When will we stop campaigning on climate change?
Sun tax is off
Chart of the week: Renewables progress YTD
Management of the Tomago aluminium smelter in NSW say they want to switch its 960 megawatt load to renewables after their coal-fired contract with AGL expires in 2028. This is the same Tomago that had been leaning on the Federal Government to keep the Liddell power station operating beyond its original 2022 close-by date. It’s a staggering 180 degree turn by a business that major shareholder Rio Tinto has been trying to offload for the past decade as it pivots to green branded zero emissions aluminium operations. Is the mountain now coming to meet Mohammed?
Talk is cheap, but sustaining a stable 960MW load has, to date taken a large and stable generator using either coal, nuclear or hydro. Running 960MW of renewables means being able to access 960MW of firming generation, because there will be times when renewables are not generating at all. And at these times, everyone else will want to be using the same kit. Can Tomago pull it off or is this just another really unhelpful spanner in AGL’s works as it announced a $2.1 billion loss in what The Australian described as a “horror year”. Try spinning that one Clive.
The IPCC released its report leading up to next year’s report and similar to its last report that continues to remind us that climate is getting worse and the global response to it is insufficient. It says a lot that were still in much the same sinking boat we found ourselves in 30 years ago. Maybe we’re going about it the wrong way.
The AEMC has watered down its solar tax to try and limit massive overbuilding of rooftop solar, which goes to show that the new management is going to be more easily swayed by political pressure than the old one. Is this a good thing?
The Victorian gas markets is looking pretty ugly by the end of the decade as supply dwindles, prices skyrocket and the state government cheers all this on. Will industrial gas consumers flee to Queensland which will remain blissfully self-sufficient for the rest of the decade?
Having built a shed-load of wind farms in western Victoria, residents are now up in arms about the massive transmission lines needed to connect them to the market. You know it’s bad when local Labor politicians are lobbying for a more expensive re-route of the lines. This just adds to the hidden cost of large-scale renewables.
Ampol have joined Caltex wanting to offer EV charging at their petrol stations, The Nationals want the ban on nuclear power lifted, and Andrew “Twiggy” Forrest claims that work is already well underway on his gas import terminal at Pt Kembla.
When will we stop campaigning on climate change?
Since world leaders came together to ratify the United Nations Convention on Climate Change (UNFCCC) in 1992, annual global greenhouse emissions have materially fallen only three times: twice during global recessions and once during a global pandemic. Global negotiations to reduce greenhouse emissions have been consistently and remarkably unsuccessful.
This week the Intergovernmental Panel on Climate Change (IPCC) released its latest Working Group 1 Report ahead of the Sixth Assessment Report (AR6) to be finalised in September next year.
Technically the report reconfirmed the accelerating pace of climate change, with human activity responsible for a 1.1℃ change in global temperatures since the start of the 20th century, increasing to 1.5 ℃ over the next 20 years.
Politically, the report was rolled up and used to berate political rivals for their failure to act, noting that this failure to act has been global and 30 years in the making. But it’s always handy to have someone to blame.
In Australia the report was predictably spun back onto the Morrison Government’s unwillingness to commit to net zero emissions by 2050. Morrison is sticking to the technology-only approach, and then curating much of the R&D investment. Commitments to cut emissions 30 years in the future are pretty meaningless without being bounded by a credible policy framework.
After a bloody 15-year political brawl on climate, both the Federal Government and the opposition have basically given up on a national policy to constrain emissions. It’s proven to be a difficult sell in suburban and regional Australia. In the US Democrat President Joe Biden faces the same problem and is offering the same solution. Spend more, constrain less. To the extent European countries have been marginally more successful in catalysing emissions reduction to date, it probably reflects greater bipartisanship around the issue.
Global emissions fell by 5.8 per cent last year, the biggest single global annual drop in recorded history. The COVID-19 pandemic cut energy consumption across the board, affecting renewables the least because they dispatch at zero marginal cost. The global post-COVID rebound has driven a commensurate rebound in emissions, predicted this year to be back up by 4.8 per cent as the global economy recovers.
It’s not all doom and gloom. The rate of emissions growth is slowing with increased global renewable penetration, but will require much more accelerated investment and technology shifting to have a chance of reducing emissions sufficiently to avoid temperature increases above 1.5 degrees.
Maybe, after three decades of sub-optimal outcomes, it might be useful to question the way we have gone about tackling climate change. The United Nations climate home page looks like it belongs to an activist group, and the purpose of activism is pressuring others to act. But the UN is trying to speak to all governments and their populations with a single voice, and that ignores the very different dynamics each country faces. In doing so, it sets up the climate-sceptical elements of each society to react against being told what to do by an unelected supranational body.
Maybe treating climate change as a fashionable cause, and not the science and engineering problem it has always been, has been part of the problem.
Sun tax is off
It’s rare that the arcane world of energy rule-making attracts a lot of media attention. Every so often, though, an issue comes up which can be spun into a broad story. The latest one is the “sun tax”, a draft rule by the AEMC to allow network businesses to charge households with solar PV for exporting to the grid. Although the draft rule had its genesis in proposals by welfare and environmental groups that sought to spread the costs of adapting the grid to two-way flows more fairly, it was still fairly controversial. For years, solar PV owners have been fed the line that they are providing an unalloyed good and deserve to be rewarded handsomely – how could they possibly be asked to pay for the privilege of sending their excess solar to the grid?
