March 25th 2017

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Articles from this issue:

COVER STORY Decentralisation: an undeveloped country

CANBERRA OBSERVED Millennials feel they've been left out in the cold

EDITORIAL Gas, power crises are due to renewables obsession by Peter Westmore

WESTERN AUSTRALIA Barnett election wipe-out delivers WA to Labor

MULTICULTURALISM First among equals or an also-ran culture?

WEST AUSTRALIAN LAW Domestic-violence laws disregard basic rights

INDUSTRIAL RELATIONS Fair Work Commission's disastrous penalty-rates decision

OPINION Trump-Russia allegations are smoke and mirrors

FOREIGN AFFAIRS Don't laugh: this is serious. Revival of Maoist play is a propaganda coup in Victoria

RURAL AFFAIRS Without new dams in the Basin, we're up the creek

CULTURAL HISTORY Pascal without pressure

OPINION Scope for regeneration as Me Generation shuffles off

MUSIC Dying for exposure

CINEMA Kong: Skull Island: Ape-ocalypse Now

BOOK REVIEW How maritime England lost America

ENERGY Hazelwood is vital to Australia's power supply

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Hazelwood is vital to Australia's power supply

by Peter Westmore

News Weekly, March 25, 2017

As the crisis in Australia’s energy supply is principally caused by the closure of base-load power stations – most recently, the imminent closure of the large Hazelwood power station in Victoria – the Australian owner of one of New South Wales’ base-load power stations has called for Hazelwood to be kept in service until replacement base-load power is available.

The call to keep Hazelwood comes from Delta Electricity, which runs the Vales Point Power Station in NSW.

Pointing out that the prospect of the closure of Hazelwood has already caused wholesale electricity prices to rocket upwards, the CEO of Delta, Trevor St Baker, says that it puts the security of Victoria’s power at risk.

He echoes the warning of the Australian Energy Market Operator (AEMO), which has estimated that Victoria faces an unprecedented 72 days of power generation shortfalls over the next two years with Hazelwood shut down.

Despite claims by Prime Minister Malcolm Turnbull and the Victorian Government (The Australian Financial Review, March 24) that Hazelwood is too old to generate power, Mr St Baker says that its available units must be maintained to protect security of supply.

He confirms what the chief executive of Hazelwood said in relation to boilers on four of the eight generating units: that their operating licences require them to be upgraded by June 30, or that they be shut down.

He says that the other four units, which generate 800 megawatts, could continue to operate, and the older four boilers could be updated progressively, so that they would be available for next summer, when the next peak in demand is expected.

This is a short-term solution, to meet the expected imminent shortfall in power generation, not a long-term solution.

Long-term solution

The long-term solution is to build an ultra-super critical new brown-coal-fired power station, which would cut greenhouse gas emissions by 32 per cent.

Delta Electricity has already signalled its interest in building such a plant in Victoria. So far, there has been no response.

The calls to keep Hazelwood operating now come from the Australian Industry Group as well as Delta Electricity.

BHP was quoted recently as saying that energy prices for their East Coast operations were expected to increase by 150 per cent between 2015 and 2017, and the Australian-born chief executive of Dow Chemicals told The Australian Financial Review that due to rising costs of electricity and falling reliability of supply, “there is no reason to reinvest here, and every reason to leave”. (AFR, 24 March 2017)

The Hazelwood Power Station is run by French multinational GDF Suez, under the name Engie.

In a submission to the inquiry by Australia’s Chief Scientist into Australia’s future energy security, Delta pointed out the disastrous consequences of the closure of Hazelwood, which supplies 20 per cent of Victoria’s power. Delta said that since the closure of Hazelwood was announced last year, wholesale electricity prices had risen by 70 per cent.

Commenting on the impact of the earlier closure of base-load power stations in South Australia, as a result of the state government’s preference for renewable energy, Delta said: “South Australia serves as an example of where system security and reliability has not been held as paramount, and where the expansion of renewable generation and the early closure of the Flinders power stations have increased electricity prices to an unsustainable level for many businesses in the state.”


It added that the development of wind and solar generators in SA was not subject to an adequate assessment of the longer-term implications for security and reliability of supply.

“Market conditions were created that caused the removal of existing conventional generation from the market, which in some cases is permanent.

“As a result there is now insufficient inertia in SA to maintain secure operations when the Heywood Inter-connector [to Victoria] is unavailable.”

Delta pointed to the failure of the Australian Energy Market Operator (AEMO) to predict the consequences of the closure of large coal-fired power stations in South Australia.

It said that if the impact of the closure of a large conventional power station had been anticipated, preventative action to preserve the required system security and reliability could have been taken.

Delta called for a requirement that large conventional generators give one to two years notice to AEMO of an intention to close.

It said that such notice would give the energy market operator time to assess system security and reliability, and to respond appropriately.

It added that if insufficient base-load power was available, “AEMO will need to be empowered to take action to ensure system security and reliability standards are met. Such action could extend to limits on approvals of new non-synchronous generation or intervention in the market to procure additional system security services.”

While acknowledging the role of renewable energy sources in the country’s energy mix, Delta said that setting very high renewable generation targets had put the efficient and effective operation of the national energy market at risk.

“The near-zero marginal cost of renewable energy generation drives low and volatile wholesale energy prices that undermine the viability of the conventional power plant that currently underpin power system security and reliability.

“This has been evidenced in the South Australian region of the NEM [national energy market] where the expectation of further suppressed wholesale market conditions resulted in the decision to close the Flinders power stations.”

Delta said that there were instances internationally where high-cost renewable energy had forced the closure of low-cost base-load generators.

“Germany has relatively low wholesale electricity prices but close to the highest retail prices in Europe, driven by its renewable energy surcharge.

“Conventional power plants have been crowded out of the wholesale market, forcing Germany to rethink its energy policy to retain conventional power plant.”

Germany has a very high 29 per cent of its energy provided by renewable generation, backed up by base-load power imported from France, Austria, Poland and Switzerland.

Delta Electricity pointed out that rising power prices in Australia were likely to force the closure of Australian manufacturing, and its export to countries like India and China, which will manufacture the same goods using electricity from coal-fired power stations.

It said that the Paris Climate Agreement, which Australia has signed, allows substantial expansion of emissions from both China and India until 2030, which contrasts sharply with Australia's commitment to reduce emissions in absolute terms.

“Australia's more onerous commitment will require a greater replacement of low-cost conventional plant with higher-cost renewable generation, compared with India and China.”

Delta said that base-load power stations were necessary to maintain low-cost, secure energy, and called for new, lower greenhouse gas-emission ultra-super-critical coal-fired power stations to replace older less efficient coal-fired plants, as they reach the end of their service lives.

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