Australia is experiencing one the worst energy crises since the 1990’s due to the war in Ukraine, supply chain shortages, natural disasters and an increase in global demand for fossil fuels. But it is also mainly of our own making.
Prime Minister Anthony Albanese has been quick to blame the Coalition for all its woes despite the Coalition installing the most amount of renewable energy generation out of any developed country in the world in the past 10 years. Despite this, Albanese is claiming that more renewables are the answer.
The blame is being pushed onto our coal and gas producers without any reflection of the dereliction by all of the states governments with their failure to maintain our coal fired power stations in the hope that renewables will miraculously keep the lights on.
Our state governments are also the ones that do the royalty deals and sign the approvals for coal and gas approvals. They have allowed our own domestic energy security to be undermined by a short-sighted grab at royalties and short-term jobs.
Western Australia had the foresight to place a domestic reservation cap on their gas production and their power prices have been relatively stable. However, they are now also facing issues as their coal fired power stations become overloaded with cheap intermittent renewable energy flooding the network during the day and leaving large holes in the network at night.
Albanese and Treasurer Jim “training wheels” Chalmers now have a plan to “cap” the price of domestic coal and gas to stabilize the electricity network.
It is an example of sheer stupidity made by politicians who don’t understand even basic economics.
Basic economics dictates that price is determined by supply and demand. When demand is high and the supply is low – the price goes up.
Labor’s plan to “cap” the sale price of gas and coal – will directly restrict supply and rather than push prices down will actually push prices up or lead to shortages.
Australia’s coal and gas producers are also able to export their products to international customers who are more than willing to pay the going market price. Coal and gas producers will simply divert product to the more lucrative market and leave Australia electricity consumers in the dark.
Already, Shell, one of the largest gas exporters in Australia and the world, has threatened to not divert export supply to domestic markets in the event the price is capped.
While Australia should never have ceded our coal and gas resources to foreign multinationals – the current electricity price issues is actually being driven by renewable energy projects.
The big push to solar and wind in the last ten years – which now make up 30% of our electricity mix – have pushed power prices to basically zero in the middle of the day when supply is highest and demand lowest. But for coal fired power stations that are designed to provide baseload energy production 24 hours a day, 7 days a week – price volatility means they need to ramp up generation overnight and reduce it during the day which increases the need for maintenance and reduces profitability.
While renewables on paper might appear “cheaper” – once we add in the storage and transmission costs, they are highly expensive and inefficient. As an example, the average dispatch cost of various power sources in Australia over the last 12 months have been:· Rooftop solar – $90 per megawatt hour (MWh) (8% of network)· Solar farm – $110 per MWh (5%)· Wind – $135 per MWh (12%)· Brown Coal – $140 per MWh (15.3%)· Black Coal – $205.64 per MWh (43.2%)· Hydro – $220 per MWh (8%)· Gas – $230 per MWh (4%)· Battery discharging – $256.22 (0.1%).The most expensive power in the grid – other than diesel – is power discharged from batteries.
So we have a situation where renewables flood the market during the day – and then at night the most expensive power is from batteries used to store renewable energy.
The simplest solution to the current glut is to actually limit new and existing renewable connections to the electricity grid until such time they have built sufficient battery storage and grid transmission capacity to not undermine the entire network.
Renewables can then be switched on as coal fired power stations are phased out but there is sufficient storage and transmission to avoid the crash and shortages.
But that would take common sense – and with our current state and federal governments – that’s in a very short supply.
