South Australian “energy intervention”: a gift to the gas industry

Pelican Point gas-fired power station stayed idle during the blackout on February 8.
Friday, March 17, 2017

In public policy, there are many dog’s breakfasts presented as considered initiatives. Rarely, though, are we served up such a self-contradictory, irrational and generally talentless a dish as the new “energy intervention” announced by South Australia’s Labor government on March 14.

Aimed at side-stepping conservative attacks over recent power cuts, the government’s plan makes some provision for storage back-up to underpin wind and solar. But mainly, the $550 million scheme consists of large-scale concessions to fossil fuel interests — in this case, the gas industry.

First, the good news. A $150 million Renewable Technology Fund will pay for the building, by next summer, of Australia’s largest grid-connected battery facility. With a capacity of 100 megawatts, this facility will allow the storage of low-cost wind and solar energy. Providing extra supply during peak demand periods, it will aid in preventing blackouts.

All very rational and necessary. But by far the government’s largest allocation — $360 million — is for building a new publicly-owned 250 megawatt gas turbine power plant, to be fired up when demand presses critically against supply.

And here, in a rush, come the irrationalities. In the relatively new Pelican Point power station, South Australia already has a little-used turbine with 240 megawatts of capacity. Its owner, French corporation Engie, keeps it semi-mothballed because the profits from operating it are considered insufficient. The fact that the turbine stayed idle was among the key causes of a blackout that affected 90,000 consumers on February 8.

Will the government now lease the Pelican Point turbine, and use it as a “spinning reserve” on hot afternoons when demand becomes extreme? It appears not.

Meanwhile, who says gas will even be available to run the government’s projected plant? More than 70% of Australian natural gas is exported under contract to lucrative international markets. Output is set to decline, and large-scale industrial users of gas are already expressing alarm at potential supply shortfalls.

High world gas prices, feeding back into the Australian market, are the main cause of spiralling local energy bills. What does this suggest for the economics of a new gas-fired installation?  

As explained by energy commentator Giles Parkinson in a March 9 article, future gas supplies are likely to come from higher-priced sources. Even if a proportion of Australian gas is reserved for domestic use, prices are not expected to come down.

Exactly the same objections apply to a further point in the government’s scheme. Dangling the carrot of bulk state energy orders before private capital, the government hopes to induce energy companies to build new generating capacity. The clear assumption is that this will also be gas-powered.

To sweeten the pill for the gas interests, the government further projects a $24 million handout for new gas exploration. Landowners will be offered a 10% share of state royalties on gas extracted — should they want to imperil their underground water supplies and those of their neighbours.

What about renewables? Unlike the steep upward trend of gas prices, the cost of renewable energy is falling fast. A recent Australian study concluded that wind and solar, combined with energy storage, are now cheaper than new gas for providing reliable electricity.

Currently, the federal government has three proposals before it for utility-scale solar thermal with storage near Port Augusta in South Australia’s north. But in more than six months, this process has not moved past initial conversations.

The clear cost leader among renewables is now solar photovoltaic energy. Its possibilities become especially exciting when it is combined with pumped hydro storage. The latter is many times cheaper than batteries over the near-century lifespan of its installations.

As well as a vast solar resource, South Australia has numerous locations suited to seawater pumped hydro. Attention has focused on the possibilities of a 300-metre-high plateau south of Port Augusta, adjacent to Spencer Gulf. Pumped hydro could also store energy from the state’s burgeoning wind farms.

Once initiated, this mix of technologies could be expanded many times over, while keeping intrusions on the environment modest. From near 50% renewable energy, South Australia could achieve 100%, with first-rate energy security. And it could go further, sending large amounts of clean energy interstate via two high-voltage interconnectors to Victoria.

Polling has consistently shown renewables to be highly popular with the South Australian electorate. Clear proposals along the above lines would be a certain vote-winner. But confronted with fossil fuel industry pressures and propaganda, Labor has run scared.   

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