Shorten changes the game on electricity

Somewhat lost in the noise surrounding yesterday’s High Court decision on the equal marriage survey was Bill Shorten’s statement that privatisation of the electricity industry in the 1990s was a major contributor to the current disaster. He’s essentially correct, though ‘privatisation’ has to be taken as shorthand for ‘the process of disaggregation and market reform of which privatisation was a central part’. I’ve been over this ground many times, including here and here, and have argued that renationalisation is the only solution.

Unsurprisingly, there’s been pushback from the Oz, which ran a piece headlined ‘Bill Shorten’s power play debunked” with the lead ‘Bill Shorten’s claim that the electricity crisis has been driven by privatisation has been dismissed by business leaders and energy experts,’.

It’s remarkably lame job.

The only business leader quoted is Tony Shepherd, formerly of the BCA, and last seen heading the disastrous Commission of Audit. Next up is Labor deserter, Michael Costa, followed by Jeff Kennett. Both Shepherd and Costa are climate denialists, which instantly destroys their credibility. Costa and Kennett have already had their privatisation policies rejected by voters, so it seems unlikely that their criticism will scare Shorten. In fact, he’s already hit back*

The only serious expert quoted is Tony Wood, but he doesn’t really help the Oz. He’s quoted as saying “Grattan Institute energy director Tony Wood rejected privatisation as the cause of the energy market crisis. He said 15 years of political disagreement on climate change policy and regulated monopolies in the electricity distribution networks were contributors to the current electricity crisis. He also pointed to the fact that in Queensland, the Palaszczuk government in June was forced to order its state-owned power generator Stanwell to pursue lower profits during heatwaves because of spikes in power prices.”

The first point is accurate enough, but the point about Queensland proves the opposite of what the Oz wants us to believe. It’s only because Stanwell is publicly owned that the Palaszczuk government can order it not to exploit the mess that is the National Electricity Market.

Turning to the politics of the issue, Shorten’s recasting of the debate is going to cause Turnbull a lot of problems. He’s made energy a central issue,, and is convinced that it’s a winner for the government. And, having attacked Shorten as wanting to turn Australia into North Korea, they can scarcely leave the privatisation debate.

This is likely to be disastrous for the government. Not only is privatisation politically toxic, but the government has already undermined any possible credibility on the issue with speculation that it will finance a new coal fired power station, along with Snowy 2.0 and other interventions. Once the debate moves on to the real issue of the failure of market reform, the culture war rhetoric on which the government has relied so far will be totally irrelevant.

* We shoudn’t pay too much attention to comments threads but it’s notable that even the Oz commentariat, almost uniformly made up of rightwing climate denialists, is far from united in support of privatisation.

64 thoughts on “Shorten changes the game on electricity

  1. “the government has already undermined any possible credibility on the issue with speculation that it will finance a new coal fired power station, along with Snowy 2.0 and other interventions.”

    The government could nationalise the entire electricity industry and Malcolm Turnbull would still without batting an eyelid accuse Bill Shorten of being the second coming of Erich Honecker. (After being briefed by Matthias Cormann on who Honecker was.)

    And Turnbull would be backed by the usual suspects (AFR, Australian etc).

    There are no prizes for intellectual consistency in Australian political debate. In fact there are only penalties.

  2. I remember hearing Tony Wood agree that the companies have gamed the market. Thus at this stage he does not believe the market has worked. I think he supports proposals to make it work. I am not as confident as he

  3. @rog broadly, by withholding supply to increase prices. For a generator with multiple plants there are times when they make more money by running fewer plants, the rise in prices offsets their drop in output. The electricity generation system is a natural monopoly turned into an ogliopoly by partial privatisation, with a layer of “make it look like a market” troweled on top by true believers in the “markets are always better” nostrum. The market is definitely profitable, but it’s such a simple system that it’s obvious to most of us where the profit comes from… we, the people who (used to) own the system.

    Queensland still has public generators, and as mentioned that’s one of the stabilising influences. Without that you might look at Enron for an example of how the market functions.

  4. The question of which sources of supply we should use to replace the end of life coal plants is quite different to what the price of electricity should be in any given pricing period (10 or 30 minutes, IIRC). It doesn’t really matter what the spot price is, it still makes sense to build the cheapest generator you can.

