Saturday, February 11, 2017

Why isn't gas generation subsidised, somehow?

With the argument over electricity generation going on, I make the following observations:

*  no one seems to be disputing that there would in fact have been enough electricity for South Australia to avoid load shedding last Wednesday if an additional gas generator had been turned on.  

*   The SA government and Labor politicians therefore blames the Australian Energy Market operator for not having directed Pelican Point to go fully online.   The authority (if not them, then someone) tried to blame the government for not telling it via an emergency direction to turn on the generator.  (The government responds that realising a forecast high temperature does not count as an "emergency" - and that seems more than a reasonable argument.)

*  The Federal government, up to and including Turnbull, has politicised the blackouts to an extraordinary and quite  sickening degree:  using it as an opportunity to deride renewable energy and promote coal as it if is a magic elixir, instead of the more obvious question - how do you make a system that already has adequate capacity use it to avoid brown outs.

* Ross Gittins wrote a plain speaking article a few days ago explaining what lots of people have said - the core of the current problems revolve around government policies regarding gas.   Here's Gittin's conclusions:

Turnbull blames South Australia's blackouts on its excessive enthusiasm for renewable energy which, pending the development of storage arrangements, has a problem with intermittent production.

He doesn't admit his parity-pricing policy is contributing. It was expected that gas-fired power generation would ease the transition from coal-fired to renewable generation.

That's because gas-fired power stations emit far less carbon dioxide and can be turned on and off as required to counter renewable energy's intermittency.

Guess what? South Australia has a new and big gas-fired generator at Pelican Point, near Adelaide, but it's been mothballed.

Why? Because the operator had a long-term contract for the supply of gas at a price set at the pre-export-parity level, and decided it was more lucrative to sell the gas into the East Asian market.

Last week Turnbull had the effrontery to argue that now gas-fired power had become uneconomic, we needed to fill the gap by subsidising new-generation "clean" coal-fired power stations.

Small problem. They're hugely expensive, only a bit less emissions-intensive than existing coal-fired stations, can't easily be turned on and off, and would supposedly still be operating 60 years later.

If there's a case for subsidising any fossil fuel-powered generators the obvious candidate is the gas-fired plants the feds' export-parity pricing policy has rendered uneconomic.

So great is the coal industry's hold over the Coalition that, not content with subsidising increased supply of coal from Adani and others at a time when coal is a sunset industry, Turnbull is now making up excuses to subsidise increased demand for coal by local electricity producers.

Economists are always telling politicians not to try picking industry winners. In reality, the politicians are far more inclined to back known losers.
 I cannot see any flaw in the argument in the highlighted paragraph.....

And finally:   maybe I am not reading widely enough, but has any journalist or commentator explained more about what's behind the Turnbull/Frydenberg/Morrison rapid new found love affair with coal?   It seems kinda suspiciously like they are responding to intense behind the scenes lobbying that the public might not be fully aware of ...

Update:  Lenore Taylor's article is a fine, angry bit of commentary which covers a lot of the above, but still doesn't uncover anything about specific recent lobbying efforts.


not trampis said...

I am staggered at the incompetence of the regulator. They do not take not account the peradventure the next day in forecasting demand or they simply ignore supply?

not trampis said...

I should add getting finance for coal stations would be problematic.

Banks understand if a country is going to reduce emissions then there must be less of them as a recent paper from the BOE I highlighted pointed out.

Adani is struggling to get any finance as Quiggin has highlighted a few times.