Can the NEG help balance energy policy?
What does our Federal Energy and Environment Minister, Josh Frydenberg, have to say about the state of the energy market in Australia?
Glad you asked.
The below article, from yesterday's AFR, answers this question. He thinks it's rebounding.
Clearly, there are always multiple opinions on most topics, but I think we can agree on a few points:
- There's a gas supply issue
- There's a gas price issue
- There's an electricity affordability and reliability issue
- It's challenging to balance energy policy with climate policy
- The rate of price increases is easing, and there may be some slight falls as policy changes kick in
- Demand-side solutions to improve efficiency should be part of the overall approach
- Supply-side solutions should be technology agnostic and aim to balance reliability, affordability and emissions
The dreaded energy policy 'trilemma' seems insurmountable, and the Federal government is attempting to find a balance through its new policy, the National Energy Guarantee or NEG.
To understand what the NEG is trying to achieve it helps to understand the 'trilemma'. For those unfamiliar with the 'trilemma', it's relatively straightforward;
- Low or zero-emission power generation, such as Wind and Solar, tends to be more expensive and less reliable than, say, nuclear, coal or gas.
- Reliable power sources that can meet demand most of the time tend to be higher in emissions such as coal and gas. The exception is nuclear fission (but that's off the table here in Australia).
- Hydro can provide dispatchable baseload power with zero emissions, but it's often limited by geography and rainfall patterns.
- Gas-fired power generation is lower in emissions, can provide baseload power and is more responsive to demand fluctuations than coal or nuclear, but in Australia, gas is becoming increasingly constrained and expensive.
The trade-offs can be illustrated as follows:
Getting the balance right is difficult and will vary based on local fossil fuel, hydro, wind and solar resource availability, in addition to other factors. What we can see from the data is that in every economy with a high penetration of Wind and/or solar power, there's a higher trend in retail electricity prices.
We believe a technology-agnostic transitional approach to a low emissions economy allows more time to achieve the elusive balance across reliability, affordability and emissions in our energy mix. If it works as intended, the NEG may yet achieve that.
Here in Victoria, Australia, our own Coldry technology could be retrofitted to existing brown coal power stations, reducing emissions by ~10-15%, or tightly integrated with a new high efficiency, low emission (HELE) power station to deliver a 42% to 63% reduction in CO2 compared to business as usual.
Suggesting coal, let alone brown coal, should play a part in our future energy mix immediately attracts derision. Rarely do the alternative solutions come with an affordable price tag.
We get it. Some activists want to immediately and completely shut down all coal. Which is virtuous and feels great until you receive your power or gas bill.
Australia's energy market is on the rebound
6 March 2018 | Australian Financial Review | Josh Frydenberg
Power prices are falling, but there's still a lot of work to be done.
Power prices are still too high. This hurts households and businesses alike. There is good news, however, that a record wave of 6000 megawatts of new generation is coming online, putting downward pressure on prices.
Alinta cut its power prices by around 3 per cent in January and last week Powershop followed with a 5 per cent cut worth $70 a year to customers.
There are further falls to come with the ASX futures market for 2018 New South Wales electricity contracts down 26 per cent from last year and a further fall priced in for 2019. The forward curve for Queensland, Victoria and South Australia shows similar falls.