    One other place the market has failed is reliability – at the moment generators aren’t really responsible for long-term system stability, and it’s been left out of the “make it look like a market” specifications. But don’t worry, the market will self-correct over time. Just like it did in Auckland… six weeks without electricity in the CBD and the customers decided that it was worth paying a premium for reliable supply. That made the system even more profitable, so everyone was happy.

  5. A report in the Fairfax papers this morning states that Tanya Plibersek is overseeing Federal Labor’s policy development. That could account for some of the more progressive messages we’ve been seeing from Labor recently.

  6. As for Mal Adroit’s Snowy 0.9 proposal, I heard, when it was first proposed, an Actual Engineer who’d worked for the Snowy Scheme point out that the exact proposal Mal had resurrected had been rejected on cost-benefit grounds about 40 years ago, and that it was unlikely to even get past an environmental assessment these days. He was dismissive, in other words.

  7. It’s easy to screw up electricity deregulation, as California and Australia have shown. But the pioneering UK, Texas, Germany and I think India offer decent working models. Competition in generation is worth having. The problem lies with the legacy monopoly in transmission and distribution.

  8. @James Wimberley
    But why would you bother, when a public system delivered affordable, reliable power for decades? And when a rapid transition makes rapid central decision and delivery of the best alternatives essential? Markets are ok if you don’t mind lots exploratory mess, but they just do not do command and control.

  9. How gamed it? 1. not working with govts on post expiry plans of coal-fired supply… 2. dicing with generation to create artificial shortages and jacking up the prices 3 . graded pricing – 1st 30 megajoules at $7.80 next 30 at $5.50 anything beyond 60 at $2.90/unit … sounds good but each customer is priced on a ‘bespoke’ basis so they rarely get to the ‘cheap’ units…AGL renowned for doing this. 4. under maintaining grid, causing shortages/blackouts leading to higher priced contract offers for reliability …. and many many more…

  10. Labor as the better alternative looks too much like “low emissions coal” compared to existing coal; marginally better, when we need a whole lot better. I still don’t get a sense of real commitment to the transition that has to happen. They, like the LNP, look willing to put climate considerations last or even as the “necessary sacrifice” for reliability and affordability. They don’t go after the irresponsibility of climate science denial by people in positions of power, trust and responsibilty, not even that of those most vulnerable to it like Joyce and Canavan. But this is something that has to be led from the mainstream of politics. Which Labor can only bring themselves to do when they depend on Green support.

  11. As someone who works inside the electricity industry (power systems engineer) I can say it is hard to overstate how messed up things are, and how bad things could get.

    We need a vertically integrated system, one entity in each state (or a single national entity) responsible for planning, building and operating the network, as was successfully done by the old electricity commissions.

    The electricity system is one large machine, trying to treat it like a market in which the generators are the “shoes factories” and loads are the “shoe customers” is spurious. The behaviour of one shoe factory won’t cause the machines at another shoe factory to stop working, but in an electricity network everything interacts. A more apt analogy for the electricity system is to a car engine. The car company designs the whole thing, and it works.

    Disaggregation has lead to huge inefficiencies in being able to freely share engineering data between generators and transmission and distribution companies (everyone is paranoid about their IP and everyone is terrified of being sued, so the default position is to share as little as possible). Talented engineers can spend most of their time doing legal gymnastics rather than engineering. Transmission and distribution companies are having to investigate endless “what if” scenarios because they need to consider all the mutually exclusive connection applications for new generators that come through their door.

    The current regulatory arrangements were designed for an oversupplied coal based system. The transition to renewables requires central control, just as was needed to rapidly build the network to begin with.

  12. @John Quiggin, i feel like my comments above about inefficiencies of disaggregation may relate to the Theory of The Firm? I vaguely recall you may have commented on this before in other contexts. I’d be interested if this is an angle worth pursuing in the cause of re-aggregation of the system.

