Tom Burton: a long week in power politics

By Tom Burton

March 17, 2017

For a country which is arguably a world energy superpower, the partisanship and pure puerility of our domestic energy policy making is stunning.

Australia is the world’s second-largest supplier of coal, third-largest uranium supplier, and by next year will be the largest supplier of gas to the world. We are also a relative leader in large scale deployment of solar and wind energy. In that capacity we have every right to be projecting and shaping global energy policy.

With that leadership should come a depth of major service and other related industries feeding off our undoubted natural advantage in energy supply. Think how other countries have leveraged their advantages in advanced manufacturing (eg Japan, Germany), computing (eg US, Israel) and even shipping (eg Liberia and Panama) to build out large scale local ecosystems.

Australia has only a few core strengths around which we can build globally robust, annexed industries. Mining and agriculture are probably the only two sectors for which we can rightly claim deep expertise. Energy arguably should be in this group too.

Instead, energy policy has become a poster child for what most annoys citizens, business and community groups about the inability of the political class to frame a sensible consensus around the road map for a critical piece of our economic infrastructure and technology change.

This week was a classic, as the prime minister, premiers, energy CEOs and a bunch of billionaires were caught trying to sort out in real time the obvious dysfunction of our complex cross-jurisdictional energy and regulatory framework.

In South Australia the government is now back in the energy generation game with a smart new half-billion dollar gas generator and Australia’s “biggest” battery, following its summer horribilis. Energy may be a long-run game, but bidders for the $20 million battery have only two weeks to submit their bids.

Not to be outdone, Prime Minister Turnbull suddenly unveiled a plan for an additional $2 billion pump hydro storage plant in the Snowy Mountains. Turnbull quickly drove south to Cooma, and dressed in high-vis gear, enthusiastically unveiled the idea as a smart fix for the price volatility that has plagued the national scheme and left all governments at the mercy of the incumbent gas and coal operators.

The Snowy Hydro already pumps some water uphill and holds it until demand peaks, acting as battery back-up for the national grid. The idea of increasing its capacity has been around since the 1980s — I recall sitting in meetings as engineers drew on maps for ministers showing how easily it could be extended.

The Commonwealth is a minority owner (13%), with NSW (58%) and Victoria (29%) the dominant shareholders, but by the end of the day Turnbull was pledging for Canberra to fund the whole scheme. Presumably this also means the 2014 audit commission recommendation to privatise the utility is now off the table. (John Howard also tried to sell it back in 2006.)

The night time meeting when Gary Nairn, former member for Eden Monaro (left), prevailed upon John Howard not to divest from Snowy Hydro.

It all felt very Neville Wran, the venerable late NSW Labor premier (76-86), who brought the concept of the “pic fac” to Australia. Wran was Turnbull’s best friend and decade-long business partner, after retiring from politics.

Turnbull was on a roll. In a scene that would make Beijing proud, he had the previous day summoned the CEOs of the major gas companies to Canberra to warn them the big regulatory stick — otherwise known as compulsory reservation — was coming their way if they did not ensure continuity of supply to the locals.

The gas companies have been sending LPG offshore to take advantage of better prices, which of course is exactly what the policy is meant to do. As with petroleum in the 80s, Canberra’s econocrats several years ago purposefully liberated the gas market from local price-fixing, meaning Australian consumers were going to have to start paying the same prices as international consumers do.

With the big baseload, low-cost coal plants of the Hunter and Latrobe valleys coming to the ends of their lives, the gas generators have been holding the whip hand, controlling peak supply and being able to extract massive premiums during unplanned shortfalls.

This in turn has seen domestic prices climb, fuelling an unholy war between the fossil and renewables sectors over who is to blame, with the Coalition government strangely and vociferously allied with the fossil lobby.

Until yesterday. Turnbull’s intervention dramatically changes the game, giving the battery power sector a major leg up and arguably will mean, over time, far less reliance on gas to supply into the peaks.

The technology and costs to enable widespread, economic battery deployment in homes and businesses is rapidly arriving. Battery power facilities are already significantly cheaper than gas, so along with the deployment of Turnbull’s pump hydro and other more industrial scale storage systems it is highly likely that battery and other storage systems will emerge as the major source of extra power when needed.

This is precisely the point Elon Musk, the man behind the Tesla electric car, was making when he had the ear of the PM at the start of what has been one of those highly theatrical weeks in politics — capped off with the bizarre on-camera smack down yesterday between SA Premier Jay Weatherill and federal Energy Minister Josh Frydenberg.

Whatever the theatrics, the recognition of the game-changing nature of battery storage will be a major relief to state governments. They have been caught between the gas and farm lobby and their shock jock camp followers over the divisive fracking issue.

The rapid fall in solar and wind costs already means they are quickly becoming more than competitive with alternative energy sources (including nuclear) and is why the big energy players are investing so heavily in these technologies.

As with most things, modern industrial technologies are also rapidly remaking energy markets. In this world the issue becomes flexibility, rather than the older paradigms of base and peak demand. Turnbull’s big pump hydro intervention and the rapid uptake in broad scale storage is promising to bring a mother load of flexibility into the system.

This is exactly what Professor Blakers from the ANU Research School of Engineering has been arguing. Blakers is well respected in the scientific community and in February predicted that with the deployment of pump hydro and other domestic and industrial energy storage, Australia would over the next 15 years have an energy grid based on 100% renewables.

This of course means we are in for a tricky transition period and is where the national energy market review now being undertaken by chief scientist Alan Finkel becomes critical if we are to walk back from the destructive hyper-politics of recent times.

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Mark Duffett
Mark Duffett
5 years ago

“Battery power facilities are already significantly cheaper than gas”. Sure about that? My understanding is they cost significantly more, all things considered. What’s your source? Something more reliable and less partisan than RenewEconomy, I hope.

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