© Reuters. FILE PHOTO: The Liddell coal-fired power plant is pictured in the Hunter Valley, north of Sydney, Australia, April 9, 2017. REUTERS / Jason Reed
By Clyde Russell
LAUNCESTON, Australia (Reuters) – Despite the logic that one of the world’s largest exporters of coal and liquefied petroleum gas (LNG) is struggling to secure enough domestic supplies to stay afloat, it is current reality of Australia.
The country’s national electricity market (NEM) has so far avoided widespread blackouts, including the populous eastern states, but not the more remote Western Australia and the Northern Territory. .
But this is more likely to be a matter of luck as the power generation system and grid are under strain due to a lack of supply amid shutdowns of coal-fired power plants, high natural gas prices, high energy production, and more. Seasonal sun exposure is lower and winters are starting to get cold.
As usual, the situation is much more complicated than politicians, industry lobby groups and commentators would lead you to believe.
There is some degree of job failure, mainly due to a lack of coordinated national energy policy between federal and state governments, resulting in underinvestment in the electricity sector.
Much of the blame can be blamed on the conservative Liberal-National coalition government, which held power at the federal level for nine years until it was ousted by the centre-left Labor Party in a general election last month. before.
The former government is seen by many as the head of the fossil fuel lobbying panel, even going so far as to advertise what it calls a gas-driven recovery from the COVID-19 pandemic. only led to approval to build a gas-generating plant in the state of New South Wales that energy analysts say is unnecessary and would not be economically competitive to operate.
Consideration needs to be given to what won’t happen, what is likely to happen and what will happen if Australia meets the dual goals of affordable and reliable electricity, as well as decarbonisation of the generation system. electricity using coal today.
What will not happen is that Australia will build new coal or nuclear power plants.
Considerable media attention has been devoted to this idea, but these are irrelevant arguments by conservative politicians who have done little to advance this agenda throughout. their nine years in power.
What will happen is that Australians will vote with their wallets and install even more household batteries and solar in a bid to cut energy bills, which have already increased by more than 20% for customers in Australia. some areas of this year’s NEM.
While this will help ease the pressure on household costs, it adds to grid management issues, as solar energy without batteries means excess electricity generation. in the middle of the day and there is not enough electricity at night, or during prolonged cloudy weather, as can sometimes happen in winter.
This is where the new government can act by subsidizing household batteries directly or working with state governments to ensure there is enough incentive for consumers to add more storage to their energy systems. their sun.
Federal and state governments can also act to increase incentives for utilities to install grid-scale batteries and build more wind farms to provide electricity when solar output is weak.
REGULATIONS COMING SOON?
What is also likely is increased regulation in one form or another, amid widespread public anger that the country competes with the United States and Qatar is the world’s largest LNG exporter. , and with Indonesia as the leading coal carrier, no guarantees can be made. sufficient supply at a reasonable cost for domestic demand.
Part of the problem last week when the Australian Energy Market Regulator was forced to suspend the spot electricity market was that peak natural gas producers could not make enough money due to high spot gas prices. .
The Natural Gas Lobbying Council argues that there is sufficient supply for the domestic market and that most customers have fixed-price contracts.
That may be true, but the gas corridor doesn’t like to talk about the high prices of spot supplies needed when coal-fired generators go offline, as is the case now.
The industry’s solution is to build storage for natural gas, where supplies can be released in times of stress.
This can be efficient, but conveniently puts the cost and operation of storage on someone else, most likely market operators or power companies, who will pass the costs on to formalization. higher order for consumers.
It is also possible that the federal government legislates gas companies to secure supplies at prices that are not related to spot LNG prices in Asia, which are too volatile and too high, and is likely to remain the same. Europe’s demand for gas as it tries to cut supply from Russia.
Australia’s current problems require both short-term and long-term solutions.
Short-term calls call for intervention to ensure an adequate supply of natural gas at a low enough price to ensure that peak gas plant operators can at least cover the costs if they want to produce power output.
Longer term requires policies to ensure that investments in solar, wind and storage are efficiently linked and integrated into the grid, while ensuring that peak plants run on electricity. gas has enough momentum to sustain the market as aging coal-fired power plants gradually leave the system.