  13. Final aside: I see a lot of comments on left leaning blogs (including this one), to the effect of “we could have a renewable system tomorrow if not for those evil corporations!”. It should not be under estimated what a complex, uncertain and probably expensive task it is to transition the network to asynchronous renewables. It has literally never been done anywhere before, we are inventing solutions as we go. Anyone who says they know exactly how to achieve the transition is either ill informed or deceptive.

  14. Isn’t just the failure to continue with a carbon tax a prime reason for the current mess? With a carbon tax credibly in place there would have been a greater move towards the use of natural gas and increased incentives to supply it locally.

    Even monopolistic, private electricity suppliers would have incentives to make this sort of switch.

  15. @Herb

    Plainly, we could not now expect 100% decarbonisation of the energy system tomorrow. A commitment like that will be harder and longer in some places than others. Iceland has essentially done this already, but special circumstances apply. It seems quite plausible for Australia to achieve this on a timeline of 15 years, and perhaps quocker. Decarbonisation of all primary energy would be a far larger task of course, and decarbonisation of all industrial activity and agriculture, harder yet.

    That noted, I am past femsnding to know in advance previsely how much it would cost. Plainly, it will be disruptive, and there may well be some unforeseen negative consequences, much as every development in human arrangements has produced. There’s no record of anyone foreseeing the consequences of settled agriculture and mass landclearing, or religion, or the development of gunpowder or the resort to fossil hydrocarbons. Even those developments the pernicious consequences of which people did foresee e.g. neoliberalism did not deter those in charge.

    The implementation of decarbonisation has had far more active examination than almost any structural change that has ever been implemented. Equally though, this change is forced by circumstance, much as would any other existentisl struggle. It really doesn’t matter if it’s 10% or 20% or even 100% more costly on short term timelines than business as usual. If this is what survival of maintainable community demands, then it’s a cost we must bear, not just for ourselves, but for those yet to be born, on whose behalf we must act.

    There is no Planet B. This is the only one we have. We must protect its ecosystem services, because all other courses of action will prove catastrophic.

  16. Fran, I agree; anyone who thinks they know what it will cost is kidding themselves. This looks like a challenge that requires – dare I say it – agility and innovation, because the solutions needed today will very likely prove unfit for purpose tomorrow. Definitely unfit for purpose if the purpose doesn’t include a genuine commitment to a transition to low emissions.

    Given the current rhetoric, where high emissions coal plants are renamed as low emissions, where emissions goals, if mentioned at all, are not about enduring climate stability but about kowtowing to international agreements and those goals are portrayed as incompatible with affordability and reliability, and this kind of doublespeak is widely accepted with barely an objection within our mainstream media, it’s hard to see how we can get rational policy fit for purpose.

    Nationalisation under such conditions doesn’t automatically lend itself to doing better; perhaps worse, given that market mechanisms – unless gamed – are increasingly favouring investment in Renewables.

    Only some kind of overall carbon pricing looks likely to work as an enduring policy but even with that it’s likely the need for interventions will always be there.

  17. @Fran , I agree we should decarbonise for the reasons stated. There is no planet B. My gripe is with some who see this as an easy cheap process that the right only oppose because they are pure evil. I place the Reneweconomy website in this basket. Concerns about cost and reliability are valid. I would prefer the line of the left to be “this might be expensive and reduce reliability for a while, but we have to do it anyway”.

    Regarding Iceland, their network is almost 100% hydro and geothermal which are synchronous dispatchable generation sources. From an electrical perspective they are the same as fossil fuel generators basically. So they do not provide us with lessons for how to decarbonise our system. As I said there are no major networks run on asynchronous generators (wind / solar PV) in the world.

    Regarding a 15 year transition, I wouldn’t say it’s physically impossible. But I think it’s very unlikely, and definitely impossible with our current institutional and regulatory arrangements. Given we are going to have to invent new solutions along the way, no one knows how long this will take. If 15 years was the goal, you’d definitely need an incredibly large and powerful federal body to centrally plan and execute the whole thing. Even just to compulsorily acquire all the land and easements you’d need for transmissions line would be a nightmare. Hence I am in favour of re-aggregation, and if that is to happen, the resulting entity may as well be in public hands rather than being a privately owned regulated monopoly.

