Australia’s energy transition
Liddell power station has shut down, as expected
On July 20 the Australian Energy Regulator produced its regular Wholesale Markets Quarterly Report. Its accompanying press release – Wholesale energy prices increase but remain below unprecedented highs of 2022 – includes a remark that Liddell power station has closed, as expected. That lost capacity has been partially offset by a record amount of wind energy supplying the market, but there has been no reduction in the reliability of the network.
That report has given an opportunity for anti-renewable voices, particularly those in the remnants of the federal Coalition, to suggest a direct causal relationship between Liddell’s closure and higher prices.
Also, if wholesale prices have fallen, why are retail prices now rising? In an ABC post by Kate Ainsworth – Annual wholesale electricity prices fall by 59 per cent as households face surging power bills – Tony Wood of the Grattan Institute explains that this has to do with the way prices are set in the National Electricity Market, with a substantial lag. Only now are consumers paying for the high wholesale prices of 2022 (a rise of about 2.5 cents per kWh). The recent reductions won’t show up in retail prices until after June 2024. Such is the absurdity of the NEM.
There was relationship between Liddell’s closure and higher prices, but it was not in the way the anti-renewable mob ascribed simple cause and effect. As Giles Parkinson explains in Renew Economy – Energy oligopoly turns screws on customers after Liddell exit and renewable pause – Liddell had been bidding prices down essentially because it was running down at a low marginal cost. And because it had become impossible to regulate its output in response to demand, it was hardly contributing to the network’s reliability.
Parkinson explains that the big utilities are not doing much to make a transition to wind and solar. That’s because “they are making so much money from their existing fossil fuel fleets, and that is likely to continue for a while, as long as there is not too much new wind and solar capacity to affect their bidding patterns”.
In another Renew Economy article – Rooftop solar takes biggest bite yet out of fossil fuel industry’s energy lunch – Parkinson explains that the growing up take of rooftop solar, driven in part by high prices set by the fossil fuel producers, has taken a large bite out of the fossil fuel companies’ revenue, helping to reduce wholesale prices. He also reminds us that the Coalition is running a hysterical campaign against rooftop solar, suggesting it is a threat to national security – as if climate change isn’t a threat to national security.
As with so many sectors of Australia’s economy, this story is about market power, ill-advised privatization, and the Coalition’s pathological hatred of renewable energy.
Australia has heaps of wind and sun. So do many other countries
Australia has an opportunity to become a major global player in renewable energy, but it’s a highly competitive market, CSIRO Chief Economist Paul Graham reminds us in his Conversation contribution: Australia is touted as a future clean energy ‘superpower’ – but research suggests other nations will outperform us.
He explains the conditions making for competitiveness in renewable energy. Having wind and solar resources is important, but there are labour costs in installing wind and solar plants, and Australia has high labour costs in comparison with China, India and “developing” countries in Africa.
The CSIRO has studied the cost of renewable energy in 194 locations around the world, and they project that we will be close to fourth place in 2030. Promising, but we still have to work to make the best of our resources.
Financiers are backing away from thermal coal
Whitehaven Coal has been unable to secure a billion dollars of debt refinancing, which it has been seeking to allow it to develop new thermal coal mines.
On ABC Breakfast Will van de Pol of Market Forces explains how his organization and others have been campaigning for financial institutions to refrain from funding new or expanded thermal coal projects: Major coal miner refused debt refinancing.
The Whitehaven situation is important, he explains, because while financiers have been reluctant to provide funding for new projects, it has generally been easier for firms to obtain finance for general corporate operations. Whitehaven was seeking finance to sustain and expand its general operations.
Whitehaven would now be seeking finance from other sources, albeit at a higher cost of capital. If it abandons its plans to expand coal mining, that would surely be in shareholders’ interests, who could enjoy a return of capital (the firm is well cashed-up), or dividends from investments in projects with a long-term future. Whitehaven’s proposed new mines would take many years to develop, over which time the global market for thermal coal will weaken, leaving the company with stranded assets, van de Pol explains. (9 minutes)
Electric vehicle charging – still some way to go
If electric vehicle sales are rising quickly in north Queensland they must be booming in Balmain, Fitzroy and Norwood. It’s clear that growth in the number of charging stations is helping overcome people’s range anxiety.
Nevertheless, as Kai Li Lim of the University of Queensland and Scott Harrison of the University of California, Davis, point out, EV drivers have realistic fears about “charge anxiety”. Will the charging station be fully occupied, will it be working properly, will the plugs be compatible? They point out that no such anxieties exist with gasoline stations, which are remarkably reliable.
Still room for others (Myrltleford, Victoria)
Their Conversation article – How far to the next electric vehicle charging station – and will I be able to use it? Here’s how to create a reliable network – urges governments to take a lead, in conjunction with industry, setting standards and regulations, and investing in skills, to increase confidence in EV charging.
Cairns and Townsville, two cities where EV sales have boomed, are a few steps ahead of Collie, a town in southwest Western Australia with a coal mine which has a limited life. The Collie Council has rejected a proposal by a company to install eleven EV charging stations. Collie already has one station, and they note it doesn’t get much use. Confirmation of the adage “don’t build it and they won’t come”.