The Blackout season cometh

The arrival of summer in Australia is heralded by some time honoured traditions; putting up the Christmas tree, the sound of test cricket on the radio and the now traditional pre-Christmas alarm about the risk of summer blackouts.

Blackouts – the sudden and unexpected loss of electricity supply, remain an annoying, and sometimes expensive, reality in every electricity system in the world.

While Australian energy politics is still scarred by the entire state of South Australia going dark in September 2016, we’re not alone.

In June this year around 48 million South Americans lost power for up to 14 hours when a transmission line failed, triggering the collapse of the grid across three countries. In August more than a million households around London were blacked out from the cascading effects of a lightning strike.

Then in October more than a million Californians were hit with rolling blackouts when energy companies had to switch off power to avoid the risk of sparking bushfires.

Electricity grids are large and complex machines that produce and move energy with remarkable efficiency and reliability. Like all machines, things can and do go wrong.

Increased use of intermittent renewable generation sources and learning to build a new type of electricity system while simultaneously closing the old one is adding additional risks and technical challenged. The real question is what sort of reliability are we willing to live with and how much are we prepared to pay for it.

Energy Ministers kicked off festivities late last month when they asked the Energy Security Board (ESB) to review the way electricity reliability is measured and to report back after summer on its advice on reforms to keep the lights on.

Electricity reliability is a political killing field. It’s a net negative for any incumbent government. The electorate doesn’t notice a reliable system, only an unreliable one.

Most will not have noticed how much more reliable electricity is now than in the 20th century, when blackouts were an infrequent but regular part of suburban Australian life and a box of candles under the kitchen sink was de rigueur.

They also don’t care what caused the blackout, because the impact is the same. Around 96 per cent of blackouts in Australia are caused by relatively small and hard to avoid failures in the vast network of poles and wires like power lines coming down, or local transformers failing.

Another three per cent are caused by the system shutting down because it was pushed outside its safe operating limits, like the system black in South Australia. Only 0.3 per cent of all blackouts over the past decade were caused by running out of power.

The current reliability standard, currently under review, requires 99.998 per cent of all electricity demand is met each year. The reason it is not 100 per cent is because the cost of trying to deliver that tiny extra 0.002 per cent of certainty would be prohibitive.

That makes perfect sense to the panel of consumer groups, energy businesses and large industrial customers who agree set the standard. But it’s a hard sell for Governments anxious about dwindling supplies of certain, dispatchable power as another summer approaches.

Faced with such uncertainty, politicians have a tendency to over-compensate, which can get expensive. In 2004 a decade of chronic underspending on Queensland’s poles and wires network combined with storms and heat weaves to deliver a series of hugely unpopular blackouts that summer.

Then Premier Peter Beattie responded with the full force of his highly respected political instincts: he announced multi-million dollar spending on fixing the networks and ramped up the required reliability standards. Nothing was too good for the people of Queensland.

To comply, Energex and Ergon were required to drastically increase spending, much of it unnecessary, across the entire network. The effect of these reforms led to the infamous “gold plating” of networks, paid for by consumers in higher power prices.

Once AGL and Origin complete repairs on their two Victorian power stations later this month, supply conditions this summer will be mildly better than last summer, thanks largely to more than 3500 megawatts of new renewables and a new gas power station in South Australia.

The new renewables will help, but don’t replace the certainty of the ageing coal generators that have and will continue to exit. Emergency measures like the Reserve Trader Mechanism (RERT) have also helped, but are expensive and should be seen as a last resort.

The real opportunity here is whether the ESB can use this rare and valuable outbreak of political consensus to suggest structural reforms that not only reframe reliability, but steer us towards a more affordable and sustainable electricity system at the same time.