    @hc , a carbon price may or may not be a good thing for incentivising investment. I’ll leave that discussion to @John Quiggin. Whether a Renewable Energy Target or a Carbon Price or any other mechanism is used, they will all have the problems of engineering inefficiency for design, planning and operation of the network I described above if the system isn’t re-aggregated.

    @Ken Fabian. The Renewable Energy Target is what drives renewable energy investment (and the ACT reverse auction). No wind farm or solar farm would get built without them. The current market signals are not taking us on an investment path along which the system will work at all the transition points along the way. Hence the frantic, expensive and panicked band aids being randomly proposed by state and federal governments. This transition is too complex to be managed by markets. We need central planning and control.

  18. As an example of the limits of markets, you could ask if they work so well for the system overall, why not for an individual wind farm? Rather than a centrally designed, procured and operated wind farm (e.g. Let’s say AGL builds a wind farm with 100 vestas wind turbine generators), they could have their own market where multiple different manufacturers own different turbines in the wind farm, and the reticulation system linking them together is owned by another company, and they all have detailed contracts outlining their obligations to each other.

    The answer as to why no one does this is that it would be a complicated dogs breakfast, and it just wouldn’t work. That’s my agreement against an electricity market with dis-aggregated generation, transmission and distribution. We are rapidly getting to the point where this overly complicated dogs breakfast won’t work.

  19. @Herb

    Fair enough then. That’s pretty much how I see the matter. Were the political commitment there it could be done, and yes, it would be far easier were the state simply to acquire the necessary assets and make it so.

    As has been pointed out many times, were this an existential war, few would be debating the cost (human or otherwise) or the complexity or the uncertainties. It would simply be done, and yet, here we are, out in the weeds with folk arguing the toss on what in all probability would probably work out (in total system terms over the life of the operational elements) to be quite similar, even excluding the community cost of burning FHCs/emitting GHGs.

  20. @Herb
    On your theory, the coordination problem in aviation – which is severe, millions of lives depend every day on a disciplined use of airspace and runways on a minute I by km in its basis – means that air travel must be organised as a national monopoly. This would plainly be wrong. Air traffic control is a centralised state monopoly everywhere. Operating planes and selling seats to passengers is competitive everywhere. What’s wrong with this model for electricity? German and British power supply is much more reliable than Australian. For now, I am sticking to the template of “specific Australian screw-up” rather than “general problem with deregulation”.

  21. @Tony
    Finally an actual electrical engineer to talk a bit of sense about our deplorable electricity situation.
    Realistically wind and solar should not be connected to the grid which was designed for a coal fired base load They should be connected to batteries which require some huge breakthroughs to be viable.
    Solar can pay for itself if used by the owner during the day but it should not be connected to the grid. Basically the power companies don’t want the power during peak solar production but during peak electricity demand(evenings) there is no solar available.
    Basically people want cheap reliable electricity and no blackouts

  22. Herb, yes the RET has been significant, although investment in large scale renewables has been less than it might be because of the policy uncertainty. But the biggest “subsidy” here remains the ongoing amnesty fossil fuels enjoy on climate and other externalised costs; as long as that continues any cost comparisons, including for RE with firming, are distorted.

    chrisl, I disagree that RE should be have been excluded from the grid. Certainly the backup/firming are important but in the absence of foresight, planning and policy and in places like SA the growth of RE is pushing near the limits without backup. I don’t believe it’s truly a crisis, although any blackouts, including those because coal and gas plants fail in hot weather – or because they are being withdrawn to force prices up – will be used shamelessly in the LNP’s pro-fossil fuels campaign.

    Yet the true value of storage is being made clear by the failures of policymakers and investment to stay in step with RE growth. The market will do what governments have chosen not to do; provide the economic incentives for the necessary growth in storage. It (and other firming options like voluntary load shedding) is beginning to get the attention it should have had had that foresight and planning had been there. Firming for RE is what is needed, not more coal.

  23. You have to laugh about all the LNP politicians and their hangers on who have just discovered that private businesses (read: AGL) make decisions that in their private interests and that whether those decisions are in the national interest is neither here nor there, from the point of view of the businesses. It’s hilarious seeing Matt Canavan, who was once a Productivity Commission economist, lamenting that AGL is acting in its own interests.

