects <a href="https://www.aemo.com.au/energy-systems/major-publications/integrated-system-plan-isp">already identified</a> by the Australian Energy Market Operator as essential to meet the electricity grid’s transmission needs over the next 20 years. </p>
<p>Starting them immediately, when business investment is weak and there’s a need for jobs and governments can borrow at <a href="https://www.smh.com.au/politics/federal/government-interest-rate-goes-negative-in-550m-treasury-note-sale-20201210-p56maq.html">rates close to zero</a>, will bring forward all of the benefits of being able to bring ultra-cheap power from the places it will be made to the places it will be needed as expensive fossil-fuel generators bow out or are out competed.</p>
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Read more:
<a href="https://theconversation.com/what-is-the-electricity-transmission-system-and-why-does-it-need-fixing-147903">What is the electricity transmission system, and why does it need fixing?</a>
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<p>Judges Alison Booth, Jeremy Thorpe and I noted that policy hacks were the most useful where <a href="https://esacentral.org.au/latest-news-item/40256/virtual-policy-hackathon-results">neither the market nor the government</a> was getting the job done. </p>
<p>The proposal would help ensure renewables can connect to the grid, something “neither the market nor the government is managing to do quickly”.</p>
<p>A few weeks later Labor leader Anthony Albanese used his budget reply speech to propose the same thing – a <a href="https://anthonyalbanese.com.au/anthony-albanese-media-release-a-future-made-in-australia-a-plan-for-good-secure-jobs-thursday-8-october-2020">Rewiring the Nation Corporation</a> to turn the projects identified in the Energy Market Operator’s <a href="https://www.aemo.com.au/-/media/files/major-publications/isp/2020/final-2020-integrated-system-plan.pdf?la=en&hash=6BCC72F9535B8E5715216F8ECDB4451C">integrated system plan</a> into reality.</p>
<p>Here is what is proposed in the winners’ own words:</p>
<h2>Accelerating priority transmission projects</h2>
<p><em><a href="https://www.linkedin.com/in/nicvernon/">Nick Vernon</a>, <a href="https://www.linkedin.com/in/agrata-verma-69142b70/">Agrata Verma</a>, <a href="https://www.linkedin.com/in/bellahancock/">Bella Hancock</a></em></p>
<p>Investment in new renewable generators in Australia sank <a href="https://www.pv-magazine-australia.com/2020/01/22/investment-in-australian-renewables-sinked-in-2019/">40%</a> in 2019. A major factor holding them back is grid access. The best locations for wind and sun often have poor access to the cables that transport electricity to consumers. </p>
<p>Our near-term recommendation is to guarantee <a href="http://www.projectenergyconnect.com.au/">Project EnergyConnect</a>, a 900-kilometre cable between NSW and South Australia due to begin construction next year. The network operators got approval in January, but there is now <a href="https://www.afr.com/companies/energy/flagship-nsw-sa-power-cable-hits-debt-hurdle-20201023-p5683d">uncertainty</a> over whether they will get the funding. </p>
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Read more:
<a href="https://theconversation.com/a-dose-of-reality-morrison-governments-new-1-9-billion-techno-fix-for-climate-change-is-a-small-step-146341">'A dose of reality': Morrison government's new $1.9 billion techno-fix for climate change is a small step</a>
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<p>We propose that the two state governments agree to cover the shortfall between approved revenues and realised costs (up to a pre-determined limit) to ensure construction starts on time in 2021.</p>
<p>Medium-term, we recommend the Australian Energy Regulator conduct the regulatory investment test and revenue adjustment processes for all priority projects in parallel to condense approval timelines and that the Commonwealth and state governments underwrite priority projects’ early works.</p>
<p>This would allow service providers to commission new transmission lines sooner after regulatory approval.</p>
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<a href="https://images.theconversation.com/files/374466/original/file-20201211-19-1krnp3q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/374466/original/file-20201211-19-1krnp3q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/374466/original/file-20201211-19-1krnp3q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=854&fit=crop&dpr=1 600w, https://images.theconversation.com/files/374466/original/file-20201211-19-1krnp3q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=854&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/374466/original/file-20201211-19-1krnp3q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=854&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/374466/original/file-20201211-19-1krnp3q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1073&fit=crop&dpr=1 754w, https://images.theconversation.com/files/374466/original/file-20201211-19-1krnp3q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1073&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/374466/original/file-20201211-19-1krnp3q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1073&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.aemo.com.au/-/media/files/major-publications/isp/2020/final-2020-integrated-system-plan.pdf">AEMO Integrated System Plan</a></span>
