Affordable and reliable electricity is central to everything Australia does. But in pursuit of a policy of net-zero emissions by 2050, the new federal Labor government has doubled down on policies that will further undermine the reliability and affordability of our electricity supply system.
Labor’s Rewiring the Nation policy boasts that renewables will constitute 82 per cent of the capacity in the National Electricity Market (the NEM, covering everywhere except Western Australia and the Northern Territory) by 2030. Somehow, they say, this will be achieved while also lowering prices.
It has taken decades to get to the current equivalent figure of 39 per cent renewables, yet Labor suggests Australia could more than double this in a little over seven years. Following the lead from Canberra, the Australian Energy Market Operator released its 2022 Integrated System Plan on June 30, with practically the same targets as the government.
The Albanese government’s energy policy and AEMO’s latest plan achieve that rare feat of being both unrealistic and unaffordable, while also making the system less reliable.
In the past 20 years, the focus of federal government policy been on boosting renewable energy sources, especially wind and solar. This has been supplemented by various state-based schemes that underwrite new projects. However, actual costs to consumers have greatly increased, with further double-digit jumps occurring just recently.
While wind and solar have high set-up costs but low operating costs, it is the cost of the required back-up energy and transmission systems that is driving up the cost to consumers. Yet, AEMO’s Step Change scenario calls for a massive expansion of this approach.
Onshore wind capacity would need to increase from 11,525MW in 2023-24 to 34,415MW in 2030-31. This would require approximately 7000 additional wind turbines to be constructed across multiple sites in regional and rural Australia. Likewise, solar power must increase from 30,000MW in 2023-24 to 51,000MW in 2030-31. This will mean the installation of another 100 million solar panels, which will be overwhelmingly bought from China.
There are two principal difficulties with this scenario.
The first is it requires the approval and construction of many more wind and solar projects, and associated transmission lines, in communities that are increasingly hostile to them.
Secondly, every additional unit of renewable energy pushes up the cost of integrating it into the system while maintaining reliability. It is not a case of “the more the merrier”, because its variability requires real time back-up, driving up total system costs.
To allow connection of these vast new wind and solar projects, AEMO’s plan calls for $12.7bon to be spent on 10,000km of new transmission networks by 2050.
It identifies a number of transmission projects that need to be completed by 2030, particularly through regional NSW and Victoria and the Marinus interconnector between Tasmania and the mainland.
Transmission lines can be more vulnerable to delays in planning and approvals, even more so than wind and solar projects, and more vulnerable to local opposition, as they span hundreds of kilometres and require wide safety corridors.
In its plan, AEMO airily suggests that to address concerns about “social licence to operate”, developers need to “engage with landholders and regional communities to co-design solutions”. But back in the real world, the Western Renewables Link, in Victoria’s Western District, has encountered serious opposition from local communities.
Likewise, the new interconnector between South Australia and NSW is having to deal with the land access issues where farmers are stridently opposed.
One of the most often overlooked aspects of the federal government’s and AEMO’s plans are that energy systems require engineering and not ideology to function properly.
From an engineering standpoint, each additional renewable energy project reduces system-wide reliability. Companies cannot commercially operate base-load power stations, which need to run for 70–80 per cent of the time, when wholesale power prices are so often negative.
The reason prices are negative is because renewable energy generates spasmodically depending on the vagaries of the weather. This is why wholesale electricity prices increased over 85 per cent when the 1600MW Hazelwood power station in Victoria closed with six months’ notice in 2017.
As coal-fired baseload generation has been under increasing pressure, gas-fired generation has supplied the peak load and covered for renewables when weather conditions take them out of the market. But as Australians have witnessed this winter, exploration and development of gas supplies have not kept up with demand for energy.
It is also of concern that the Albanese government’s move to legislate emission-reduction targets will hand further legal ammunition to activists to use the courts to block new coal and gas projects, further reducing the sources of the only fuels that keep the lights on.
