BHP offers plan to solve South Australia’s power crisis

//BHP offers plan to solve South Australia’s power crisis

BHP offers plan to solve South Australia’s power crisis

2 March, 2017

Cameron England

Courtesy of the Adelaide Advertiser


BHP has declared that the need for power supply change is “urgent”, prompting the mining giant to lay out a road map to ensure the state’s energy crisis is solved.

It includes a proposal to help keep the lights on while a long-term power solution is devised.

The state’s biggest power user believes large power generators should be “incentivised” to provide enough baseload electricity in the short term.

Australia’s largest mining company has also revealed that last year’s statewide blackout, coupled with high power prices, has virtually wiped out the Olympic Dam mine’s profits for the year to date, and power issues are also putting future investment and expansion at risk.

In a submission to the Finkel Review into the Future Security of the National Electricity Market — provoked by SA’s statewide power outage on September 28 — the company says the “first priority” of Australian governments should be stabilising the market in SA to manage the high levels of intermittent generation.

“We believe this can be most effectively achieved in the short-to-medium term by incentivising one or more generators to provide baseload generation when required, at least until longer term solutions are in place,’’ the submission states.


The key planks of the plan — in which BHP directly attacks the policies of the major parties at both the state and federal levels, while not explicitly naming them — include.


REPEALING state-based renewable energy targets in favour of a national approach on emissions

INCENTIVISING one or more generators to provide baseload generation in SA when required

SCRAPPING gas exploration bans, such as those which exist in Victoria and are proposed by the Liberal Party in SA EXAMINING the power infrastructure in SA “to ensure that it is fit-for-purpose to prevent a reoccurrence of the events that contributed to the ‘black system’ event in September 2016’’.

EXAMINING the transmission infrastructure between Adelaide and Davenport in the Upper Spencer Gulf and interconnector capacity between SA and Victoria.

SILENCING the debate over renewables versus fossil fuels, in favour of fixing the rules which run the system.

BHP Billiton asset president Olympic Dam Jacqui McGill said the company had worked hard to reduce costs at the copper, gold and uranium mine in the state’s Far North, but eight months of power problems made it difficult to compete.

“Uncertainty and volatility are the enemies of investment,’’ Ms McGill said.

“It impacts our sustainability as a business, not just for the 3000 employees, but there’s 37,000 South Australian shareholders who are looking for the returns on that investment in BHP Billiton for their future’’.

Ms McGill said the company was not “calling for … anything to be built’’.

“It’s legislation, it’s words on the page … so you would have to be hopeful that this can be resolved in the short term.’’

BHP has long maintained that SA has ample power supplies, but the national market rules mean that it’s often not viable for some large generators to operate — such as the second gas-fired turbine at the Pelican Point power plant — leading to issues such as load shedding.

The company has expressed frustration that despite being the state’s largest power user, it is often the first to be knocked off the grid when power supplies fall short, putting its profitability and the safety of its staff and equipment at risk.

The underlying message in BHP’s submission is that the heated political bickering over issues — such as clean coal, whether renewables led to the statewide blackout, and which technology is the best to dig us out of the current dilemma — should be swept aside.

Instead, rules should be put in place which do not pick winners in terms of the technology used and which are underpinned by a price on carbon emissions in the electricity sector, which will lead to reliable and cost-effective power.

If that doesn’t happen, the effect will be dire, the company warned.

“The need for change is urgent,’’ the company says. “Increasing energy prices and supply disruptions hinder the competitiveness of Australian businesses and threaten future investment.

“System instability in South Australia, for example, is expected to cost Olympic Dam US$135 million this financial year (including US$105 million attributable to power outage).

“This impost has nearly negated the year-to-date profitability of Olympic Dam. Just as importantly, unplanned power outages put at risk the integrity of our infrastructure and

undermine the safety and attractiveness of living in a regional area like Roxby Downs.’’

BHP says its electricity costs increased by 42 per cent in the eastern states from 2015 to 2016, and would jump another 78 per cent in 2017.

In SA over the past year, electricity prices have averaged more than 50 per cent higher than in Victoria.

BHP also laid into state-based renewable energy targets, saying they were a waste of time.

“Australia must introduce national policies to meet our international commitments to tackle climate change. Separate action by states or territories is likely to distort the implementation of national policies and increase costs with no net environmental benefit.’’

SA’s renewable energy target is to reach 50 per cent by 2025, which was upgraded in 2014 when the target of reaching 33 per cent by 2020 was surpassed.

The furore over which technologies should be favoured should also be done away with in favour of an approach which sets the parameters such as an emissions price, and then lets the market decide.

Gas is also vital to affordable energy prices going forward, the company says, and has criticised gas exploration bans, such as the total ban on onshore gas exploration which is currently in place in Victoria, and the proposed State Liberal Party ban on unconventional gas exploration in SA’s southeast.

BHP’s power plan

■ One or more large power generators should be “incentivised” to provide adequate baseload generation when required in South Australia, to help balance out issues caused by the large amounts of intermittent generation.

■ SA’s power infrastructure (the poles and wires) should be examined to make sure they are up to scratch to prevent another statewide blackout, while avoiding “gold-plating” the system.

■ State renewable energy targets should be scrapped in favour of a national approach.

■ The rules governing the electricity market should be rewritten so they specifically take into account reliability of power supply.

■ Gas exploration bans in force in some states and gas reservation policies should be scrapped to boost investment in gas.

■ There should be a carbon price for the electricity sector.

■ Any energy policies should be “technology neutral” meaning they do not favour either coal or gas, or renewable energy.

■ The transmission infrastructure between Adelaide and Davenport in the Upper Spencer Gulf and interconnector capacity between South Australia and Victoria should also be examined.

2017-03-03T10:34:02+11:00 March 2nd, 2017|