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<h2>The case for fast tracking transmission</h2>
<p><em><a href="https://www.linkedin.com/in/patricksweeney01/">Patrick Sweeney</a>, <a href="https://www.linkedin.com/in/samuelgedge/">Sam Edge</a>, <a href="https://www.linkedin.com/in/elketaylor/">Elke Taylor</a>, <a href="https://www.linkedin.com/in/jacob-keillor-0a1a8514b/">Jacob Keillor</a>, <a href="https://www.linkedin.com/in/timothy-fong-264718165/">Timothy Fong</a></em></p>
<p>Currently valued at A$20 billion, the Australian transmission network was designed for a centralised 20th century power mix and suffers from aging infrastructure.</p>
<p>The $6 billion upgrade we propose would have as its centrepiece 15 projects the Energy Market Operator has already identified as essential.</p>
<p>Fast-tracking these projects has the potential to generate 100,000 jobs, to bring about strong private investment in low-carbon power production, and to place downward pressure on wholesale power prices, producing $11 billion in benefits.</p>
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<img alt="" src="https://images.theconversation.com/files/374477/original/file-20201211-14-182p24p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/374477/original/file-20201211-14-182p24p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=201&fit=crop&dpr=1 600w, https://images.theconversation.com/files/374477/original/file-20201211-14-182p24p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=201&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/374477/original/file-20201211-14-182p24p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=201&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/374477/original/file-20201211-14-182p24p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=253&fit=crop&dpr=1 754w, https://images.theconversation.com/files/374477/original/file-20201211-14-182p24p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=253&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/374477/original/file-20201211-14-182p24p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=253&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>A national taskforce consisting of the department of energy and the market operator would oversee a project of a similar size to the Snowy Mountains scheme, which itself created more than <a href="https://www.naa.gov.au/home/snowy-mountains-hydro-electric-scheme/snowy-mountains-hydro-electric-authority-employment-records">100,000 jobs</a> during its lifecycle.</p>
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Read more:
<a href="https://theconversation.com/the-verdict-is-in-renewables-reduce-energy-prices-yes-even-in-south-australia-108251">The verdict is in: renewables reduce energy prices (yes, even in South Australia)</a>
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<p>The government would procure the funds by issuing bonds, with recent rates indicating the yield payable will be less than the rate of inflation. </p>
<p>Firms that tendered for the work would be evaluated on their capacity to upscale production to meet milestones and on their plans to generate long-term, sustainable employment.</p><img src="https://counter.theconversation.com/content/151921/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The good projects have already been identified and interest rates are low. We could speed up the electricity transition by decades.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1223092019-08-23T06:00:47Z2019-08-23T06:00:47ZAustralia’s energy woes will not be solved by reinforcing a monopoly<figure><img src="https://images.theconversation.com/files/289183/original/file-20190823-170922-ojszvr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia's energy market has a logjam,</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/seandavis/10595382254/">Sean Davis/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><p>The possibility of blackouts affecting half of Victoria has attracted plenty of attention to a document once read only by industry insiders and policy wonks: the <a href="https://www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Planning-and-forecasting/NEM-Electricity-Statement-of-Opportunities">Electricity Statement of Opportunities</a>. </p>