The backlash has had an impact. In its final rule, the AEMC has softened the export charges proposal by requiring distribution networks to offer a “basic“ level of export without charge (while distributors don’t actually send bills to customers, retailers generally pick up these chargers and pass them on directly to customers). The definition of basic is pretty loose, but it must allow some level of export, as another part of the reforms is to establish a clear obligation on the networks to facilitate customer exports as well as consumption. Static (i.e., permanent) zero export levels will no longer be allowed. Some networks with very high levels of PV on their system have been using these to manage the impact of solar.
The principle of charging customers for solar export is still retained though, although the AEMC is at pains to note that just like consumption tariffs, export tariffs must be approved by the AER. And the AEMC points out that if paying for export gives you more export opportunity than the basic export tariff, it may be in customers’ interests to be on a paid export tariff. There is some devil in the details here, as it is retailers who will be presenting customer with their tariff options.
The networks themselves will see the final rule change is largely positive. Establishing a clear obligation on them to provide export services actually makes their lives easier as they can use this as the basis for proposing the necessary expenditure when they submit their business plans to the AER as part of determining how much revenue they can raise. This does not mean that the AER will wave all such expenditure through. It has spent the last couple of years working on how it will evaluate expenditure aimed at integrating distributed energy such as solar PV.
The AEMC has presented itself as getting out in front of developments in the market – something it has been criticised for failing to do in the past. But this doesn’t mean that the rules will start from tomorrow – they are being phased in over the next four years to allow time for deciding some of the key implementation details.
NIMBYism is a powerful force. No major infrastructure project can avoid it. Following a backlash against coal mines, fossil fuel plants and wind farms, the latest target is a transmission project. Namely the Western Victoria Transmission Network Project, whose purpose is to better link western parts of the state that are good locations for new renewables to the main load centre of Melbourne.
The proposed route runs through highly productive agricultural area, including Australia’s best potato-growing land, meaning that Food giant McCain’s has been drawn into the opposition camp. While transmission towers on farmland is nothing new, potato growers argue that the restrictions on irrigation methods and other machinery they currently use would make their farms unviable. Local MP Catherine king upped the ante this week, backing her farming constituents, by suggesting the entire project go back to the drawing board. This seems unlikely – AEMO began scoping out the project in 2017 and concluded the proposed route was the best bet in mid-2019.
However, Ausnet who won the tender to develop the new transmission lines and terminal stations, still has to get state and federal planning approval for the specific route, as well as the environmental impact assessment. So, there is still a chance for the opposition to put a spanner in the works.
The local council has got in on the act too, commissioning an electrical engineering study of a potential alternative to the overhead towers – underground HDVC cables. The study concludes that this alternative is both feasible and has a number of technical advantages, including controllability, lower losses on the transmission lines, voltage support. The report also argues that going underground can be “superior in terms of environmental impact and aesthetics”, i.e., you can’t see the darn thing. All this will be music to the ears of the NIMBYs.
There’s a minor catch, though. The report estimates that the underground HVDC option would cost $2,696m versus $470m for the existing overhead plan. Since AEMO’s 2019 analysis estimated the net benefits at only $301m, this doesn’t seem like great value for money – unless you put a very high value on “aesthetics”. Which people often do if they are not paying for it. The cost will be recovered from all users of electricity in Victoria, large and small. This 5x cost difference is why AEMO didn’t seriously entertain this option in its analysis.
But it could still happen, if enough political pressure is brought to bear. It already has, in Germany, where opposition to a major power transfer project to move renewable power from the north down to load centres in the south has forced the project underground. The 700km project, Suedlink, is expected to cost an eye-watering 10 billion euros (A$16bn). Opinions differ on the premium being paid for going underground but estimates range from 3-6 times more expensive than traditional overhead lines.
In the event that the NIMBYs win their battle and the underground option becomes a reality, it will set an expensive precedent from the NEM. Once it happens once, NIMBYs everywhere will point to it as a justification for doing it for all future projects. So, the real cost to electricity consumer would not be an extra $2bn, but far, far more.
Chart of the week: Renewables progress YTD
The last two years have been bumper years for large scale renewables investment. Australia has installed more wind and solar per capita than any other nation over this period. But it was always going to be hard to maintain this breakneck pace. Halfway through 2021, it is clear that the rate of investment has slowed. 471MW of renewables plant >100KW has been accredited by the CER, compared to 2019MW at the same point last year. The industry blames a range of factors including delayed and complex connection processes, the way electrical losses are assigned to plant and a lack of national policy support. The pace may pick up yet: the pipeline of committed and probable projects is growing; and the Clean Energy Regulator (CER) data has a lag which usually catches up by the end of the year. The list of committed projects has grown by a net 545MW, to 3,932MW. These projects have financial backing and planning permissions and are generally expected to be commissioned eventually. However, the industry peak body is currently taking a gloomier view of industry prospects.
Chart 1: Change in status since 1 January 2021 (MW)
New projects added to each stage of development are a mix of solar and wind, but solar is clearly leading the way, with all the newly committed projects and most of the newly accredited projects being solar PV. By contrast the new probables are dominated by wind, largely due to the large Goyder project in SA, which has a contract with the ACT government for part of its capacity. Note that these totals do not match chart 1, because chart 1 is net of projects that have changed status. West Wyalong solar is double counted because it has been added to probable and then moved to committed in a few months.
Chart 2: New additions by plant type (MW)