- In May of this year, South Australian Treasurer Tom Koutsantonis was somewhat remorseful over the closure of the Port Augusta coal fired power station He said
It is a sad day for our state to see such an important investment close but it’s an old coal-fired power generator that was past its day and unfortunately for whatever reason no one is going to reinvest in a coal fire generated power station, no one’s going to upgrade the plant.
That power station closure came a few years after the closure of the state’s other coal fired generator, the Playford power station. Together the two power stations had a capacity of 780 Megawatts, which was only 15 per cent of the state’s capacity or 12 per cent including rooftop (600 MW) and the interconnectors (680, soon to be 920, MW).
Those power stations might not have been the lowest cost in Australia but they did provide reliable supply at an unvarying cost which is one third that of the wind capacity that has replaced them.
Renewable subsidies require consumers to buy wind energy at three times the price of coal and subsidise rooftop solar at twice the coal price. In South Australia, wind accounts for 38 per cent of supply and solar another 7 per cent.
The South Australian Government’s distress about the power stations’ closures featured their job losses. The Treasurer said he wasn’t concerned about baseload power in South Australia, with the Victorian interconnect providing capacity that “far exceeds” what the Port Augusta power station could provide.
Last week came a triple whammy, not totally unpredictable. A cold snap drove up demand. This was associated with unusually windy conditions that stopped the windmills from operating. And the main interconnect from Victoria was down in preparation for its capacity being increased. In addition, a number of major user firms – including BHP, Nystar and Arrium – had decided to buy electricity on the spot market rather than contracting. Absence of contracts provided a signal to Engie, the owner of Pelican Point, the second largest power station, to divert its contracted gas elsewhere.
Suddenly prices, normally in the $50-100 per Megawatt hour range, were souring into the thousands of dollars. The firms which were uncontracted looked like they would need to temporarily close and the government was in panic mode. Blame was hurled, ludicrously, at privatisation and at the Commonwealth for providing subsidies to wind developments. This latter call is a bit rich since the state has made a feature of its wind resources and it was only in November last year that the Premier attending the Paris Climate Change conference paraded the prospect of the state becoming 100 per cent “low carbon” electricity which he said would be good for jobs.
Deficiencies in the transmission grid were also demonised. A contributory cause of the price surge was the outage of the main Heywood link but this stemmed from that link being upgraded. And the link is being upgraded at a cost to consumers in Victoria and South Australia so that the already subsidised wind generators can get a better price.
With a bit of jawboning and more congenial wind the prices have now come off the boil.
Next month, once the beefed-up Heywood link is fully operational the risks of high price events will recede for a time. But this only papers over the cracks. It smears the costs of wind more broadly and allows South Australia better to take advantage of the reliable low cost coal generated electricity in Victoria.
Subsidised wind will continue to put pressure on the economic viability of South Australia’s gas plants which will require yet another consumer-financed increase in transmission – one for which the Premier has said he will provide $500,000 for a feasibility study.
And from the other end, the pressures that forced the closure of the South Australian coal power stations (and provide too great a political risk for new coal power stations) are at work in Victoria. Minister Lily D’Ambrosia has said that the aim is for Victoria to get to 25 per cent renewables by 2020 up from 12 per cent currently. Labor federally is looking to get to 50 per cent renewables by 2030. Reliability aside, all this means substituting coal based electricity that costs $40 per megawatt hour with renewables that cost $120.
This afternoon Mr Turnbull gave Josh Frydenberg an “expanded” environment and energy portfolio, which includes energy security, renewable energy targets and clean energy development and financing”. Can he restore some sanity to the nation’s energy policy?