<p>The Statement, updated every year by the Australian Energy Market Operator (AEMO), forecasts 10-year supply and demand in the main grids that serve the Australia’s south and eastern states.</p>
<p>But the chance of huge blackouts is just part of the Statement – and in fact it reveals a growing tension between the market operator and the bodies that oversee electricity regulations. </p>
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Read more:
<a href="https://theconversation.com/explainer-power-station-trips-are-normal-but-blackouts-are-not-90682">Explainer: power station 'trips' are normal, but blackouts are not</a>
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<h2>Blackouts unlikely</h2>
<p>So, what does the latest Statement say? The good news is AEMO calculates the expected level of “unserved energy” – that is, demand that cannot be met by supply – is likely to be fairly low, which makes blackouts unlikely. </p>
<p>The bad news is AEMO thinks a standard based on “expected unserved energy” is a poor way to forecast keeping the lights on.</p>
<p>Instead, AEMO points to the unlikely events that nonetheless could have a significant impact on consumers and says we should frame reliability obligations around those. </p>
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Read more:
<a href="https://theconversation.com/a-high-price-for-policy-failure-the-ten-year-story-of-spiralling-electricity-bills-89450">A high price for policy failure: the ten-year story of spiralling electricity bills</a>
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<p>In its analysis of these, AEMO finds it is possible (albeit unlikely) about half of Victoria’s households could lose supply in a single event in the coming year.</p>
<p>So, on the one hand AEMO expects the system will basically meet the current obligations for unserved energy, but it also says there is nonetheless the possibility half of Victoria’s homes could suffer outages because of shortfalls on the main power system.</p>
<p>Importantly, as AEMO’s obligation is to hit the expected unserved energy standard, not beat it, it is not authorised to take actions to mitigate these outside possibilities.</p>
<h2>Market vs regulators</h2>
<p>To really understand the issues here, we need to look back to last year. In 2018, AEMO sought to <a href="https://www.aemc.gov.au/sites/default/files/2018-06/Rule%20change%20request.pdf">change Australia’s energy regulations</a> so AEMO could buy as much reserve capacity as it decided was needed to reliably manage unlikely but possible severe failures. </p>
<p>It also asked for the authority to buy reserves for longer periods so that it could source reserves more cheaply.</p>
<p>The Australian Energy Market Commission (AEMC) that sets the rules <a href="https://www.aemc.gov.au/sites/default/files/2019-05/Final%20Determination.pdf">rejected this application</a> on the basis that the standards were already high enough – maybe even too high – and AEMO was unduly risk-averse (the political risk associated with power failures made it so). By implication, left to its own devices AEMO would look after itself, at customers’ expense.</p>
<p>Whatever the stated rationale, underlying AEMC’s rejection of AEMO’s application is the philosophy of the sanctity of the market: wherever possible, the market is to be protected from intervention. </p>
<p>From the regulator’s perspective, were it to have acceded to AEMO’s request to expand the volume of reserves AEMO bought outside the market, it would be buying reserves it did not need and allowing the price signals in the market to be further undermined.</p>
<p>But I would argue the regulator’s decision is better characterised as protecting the National Electricity Market’s monopoly for the exchange of wholesale electricity.</p>
<p>It may be acceptable to force transactions through a market if there is confidence in that market. But the <a href="https://docs.wixstatic.com/ugd/cb01c4_fb2fe6a7db544b97be4907a4cc13666a.pdf">evidence of market failure</a> is abundant: wholesale prices in Victoria at record highs, rampant exercise of market power, reliability concerns that often make the front page, and in certain cases shortfalls in dispatchable capacity, storage and <a href="https://theconversation.com/new-demand-response-energy-rules-sound-good-but-the-devil-is-in-the-hugely-complicated-details-120676">price-responsive demand</a>.</p>
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Read more:
<a href="https://theconversation.com/new-demand-response-energy-rules-sound-good-but-the-devil-is-in-the-hugely-complicated-details-120676">New demand-response energy rules sound good, but the devil is in the (hugely complicated) details</a>
