21 June, 2017
Courtesy of the Australian
The Turnbull government is preparing to back the construction of new coal power stations to prevent a dangerous shortfall in electricity supplies, using “reverse auctions” to replace ageing coal-fired generators with new technology already embraced in Japan and China.
The new agenda promises to scale back the need for a controversial clean energy target and clear the way for a peace deal within the Coalition after a bruising debate last week over reforms to favour renewable energy.
The move comes as the government pledges “immediate” action to boost the supply of gas by forcing exporters to divert production into the domestic market to prevent local prices soaring above the amounts paid for Australian gas in Asia.
Malcolm Turnbull declared the government was open to using “clean coal” technology to replace existing generators as he emphasised the need to prevent price rises and power outages across the national electricity market.
“I’ve said in the past that I think that, as Australia is the largest seaborne exporter of coal, it would be good if we had a state-of-the-art, clean-coal power station in Australia,” he said yesterday.
“But that’s not to say that the federal government should be building it or would be building it.”
Under the reverse-auction plan, private operators would put forward proposals to fill the gap left by the closure of ageing coal generators, allowing the government to choose between clean coal, gas or other options that meet a benchmark for reliability.
Households are being hit with a 20 per cent spike in electricity prices as the east coast market reels from the closure of the Hazelwood coal-fired power station, a surge in gas prices and a court decision last month that allows power companies to pass huge costs on to customers.
The call for a clean energy target, put forward by Chief Scientist Alan Finkel 10 days ago, sparked fears within the Coalition about price rises from any scheme that punished coal and gas by linking financial rewards to low carbon emissions.
Cabinet ministers are now making the case for the reverse-auction concept to give new coal power stations — using high-energy, low-emissions, or HELE, technology — a chance to bid for the right to replace ageing coal generators when they shut down.
Informal estimates within the government suggest a plan to replace “dirty” coal stations with “clean” HELE generators would help Australia meet its commitment to cut emissions by 26 to 28 per cent by 2030.
This would ease the burden on a clean energy target to achieve some of the emissions reductions, making it a “softer” target with a smaller incentive for renewable energy providers.
The government is seeking to avoid a repeat of the withdrawal of about 25 per cent of Victoria’s power generation when Hazelwood closed in March, intensifying concerns about the impact on supply and prices when more power stations close over the decade ahead.
A “reverse auction” is winning support among Coalition backbenchers as a way to encourage energy companies to build HELE plants to fill the gap from the closure of the Liddell and Vales Point power stations on the NSW central coast, the Gladstone station in Queensland and the Yallourn brown-coal power station in regional Victoria.
Dr Finkel called for a three-year notification period for any big generator planning to shut down, setting up a process to consider the best way to make up the shortfall.
Mr Turnbull said it would be up to the Australian Electricity Market Operator to suggest a reverse auction in line with the approach being used in the US, Britain and Germany. “They’ve got to define what the size of the problem is likely to be: what the shortfall, what the need for dispatchable power, baseload power, is likely to be,” he said.
The Coalition partyroom yesterday gave Energy Minister Josh Frydenberg in-principle support on 49 of 50 recommendations in the Finkel report, including the notification period and a “reliability obligation” on wind and solar farms to require them to install batteries or other back-up power for reliability.
The clean energy target was the most controversial proposal in the Finkel report but it was not endorsed by the partyroom and is yet to be approved by federal cabinet. While a clean energy target could supersede the existing Renewable Energy Target over time, there is no sense of urgency with this issue compared with the “immediate” decisions on gas supply and the power of the federal regulator to stop price hikes.
As expected, the government will go ahead with the plans announced earlier this year for an Australian domestic security mechanism to tell the three big liquefied natural gas exporters on the east coast how much to put into the domestic market. Resources Minister Matt Canavan will sign the regulations next week to commence the scheme on July 1, but he must wait on advice in September to decide the export curbs to start from January 1.
The new curbs will not set a preferred price for the Australian market but are aimed at ensuring enough supply to keep prices in line with Asia. With analysis predicting prices above $11 or $12 in Australia, the government aims to get the price closer to $7 or $8, although the final rate depends on the cost of transport through pipelines from Queensland gasfields to city customers.
Mr Frydenberg also announced plans to legislate stronger powers for the Australian Energy Regulator by limiting the ability of electricity companies to challenge its decisions in the courts. A Federal Court decision last month rejected the regulator’s arguments and cleared the way for big energy companies to pass on billions of dollars of expenses to their customers.
Image courtesy of the Herald Sun.