    The National Electricity Market was set up explicitly on the premise that private decisions by private businesses (or government-owned businesses acting independently of their owners) would sum up to the national interest in general and the users of electricity in particular. The whole point of the word Market in National Electricity Market was to unleash the power and beauty of Adam Smith’s invisible hand blah blah blah. Well, it might have worked, or it might not have, but any chance of it working has been thoroughly corrupted by the bollocks that is our energy and climate policy.

    As always, be careful what you wish for.

    It’s almost as hilarious seeing the lefties on social media praise AGL as far-sighted and wise. As always, be careful who you get into bed with.

  24. @James Wimberly, you may be right that there are other models short of full vertical integration that would work. My views are not necessarily indicative of electrical engineers at large, and market design is not my expertise at all. I just know what it’s like to try and get some engineering done with our current arrangements, and in my experience it is incredibly inefficient. To your more specific examples I’d comment as follows:

    There may be overseas jurisdictions with market based systems that are doing better than us right now in terms of price and reliability (you mentioned the UK and Germany). But what we don’t have is an example of a network that has transitioned to asynchronous renewables (which is what Aus is attempting to do) because it hasn’t been done anywhere. Maybe the UK and Germany will experience the same pitfalls we are when their penetration of asynchronous renewable gets higher. Note that Germany is part of the continental European network, so the issues we are dealing with in Aus won’t become apparent until all of Europe starts to hit levels of asynchronous supply comparable to that of South Australia.

    Regarding the aviation analogy. While I have no experience in aviation so “I don’t know what I don’t know”, the difference in this situation compared to an electricity network appears to me to be that each plane is a distinct entity that doesn’t intrinsically affect the operation of other planes. How the landing gear operates on one plane doesn’t affect the altitude control of a second plane. In an electricity network everything is linked by the electromagnetic field, and the generators themselves create that field. Instability in one generator can cause instability in another. Every generator needs to be designed such that it doesn’t adversely impact it’s neighbouring generators. They also need to jointly contribute to maintaining acceptable voltage and frequency that allows them to operate in the first place. This can’t be done as a one size fits all process, every one is bespoke. This would be analogous to if aeroplanes jointly created the sky and if the given fleet of planes in the air didn’t behave in a given way the sky would fall down. Your example of scheduling flights through air traffic control is a reasonable analogy for what AEMO does in dispatching generation to meet supply and demand. But as I have alluded to above there is a whole more going on that doesn’t fit in the analogy.

    Right I’ve probably droned on enough on this thread. Sorry for all the novels!

  25. @Herb

    “there are no major networks run on asynchronous generators (wind / solar PV) in the world.”

    Exactly. Even Denmark, which is often held up as the poster child of renewable energy, has the back up of Swedish nuclear power whenever it needs it.

  26. @Herb

    “It should not be under estimated what a complex, uncertain and probably expensive task it is to transition the network to asynchronous renewables.”

    “Finally an actual electrical engineer to talk a bit of sense about our deplorable electricity situation”.

    It’s a funny thing. When Chris Uhlmann pointed out the problems of asynchronous renewables after the SA blackout he was vilified as a tool of the coal industry and climate deniers, including on this blog.

    Come to think of it, so was Malcolm Turnbull, for saying the same thing.

  27. @Smith
    Uhlman talked rubbish. So did Turnbull. And so does the claimed ‘engineer’. Not one of the three has been ‘vilified’, here or anywhere else.

    In the USA, the engineers and scientists reporting on the grid confirmed that increasing wind and solar increased reliability of overall supply. Scott Pruitt is likely to ensure that these clear explanations are deleted from the final report – but it’s already out there for those who look.

    In Germany, similarly, increasing and widely distributed wind and solar are confirmed by the engineers and scientists as stabilising and supporting the grid.

    Sure, if you run your wind farms so that they are shut down too readily they won’t provide all the stabilisation they should; as the report into the SA blackout showed.

    Privatising the worn-out coal-burning power stations has helped them limp along a bit longer than their obsolescence implied. They can’t be kept going many more years – they are, simply, economically unrepairable.