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<p>In its Statement, AEMO signalled it will work with Victoria’s state government to explore ways they can work together to meet Victoria’s reliability needs, in spite of the AEMC’s decision. </p>
<p>This is a very significant development and I envisage it will presage similar bilateral arrangements between AEMO and other states.</p>
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Read more:
<a href="https://theconversation.com/35-degree-days-make-blackouts-more-likely-but-new-power-stations-wont-help-109085">35 degree days make blackouts more likely, but new power stations won't help</a>
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<p>Should we be worried about this? Not in the least. Electricity markets do not spontaneously arise; they are administrative constructions. For too long the National Electricity Market has had a monopoly on the exchange of wholesale electricity and the AEMC has had a monopoly on its oversight. Monopolies and markets ossify when they get stuck in their originating orthodoxy and ideology.</p>
<p>AEMO is beginning to clear a log jam. There is a spirit of innovation and discovery in the air. This is something to welcome and it is not a moment too soon.</p><img src="https://counter.theconversation.com/content/122309/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Mountain does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The likelihood of half of Victoria being plunged into blackout are low – but the question reveals growing tension between the energy market and its regulators.Bruce Mountain, Director, Victoria Energy Policy Centre, Victoria UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1216892019-08-09T06:06:31Z2019-08-09T06:06:31ZWhy is the Australian energy regulator suing wind farms – and why now?<figure><img src="https://images.theconversation.com/files/287442/original/file-20190808-144888-xf5nxw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/mikecogh/46717061825/in/photolist-2ebe9Tc-23jtYc7-9M2DUT-275tue7-bmarY-8vUTFT-9NDgMs-78pXUJ-28XCynA-2apWu2e-93QoJC-25t9hum-6TjQTP-66vqg4-259T33r-22337oD-rKTyAN-52wpKM-ot9FCw-putoXq-8vUUuF-8wLnbb-cigi7-9NFmxc-XSDzZJ-Y4LLYM-f9RmJr-5zSLYW-D6xzp-4LyCUm-5ch4jm-hPXqZ-73cBKi-VMCDeY-iBfQcx-gbVUv-7hWjpn-2548HG-ds4Uoi-5fLWwT-iqkx5G-9GC1A-conPg-9GB4F-em8ug-asXi2-9BKn9k-conGg-5ccM8i-5BpTz4">Michael Coghlan/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>The Australian Energy Regulator (AER) is suing <a href="https://www.afr.com/companies/energy/energy-regulator-acts-against-sa-wind-farms-on-blackout-20190807-p52elk">four of the wind farms</a> involved in the 2016 South Australian blackout - run by AGL Energy, Neoen Australia, Pacific Hydro, and Tilt Renewables – alleging they breached <a href="https://www.aemo.com.au/Electricity/National-Electricity-Market-NEM/Security-and-reliability/Generator-performance-standards">generator performance standards</a> and the national electricity rules. </p>
<p>These proceedings <a href="https://www.aer.gov.au/system/files/Black%20System%20Event%20Compliance%20Report%20-%20Investigation%20into%20the%20Pre-event%20System%20Restoration%20and%20Market%20Suspension%20aspects%20surrounding%20the%2028%20September%202016%20event.pdf">appear to contradict</a> the conclusions of a 2018 report which said while the AER had found some “administrative non-compliance”, it did not intend to take formal action given the “unprecedented circumstances”.</p>
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Read more:
<a href="https://theconversation.com/what-caused-south-australias-state-wide-blackout-66268">What caused South Australia's state-wide blackout?</a>
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<p>However the AER has since said this report focused on the lead-up and aftermath of the blackout, not the event itself. The case hinges on whether the wind farms failed to provide crucial information <em>during</em> the blackout which hindered recovery. </p>
<p>In particular, the AER is arguing the software protecting the wind farms should have been able to cope with voltage disturbances and provide continuous energy supply. On the face of it, however, this will be extremely difficult to prove.</p>
<h2>Rehashing the 2016 blackout</h2>
<p>The 2016 South Australian blackout was <a href="https://www.aemo.com.au/Media-Centre/AEMO-publishes-final-report-into-the-South-Australian-state-wide-power-outage">triggered</a> by a severe storm that hit the state on September 28. Tornadoes with wind speeds up to 260 km/h raced through SA, and a single-circuit 275-kilovolt transmission line was struck down. </p>
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Read more:
<a href="https://theconversation.com/baffled-by-baseload-dumbfounded-by-dispatchables-heres-a-glossary-of-the-energy-debate-84212">Baffled by baseload? Dumbfounded by dispatchables?
