I’m sure most Cats have come to the conclusion that the Australian Financial Review is the most anti-business business newspaper that has ever been published. There is not a new tax or a higher tax that its journalists won’t endorse. Company tax cuts – no way, there are no guarantees of higher wages, more jobs; there is so much free stuff to be given away by the government and that must have priority.
And then we have the relentless promotion of renewable energy and the denigration of coal-fired electricity … indeed coal more generally by the newspaper. And master of this trade is of course Ben Potter who fails to declare that most of his pieces are personal comments, palming them off as if they were news.
Of course, he is incensed at the prospect that the Liddell power station might continue to operate after 2022 with a new owner. Gosh, AGL has got such good ideas, investing in renewables, a bit of gas peaking, demand management. Does it get any better than this? Nothing must be placed in the way of this greenwash company headed by Yankee genius, Andy Vesey,.
But it’s OK for Liddell to close down, according to another Yankee ring-in, Audrey Zibelman, who now heads up the Australian Energy Market Operator after the unfortunate death of her predecessor. Something that Ben might have missed, but AEMO and AEMC are at loggerheads and the government has clearly marginalised Audrey – oh dear.
Here’s the thing, Ben: Audrey has form on this stuff and she has been 100 per cent wrong. When Hazelwood closed down, AEMO responded in this way:
AEMO advises that the closure of Hazelwood will not compromise the security of the Victorian electricity system nor the broad NEM next summer. There are power generation resources available in Victoria and the NEM that currently are not operating at all or to their full capacity that can be made available to replace the power currently supplied by Hazelwood.
AEMO’s market analysis reveals these resources exceed the 1600 megawatts capacity of Hazelwood.
And then just six months later:
A strategic reserve of around 1000 megawatts of flexible dispatchable energy resources is required to maintain supply reliability in South Australian and Victoria.
A lot changed in six months it would seem. And I haven’t even mentioned the misguided forecasts on the price impacts of the closure of Hazelwood – remember the Victorian premier telling us it would be a dollar or two per week. Sure.
The truth is that Audrey and AEMO are not reliable. She is a full-on greenie who believes that demand management is key – that’s right, bribing people to use less energy when they should be using it. The government should rightly ignore her. I’m sure the Cats are doing so.
But here is the story:
MALCOLM TURNBULL’S BID TO FLOG LIDDELL TO ALINTA ILL-ADVISED: AEMO
Malcolm Turnbull’s bid to flog AGL Energy’s ageing Liddell power station to Alinta Energy rather than have AGL close it in 2022 is exactly the wrong way to ensure that the state’s energy consumers have access to reliable and affordable energy.
Who says the Prime Ministerial lunge for the commanding heights of the NSW power grid is ill-advised? Audrey Zibelman, the chief executive of the Australian Energy Market Operator.
In her 16 March advice to the government on AGL’s plan to replace Liddell’s 1800 megawatt capacity with a mix of solar, wind, gas, battery, hydro storage and demand management, Ms Zibelman said the best way to ensure a good outcome for consumers was to allow the market time to operate and not to fixate on any particular supplier (AGL) or type of supply (coal).
“AEMO’s view is that optimal approaches towards ensuring an efficient balanced system must target mechanisms that allow the greatest practical level of competition and innovation on both the supply and demand sides of the system,” Ms Zibelman wrote.
“A market approach that allows multiple other participants to compete to invest in a variety of resources that can address the reliability deficit to produce the best overall outcome for consumers,” she said in the conclusion of the advice.
Don’t scare capital
In other words, don’t panic and blunder into a market you barely understand (not her words) because you will just make things worse.
The federal government has already become a large energy supplier by buying out the NSW and Victorian interests in Snowy Hydro and actively pursuing the $4 billion Snowy 2.0 expansion.
The SA government launched a $550 million energy security plan a year ago and Victoria has just announced its own big battery plan.
But the more government intervenes in the energy markets the less eager private investors will be to compete and innovate in a way that Ms Zibelman (and most energy experts) says delivers the best outcomes for consumers.
This is especially so because AEMO’s prognosis for the NSW power supply post-Liddell is not nearly as bad as the Turnbull government likes to paint it.
In fact, if you take the view that energy companies are likely to make investments that meet well-telegraphed gaps in supply – such as the closure of Liddell seven years after AGL first proposed it in 2015 – there is little likelihood of a shortfall post-2022.
In its advice AEMO found that if AGL delivered on all three stages of its plan for replacing Liddell – or other suppliers delivered comparable resources – the NSW grid would not have a problem meeting demand post-Liddell. EnergyAustralia says it wants an equal opportunity to fill any post-Liddell supply gap.
Only if AGL failed to complete its entire plan – and no other company such as EA stepped into the breach – would there be a significant risk of supply outages, AEMO found.
AEMO’s base case allows for AGL to complete its 100 MW Bayswater power station expansion only, and just 810 MW of mostly wind and solar to enter the NSW market from other suppliers. Scenario 1 adds AGL’s first stage – 300 MW solar, 250 MW gas and 20 MW demand response – to the base case, and Scenario 3 adds AGL’s second and third stages (500 MW gas, 750 MW wind and solar, 80 MW demand response and a 250 MW battery).
In the highly improbable base case, if a once-in-ten-years demand peak occurs in 2026-27 and no-one else invests in additional firm energy supply, AEMO says that every three years about 200,000 NSW households “may” lose power for five hours.
In Scenario 1, under the same demand conditions, AEMO says that every four years 174,000 houses may lose power for 3.6 hours. In Scenario 2, 172,000 homes may lose power for 2.2 hours every 20 years.
There’s just no need for a Prime Minister to wade into the energy market to forestall such remote and distant risks.