    But our problems with supply date back to the buy-back of the Bass Strait gas for which Victoria paid a hefty premium above then market for decades. As soon as the locked-in price went below market, the producers bought the gas for a derisory lump sum: and that allowed the development of the price manipulations following from the Queensland LNG projects and their absurd overcapacity.

    It’s gas price manipulation that has raised electricity costs and slashed reliability. And the continued failure to make coal pay its way, in rehabilitation costs, in paying for the pollution costs and damage it produces, and in its absurd waste of water, is the main set of subsidies in the power system.

    Renewables are the best defence the world has against greenhouse gas damage. It’s a funny thing. The third world countries building up solar and wind to get power to people gas and coal have never supplied know where their present blackouts and brownouts come from – and it’s coal, diesel and gas.

  28. “In the USA, the engineers and scientists reporting on the grid confirmed that increasing wind and solar increased reliability of overall supply”
    Please explain how an intermittent power supply can increase reliability?
    (no sun, night time, no wind, too much wind)

  29. intermittent is not the same as unreliable.

    while the reward for fossil energy is perceived to be greater than the reward for renewables the intermittent=unreliable excuse will continue to have traction.

    it’s wearing thin.

  30. @chrisl

    While there are certainly ways of managing intermittent supply so as not to prejudice supply or frequency, it’s hard to imagine how intermittent renewables could do that. I’d be keen to see the claim.

    Intermittents can certainly serve to stabilise or lower wholesale prices as by definition, their marginal cost approaches zero, but that’s plainly a different claim.

  31. may
    If you look at the nemco site where it gives you a breakdown of all the energy sources that are going into the grid at the current time (16.27) solar is providing less than 2% to the grid. Despite all the hype and the lower costs etc, less than 2 % . I am going to make a big call and call that unreliable.

  32. @Fran Barlow

    I would also be keen to see the claim. Frequency control is gained because turbines are slow to speed up and slow to slow down. Coal and gas generators have turbines, as do hydro generators. Wind and solar generators do not have turbines.

    The power systems literature says you can in theory improve frequency control with batteries, turning the solar and wind systems off, increasing wind output during a frequency dip and demand side management. Whether this will actually work – who knows?

  33. @chrisl

    Less than 2% going into the grid from solar farms, but a lot of electricity is generated on rooftops (including the cognitively dissonant Malcolm Turnbull’s Point Piper house).

  34. I referred readers to the current technical reports in the USA and in Germany. By all means read them. I am not myself an electricity system specialist – I read people who are.

    Solar and wind add markedly to reliability because they are distributed power producers (compared to a small number of very large coal generators), and because they are individually small producers (turning one off, or on, doesn’t have the system impact of a large generator dropping in or out), and because they have very short ramp-up times (compared to the long ramp-up and ramp-down times for coal).

    Coal and nuclear are actually significantly intermittent – their unplanned outages have significant impact on the electricity grid. Obsolescent coal stations get more and more unreliable and the records show them dropping out unevenly and unpredictably. Obsessing about ‘no sun’ periods for solar, and ‘no wind’ periods for wind turbines, is overdone: you need to check on the levels of intermittency compared to alternative sources, and when you do you’ll find they are higher but not so much so as to outweigh the system advantages that also come from wind and solar.

    Certainly wind and solar benefit from long interconnects too, and in the USA the East-West time differential alone boosts the benefit of solar, while wind distributed across a wider area becomes highly reliable in many areas. The ‘red states’ of the USA include some where wind is significantly more than any other electricity component.

    The 2%-equals-unreliable argument is about as silly as an argument gets: and the 2% is pretty rubbery, as Smith pointed out, because it fails to count most production from home solar panels, which is never distributed but which diminishes what needs to be distributed very substantially. Solar and wind are dominating new power production capacity world wide for good reason.

    The public sparring ignores most features of solar and wind in favour of, well, superheated steam. AGL is getting out of coal for economically sensible reasons: and gaming spot generation prices is not significant among those reasons.

