First impressions matter. The Australian energy community has been waiting patiently for two months to hear from newly installed Australian Energy Market Operator (AEMO) CEO Daniel Westerman. Yesterday a CEDA lunch in Melbourne was set as his unofficial coming out, his debutante ball.
The headline message from Westerman’s carefully scripted lunch speech was that he wanted the National Electricity Market (NEM) to be able to run at times on 100 per cent renewables by 2025 if the occasion arose.
It was a statement laced with politics and ambition, even though the messaging from AEMO had been the appointment of Westerman was a deliberate shift away from the more interventionist approach taken by his predecessor, Audrey Zibelman.
The first problem in running this message was confusion. Many journalists who received the carefully dropped speech the night before interpreted his line as meaning the Australian grid will consist of 100 per cent renewables by 2025. That’s technically pretty much impossible, and it’s also a policy matter, not an operational matter, so not Westerman’s call to make.
Such statements are likely to draw the ire of the Federal Government who will see them as a continuation of the highly interventionist approach initiated by Zibelman, and the horse leading the cart. It is the role of national government to set climate policy, and AEMO to operate the grid safely and reliably. Not the other way around.
It also creates the impression that renewables will be given “first among equals” status by AEMO in the coming years, and that renewables developers will feel entitled to think that they will be always be dispatched by AEMO regardless of what they build or where they build it. This risks countermanding the efficiency and consumer focus at the core of the National Electricity Objective, which is supposed to sit at the heart of AEMO’s decision making process.
In the highly polarised politics around climate and energy, making a first impression such as this means Westerman will have his work cut out proving he hasn’t already taken sides and that, as we were led to believe, he wants to focus on getting AEMO to be more effective and efficient, because it has a challenging job over the next decade, and we should assume Westerman is likely to be there for most of it.
In operational terms, it was also a pretty extraordinary call. At the lunch, Westerman explained his rationale for the ambition was because renewables were zero-cost generation, and therefore they should always be dispatched first. That’s not true of course. Renewables aren’t zero cost. They are near zero marginal cost to operate, but they have to pay off their initial capital costs.
More importantly, the reason why the NEM in the early 2020s is difficult to get to 100 per cent renewables, even for a nano-second, is because there are still 16 coal fired power stations operating along the eastern seaboard. Running 100 per cent renewables means switching them all off at the same time. This may be technically possible, but getting them all switched back on in the ensuing hours when they are needed will be extremely challenging.
Westerman noted that South Australia had already achieved 100 per cent renewables, and now it was the time for the rest of the NEM to follow. But while South Australia doesn’t have any coal generators, it does rely rather heavily on coal fired electricity from Victoria to quickly help pick up the slack as renewables generation drops off. At 100 per cent renewables the NEM doesn’t have this option, because coal plant takes lot more time to start up than to ramp up from a situation where it is already running.
Reaching 100 per cent renewables operation is the objective of a zero emissions, renewables grid. It will require the addition of major supporting infrastructure – lots more batteries, pumped hydro and hydrogen – to make it work. Getting to the point where this is feasible will, if we’re quick – take a decade. It won’t happen in four years time.
And so Westerman’s first impression is that he has made a promise that he isn’t authorised to make and cannot keep. For such a smart and successful professional, this was a dumb way of saying hello.