Requiem for a failed electricity system

The trouble with wind

South Australia has on average over 40 per cent of its internally generated electricity derived from wind. This is one of the highest levels in the world for a load with a relatively small interconnection with other sources (the two interconnectors with Victoria have a capacity to supply about 20 per cent of the state's needs).

Wind/solar generation has two features that are of concern.

The first is that it is intrinsically high cost. As a mature technology, it will remain three times the cost of coal powered generation in Australia. It can only compete because it is subsidised by a regulatory charge on the consumer (thereby also not facing the same scrutiny if its support was through the Budget). It receives the subsidy whenever it runs, hence wind has an incentive to generate whenever it can, forcing established fossil fuel plant to be placed offline.

Wind's additional capacity depresses prices in the short term. Because most of the costs of existing fossil fuel plant are sunk, they will continue to operate. But once major repairs are necessary the established coal plant is scrapped.

Gradually the electricity price will rise to reflect the higher cost wind generation that is being substituted for the non-subsidised supplies. But this rise is muted as the higher prices will cause high energy intensive industries to close, reducing demand. Already we have seen the Point Henry aluminium smelter close and the Kurri-Kurri smelter mothballed. The same outlook appears imminent for the Portland smelter.

Secondly, wind/solar is inherently less manageable than fossil, nuclear or hydro-generation. It requires its fluctuating supply to be shadowed by counter fluctuations. This requires additional costs and careful management.

South Australia's electricity system breakdown

The preliminary report of the Australian Energy Market Operator (AEMO) on the south Australian blackout was published October 5. It summarized the position as

Generation initially rode through the (weather induced) faults, but .. 315 MW of wind generation (then) disconnected .. result(ing) in … the Heywood Interconnector overloading,, tripping the interconnector. In this event, this resulted in the remaining customer load and electricity generation in SA being lost (referred to as a Black System)

Actually the AEMO had already spilled the beans. In its Market Notices system amidst some the 30 or so routine operating statements that AEMO posts each day came Notice 516103 on 3 October. This not only said the collapse in wind generation had caused the system to black-out the whole state but went on to redefine nine wind farms as unreliable generators. AEMO basically said that the event is not a one-off contingency but that the cascading effect of a state wide South Australia blackout as a result of losing some pylons was intrinsically likely to re-occur.

This finding did not prevent the promoters of wind and other sources of power from placing themselves in denial. Tony Wood of the Grattan Institute wrote an article in The Australian headed, "Don't blame renewable energy for the state's plunge into darkness". Many other apologists for the renewable industry were scathing about those like Minister Frydenberg who suggested wind had played a part. And even after the publication of AEMO's report, the industry's propaganda journal, RenewEconomy, was claiming it "raises questions answers none".

Who's to blame?

AEMO itself as an entity is not immune from criticism. On many occasions its engineers have said that operating a system with high wind share is technically feasible.

In public has drawn attention to problems of integrating more wind but expressed confidence in doing so and been hopeful that this would be further facilitated by advances in battery storage technology. But, as Brendan Pearson's quote of the Chief Scientist Alan Finkel makes clear, this is overly optimistic. The Chief Scientist estimated that "if we retrieved all of the batteries made for use in mobile phones, laptops, cars and industry in 2014 and used them as back-up for the electricity system, we would have enough energy to power the world for just nine seconds."

And in its submission to the Senate in July of last year AEMO, while expressing some concerns about high wind penetration in South Australia, said

Based on experience to date and analysis of likely future outcomes, AEMO considers that it is technically feasible to integrate the renewable energy likely to emerge from the RET while maintaining the security of the power system. In the longer term if even higher levels of renewable generation eventuate, there is likely to be some additional grid support costs to maintain system security and to meet frequency standards. (Select Committee on Wind Turbines Submission 469)

The former head of AEMO Matt Zema (who, sadly, has since died, hence his private counsel is no longer confidential) was less sanguine at least in private. Mr Zema during the course of a private briefing in April of this year the former head of AEMO, made the following comments

The renewable developments and increased political interference are pushing the system towards a crisis. South Australia is most vulnerable with its potential for wind to supply 60 per cent of demand and then to cut back rapidly. The system is only manageable with robust interconnectors but these operate effectively only because there is abundant coal based generation in Victoria.

Wind, being subsidised and having low marginal costs, depresses the spot price and once a major coal plant has a severe problem it will be closed. New coal plants cannot be built because governments are hostile and banks will not finance them. Wind does not provide the system security. But the politicians will not allow the appropriate price changes to permit profitable supply developments from other sources. In the end the system must collapse.

Mr Zema thought that once network collapses occurred, Ministers would search for a fall-guy and would plump for AEMO. In the light of the agency's guarded public statements, AEMO may have cause to fear being accused of culpability in the collapse.

The political landscape on energy is littered with cant. It is conditioned by a public persuaded that global warming will bring untoward harm and that the costs of substituting wind and solar (both of which are depicted as fundamentally free) will be, at worst, trivial. This is powered by rent-seeking businesses, conventional energy suppliers included, which see a path to greater profit from investments which have their risks underwritten by governments to give assured returnsl.

The PM and his colleagues energy minister Frydenberg, industry minister Hunt and South Australian frontbencher Christopher Pyne have been forthright in hitting their political opponents. In the main this has been because of inconsistency between state plans and incentives. The ALP remains a supercharged romantic wedded to a 50 per cent renewable target by 2030.

But the Coalition has been little less supportive the patronage-rich renewable industry. Indeed, South Australian wind farms were built on the back of federal and not state subsidies and few demurred at their level until the earlier near miss blackout in July of this year.

In fact, the Coalition, while criticising the ALP's goal of 50 per cent renewables by 2030 itself has a goal of 23.5 per cent renewable share by 2020. Given that hydro cannot be increased, this means it is looking for 15 per cent from wind and solar by 2020. That implies a massive and unachievable expansion from those sources' present contribution of six per cent.

Aftermath

Each state has reacted differently.

In Victoria energy minister D'Ambrosio is powering ahead with increased renewable programs and supplementing this with prioritising battery storage. She is shown here with her advisers.

This entails horrendous additional costs. But the state is passing down the same de-industrialisation path as South Australia and if wind expansion causes Hazelwood power station to close will be partly offset by mothballing the Portland smelter, hence immediate price effects will be suppressed.

The South Australian government is shell-shocked at having moved from the frontier of a Brave New World to third world status. Queensland is now saying its 50 per cent renewable goal was just aspirational though a new report claims to show different paths to the goal.

Published in On line Opinion 13 October 201