  35. ChrisH Why on earth would we be interested in the systems in USA or Germany. It is the deplorable system in Australia that interests us.
    When are the unplanned outages of coal fired power stations? They are certainly off line at times for maintenance but that is completely planned . Compared with wind power that can stop at any time and sun which can be affected by cloud cover and of course darkness.
    The 2% refers to the meagre amount produced by RE and how much more investment is required to build it up to something more meaningful and how quickly it can go to zero (guarenteed to happen at least once a day )
    The long interconnects are entirely a feature of wind as they are built in remote rural locations far away from cities and factories

  36. @Peter T
    You tell me the crucial difference that explains why commercial competition in supply can be combined with tight monopoly regulation of distribution and use of the commons in aviation but not in electricity.

  37. The actual answer, James, is that it doesn’t work in airlines either, which is why so many of them spend so much time trading under administrators and the ones that don’t are heavilly backstopped by governments, either with direct subsidies or a core network of protected routes.

    [“enough” competition drives profits down to the marginal cost of provision, or rather to what the most optimistic operator thinks their marginal cost is; this isn’t enough to cover the ongoing costs, let alone repay the capital. All profit is rent.]

  38. In my view this is exactly time to support investment in storage in a serious way. A $billion spent extending the life of Liddell – which had a GW of capacity out of action at crucial times last summer – is a $billion that could be spent on the technologies that support the transition that, in the face of the climate problem, should be considered essential.

  39. Ken Fabian Assuming cheap reliable batteries were available, where would the power come from to charge said batteries?

  40. Chrisl, I don’t expect batteries to be cheap at first – yet they are still significantly cheaper now than even one year ago – but their value per KWh is much higher than any average electricity price as they will be used primarily to supply when other supply is constrained. ie when wholesale prices are highest. Reliability looks very good. And it has to begin sometime. Where is the power to come from? Solar and wind ultimately, but right now there are periods of excess supply every day.

  41. The interesting, and extremely rare, aspect of the current debate is that both the ALP and LNP are confident they are on a winner by pushing their story of what is wrong with the electricity market and their solutions. Shorten says the problem is caused by privatisation. Turnbull says the problem is caused by renewables. Usually with policy fights one side attacks and the other defends. On this occasion, they are both attacking.

  42. @James Wimberley
    James

    You can think about this in terms of latency (decisions times needed), connectedness both within the system and beyond it and resilience. Supply in airlines has latency in hours/days, is tightly coupled within each airline but not beyond it, and only loosely coupled to larger systems. It’s resilient only to a degree: eastern Australia suffers the airline equivalent of brownouts on Friday afternoons quite often, as minor delays snowball through the system to coincide with peak demand at the major hub (Sydney). The mitigation is not in the system but in airport hotels and other places where passengers are warehoused. Delays, lost luggage, cancelled flights are common, but most people just put up with arriving a few hours late or buying a shirt to tide them over.

    Electricity latency is in seconds to minutes (as Herb outlines), is very tightly coupled both within each network and beyond to other systems and has low resilience – very few users have back-up supply.

    All this is why, when you look behind the curtain, electricity systems are not run by markets, even when they appear to be. There’s so much necessary command and control that any market is a thin veneer.

  43. chrisl :
    ChrisH Why on earth would we be interested in the systems in USA or Germany….
    When are the unplanned outages of coal fired power stations?

    If you read about why AGL valued Liddell at zero part of the reason is that it’s old and unreliable. Peak output over the last few years has been about 50%, and during the last heatwave in NSW two gas plants were completely offline (https://www.theguardian.com/commentisfree/2017/sep/12/for-energy-security-the-failing-liddell-coal-plant-is-the-last-thing-we-need and https://www.theguardian.com/environment/2017/feb/23/gas-fired-power-plants-failed-during-nsw-heatwave-report-reveals). Sure, if a wind farm reached 54% capacity factor we’d all be very happy, but coal is supposed to be 100% reliable baseload power.

  44. Why on earth would we be interested in the systems in USA or Germany

    Despite what some politicians would have you believe, electricity works the same way all over the world. Australia isn’t special when it comes to electricity generation or grid management, except perhaps in the “PC term for intellectually disabled” sense. Looking at the successes and failures of other countries is a useful way to learn, and saves us the cost and hassle of having to make the same mistakes as other people – it’s far more useful to make new and interesting mistakes of our own. Then other people can learn from us in turn. Ain’t science grand?

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