Requiem for a failed electricity system

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 and, for its part, Queensland is now saying its absurd 50 per cent renewable goal was just aspirational.