Here's a glossary of the energy debate</a>
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<p>After this, 170km away, a double-circuit 275kV transmission line was lost. This transmission damage caused the lines to trip and a series of subsequent faults resulted in six voltage dips on the South Australian grid at 4.16pm.</p>
<p>As the faults escalated, eight wind farms in SA had their protection settings activated. This allowed them to withstand the voltage dip by automatically reducing power. Over a period of 7 seconds, 456 megawatts of power was removed. This reduction caused an increase in power to flow through the Heywood interconnector. This in turn triggered a protection mechanism for the interconnecter that tripped it offline.</p>
<p>Once this happened, SA became separated from the rest of the National Energy Market (NEM), leaving far too little power to meet demand and blacking out 850,000 homes and businesses. A <a href="https://www.aemo.com.au/Media-Centre/AEMO-publishes-final-report-into-the-South-Australian-state-wide-power-outage">2017 report</a> found once SA was separated from the NEM, the blackout was “inevitable”.</p>
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Read more:
<a href="https://theconversation.com/south-australian-blackout-renewables-arent-a-threat-to-energy-security-theyre-the-future-66405">South Australian blackout: renewables aren't a threat to energy security, they're the future</a>
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<h2>What went wrong at the wind farms?</h2>
<p>The question then becomes, is there any action the wind farms could reasonably have taken to stay online, thus preventing the overloading of the Heywood interconnector?</p>
<p>The regulator is arguing the operators should have let the market operator know they could not handle the disruption caused by the storms, so the operator could make the best decisions to keep the grid functioning. </p>
<p>Wind farms, like all energy generators in Australia, have a legal requirement to meet specific performance standards. If they fall short in a way that can materially harm energy security, they have a further duty to inform the operator immediately, with a plan to remedy the problem. </p>
<p>To determine whether a generator has complied with these risk management standards, a range of factors are considered. These include: </p>
<ul>
<li>the technology of the plant,</li>
<li>whether its performance is likely to drift or degrade over a particular time frame,</li>
<li>experience with the particular generation technology,</li>
<li>the connection point arrangement that is in place. A generator will have an arrangement with a transmission network service provider (TNSP) that operates the networks that carry electricity between generators and distribution networks. TNSP’s advise the NEM of the capacity of their transmission assets so that they can be operated without being overloaded.<br></li>
<li>the risk and costs of different testing methods given the relative size of the plant.</li>
</ul>
<h2>Plenty of blame to go around</h2>
<p>The series of events leading up to the 2016 blackout was extremely difficult to anticipate. There were many factors, and arguably all participants were involved in different ways. </p>
<ul>
<li><p>The Heywood interconnector was running at full capacity at the time, so <em>any</em> overload may have triggered its protective mechanism. </p></li>
<li><p>The transmission lines were damaged by an unprecedented 263 lightning strikes in five minutes. </p></li>
<li><p>The market operator itself did not adopt precautionary measures such as reducing the load on the interconnector, or providing a clearer warning to electricity generators.</p></li>
</ul>
<p>Bearing this in mind, the federal court will be asked to determine whether the wind farms complied with their generator performance standards and if not, whether this breach had a “material adverse effect” on power security. </p>
<p>This will be difficult to prove, because even if the generator standards require the wind farms to evaluate the point at which their protective triggers activated, it is unlikely the number of faults, the severity of the voltage dip, and the impact of the increased power flow on the Heywood interconnector could have been anticipated. </p>
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Read more:
<a href="https://theconversation.com/factcheck-does-south-australia-have-the-highest-energy-prices-in-the-nation-and-the-least-reliable-grid-92928">FactCheck: does South Australia have the 'highest energy prices' in the nation and 'the least reliable grid'?</a>
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<p>The idea AEMO could have prevented the blackout if the wind farms had alerted it to the disruptive potential of their protective triggers is probably a little remote. </p>
<p>None of the participants could have foreseen the series of interconnected events leading to the blackout. Whilst lessons can be learned, laying blame is more complex. And while compliance with standards and rules is important, in this instance, it is unlikely that it would have changed the outcome.</p><img src="https://counter.theconversation.com/content/121689/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Samantha Hepburn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Four wind farm operators must face the federal court over allegations they failed their basic responsibilities during the 2016 South Australian blackout.Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.