Matters are becoming urgent. The 1680MW Liddell power station in the Hunter Valley is due to close later this year, and consumers can expect a similar impact to that seen when Hazelwood closed.
Next will come the closure of some of our newer and more efficient plants. Origin Energy has announced its intention to close Australia’s largest power station, Eraring, in 2025, which alone provides about 20 per cent of the electricity for NSW.
The centrepiece of the proposed takeover of AGL by billionaire Mike Cannon-Brookes was the early closure of Australia’s other two large baseload power stations: Bayswater in the Hunter Valley and Loy Yang A in Victoria before 2030. In 2020–21, the Liddell, Yallourn, Eraring, Bayswater, and Loy Yang A power stations provided 31 per cent of all electricity produced in the NEM.
The Institute of Public Affairs has modelled the cost to households of forcing the six key coal-fired power stations out of business. Across the five regions of the NEM, households would face average annual energy bill increases of between 95 and 125 per cent, with the average annual bill in NSW rising up to $2600 a year.
Renewable energy supporters suggest batteries and pumped hydro can be the source of back-up power. Yet grid-scale batteries remain small.
If it ran at maximum capacity, the vaunted 150MW battery in South Australia could supply 5 per cent of the state’s peak demand for just one hour. Meanwhile, Snowy 2.0’s cost overruns and lack of answers on transmission capacity is making it a joke. Total projected costs have blown out beyond $12bn.
There are also further challenges to the renewable energy generators’ social licence to operate that AEMO is so often concerned about.
About 90 per cent of solar panels installed in Australia come from China. Polysilicon is a critical part of solar panels, and 45 per cent of global polysilicon comes from the Uighur region in China.
According to a 2021 report by a team at Sheffield Hallam University, all manufacturers of polysilicon in the Uighur region have either used forced labour or been supplied raw materials by companies that have.
There is also the emerging waste problem of how to dispose of old solar panels.
A 2021 article in Harvard Business Review, The Dark Side of Solar Panels, highlighted this issue, noting that “the economics of solar – so bright-seeming from the vantage point of 2021 – would darken quickly as the industry sinks under the weight of its own trash”. The article notes there has also been no serious discussion about the recycling of wind turbine blades.
Globally, nuclear energy provides about 10 per cent of all electricity. Australia must at the least have a debate about the costs of net zero alongside the debate we need to have for nuclear power, especially in the context of a world where everything including transport is being electrified.
Germany thought it had a plan when it was retiring both coal and nuclear while building renewables. However, we now know the system only worked at all because of the gas supplied by Russia. As Vladimir Putin turns the tap on and off, there has been a scramble towards something more realistic.
Back in Australia, it would have been better if the former Coalition government had not let Scott Morrison succumb to Boris Johnson’s fantasy of a global agreement on net zero. However, we at least now have the opportunity to avoid Europe’s fate through exploring nuclear and prolonging the life of coal-fired power stations.
Proponents of renewable energy raise objections that nuclear will take too long and will require governments to effectively underwrite construction. That is, they demonise nuclear energy for requiring governments to take the same supportive and long-term approach the renewables lobby has been demanding, and enjoying, for decades.
The electricity market was officially suspended for the first time in June and is effectively being nationalised on a command and control model.
When Climate Change and Energy Minister Chris Bowen occasionally hops behind the rhetorical wall of “the market” just to take potshots at nuclear energy, it is proof of his rhetorical agility, but not his credibility.
Despite its title, the government’s Rewiring the Nation is not in fact a plan. A workable plan would not allow reliable capacity to be diminished until a dependable future solution arrives.
Sensible people would not sell their brand new car and commit to driving an unreliable wreck that may or may not start, while waiting a decade for a newer model that may or may not arrive. But that is what Australia is doing.
The modern electricity grid, which has been developed over the past century, provides a remarkably high level of reliable supply. What Australians must face is that it is about to get a whole lot more unreliable. This is not an energy transition, it is a regression.