Commentary
The Australian energy minister’s transition policies are like something out of Lewis Carroll’s Alice books: it seems the harder Chris Bowen tries to run towards his destination, the further away from it he gets.
Take his newer and harder-running Capacity Investment Scheme (CIS), a development on his original scheme announced in December 2022.
It promises a lot but is likely to be nothing more than a poorly shuffled deck of cards.
The original scheme was to provide 6 gigawatts (GW) of dispatchable renewable power, and the results of the first pilots have just been announced. The first participants in this scheme will be six projects providing 1.075 GW of “reliable capacity” in New South Wales.
The revised plan expands the scheme to 32 GW all-up, with 9 GW of dispatchable capacity and 23 GW of variable capacity. This is meant to meet the government’s aim that 82 percent of electricity generation will be renewable by 2030.
The numbers sound impressive, but what do they really mean?
Australia currently produces 273,265 gigawatt hours of power every year. Of that, 88,208 GWh is renewable.
To get to 82 percent, the government needs to generate another 135,869 GWh with renewables.
On average that is 15.51 GW every hour.
So, you might be thinking that Mr. Bowen’s 32 GW capacity will more than do the trick, in which case you would be wrong.
As is well known by now, the sun doesn’t always shine, and the wind doesn’t always blow.
If 32 GW were all wind capacity, it would only produce 11.2 GW on average each hour, varying between zero and 32 GW. If it were all solar then the average figure would be 6.4 GW.
In fact, not only will the capacity be a mix of wind and solar, but it also includes 9 GW of batteries. They complicate the picture because they store energy, they don’t produce it, and they will need to get that energy from variable sources, further reducing their capacity utilisation.
And while wind can run for 24 hours under the right conditions, and solar for 12 hours, the very best batteries can run for four hours, but most can only manage two.
So 9 gigawatts of batteries cannot backup (firm) 23 gigawatts of wind and solar.
Coal and Renewables Are Not Equal
In his release announcing the extension of the original scheme Minister Bowen implies that it will replace 26.7 GW of coal-fired power capacity.But just on the averages, you would need between 61 GW and 107 GW of wind or solar capacity to meet this challenge—plus huge amounts of batteries.
The equation gets worse.
One of the reasons for the revised scheme is that the speed of installation of renewable power has stalled.
The Clean Energy Council reported in August that “investment levels so far this year are 50 percent below the rolling 12-month quarterly average of 699 MW and are a long way off the pace necessary for Australia to achieve an 82 per cent renewable energy share by 2030.”
Why is that happening?
One reason is that it is becoming increasingly hard to make money out of renewable energy because it is all available at the same time. When the sun is up, solar panels everywhere are producing power, and when the wind is blowing the same applies to wind turbines over large swathes of the country.
This leads to famine and feast where electricity prices can go from less than -$50 a MWh (it was -$99.99 at one stage in South Australia recently) to $15,500 a MWh (the all-time record).
So here’s the problem—the more unreliable renewables you have the worse this gets, unless you have storage capable of soaking it up when the price is low and selling it when the price is high, which we don’t.
Mr. Bowen’s plan tacitly acknowledges that part of the scheme is for the government to subsidise the losses of the generators when they sell below cost in return for a share of the profits when they sell above a nominated price.
This will only mask the problem. It doesn’t matter who directly bears the loss, in the end, it will be the taxpayer either in taxes or electricity tariffs, the losses will still be there, and they will be worse if Mr. Bowen is successful in pulling in more unreliable generators without storage.
A sensible person would slow down the implementation of renewables until storage was in place. This would mean ditching the government’s fantasy commitment to 82 percent by 2030.
The only form of grid-scale storage that is commercially viable is pumped hydro, but we are looking at the end of this decade to the beginning of the next before there is much of that available.
Timelines will probably blow out—after all, Snowy 2.0 was supposed to be operating by now.
Taxpayers Bear the Cost
There is also nothing in this package to accelerate the uptake of network capacity, which is also sorely needed.Still, this accelerated policy may not have as big an effect as the government intends.
Each project has to bid for government support, and the terms and conditions will vary depending on the project. The guidelines require the projects to be well-advanced, and the government has indicated it wants as short a contract as possible.
When you’re venturing hundreds of millions to billions on an energy project you generally want to know what the parameters are at the planning stage, not halfway down the track.
Rent-seeking capital is international, and there are probably better deals elsewhere.
Unfortunately, before the scheme fails the government may have squandered a lot of taxpayer money.
We don’t know how much the scheme will cost—Mr. Bowen says this is commercial-in-confidence—so with this lack of transparency, the government could be tempted to spend up in a “whatever it costs” attempt to meet their arbitrary targets and get re-elected.
Mr. Bowen takes a shot at nuclear in his media release announcing the CIS: “The same [Liberal-National Party] that had 22 failed energy policies in government now has none—just a risky all-in bet on small modular reactors that are unproven, too slow, and too expensive.”
But if he wanted to get to net zero by 2050, nuclear could clear his “through the looking glass” problem and get him to his target sometime next decade at a lower cost.
For starters, he’d only need around 25 GW to replace all the remaining non-renewable generation in the country, he wouldn’t need storage, he wouldn’t need extra networks, and he wouldn’t need to bribe rent seekers.
And he would call time on the Mad Hatter’s Tea Party that is Australian electricity generation.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
