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Hazelwood's closure won't affect power prices as much as you might think
The ongoing uncertainty over the future of the Hazelwood power station in Victoria’s Latrobe Valley has raised the prospect that the ageing generator will be shut down in the near future.
The power station has a nameplate capacity of 1.6 gigawatts, which represents 22% of the coal-fired generation capacity in Victoria, and 6% of the total coal-fired capacity in Victoria, Queensland and New South Wales combined (South Australia no longer has an operating coal-fired power station).
Coal-fired power stations provide the bulk of the “baseload” electricity requirements in the National Electricity Market (NEM). Baseload refers to generation that meets the minimum demand, and from an economic point of view this is best delivered by generation that produces constant, reliable output. Brown coal provides the cheapest baseload power – or at least, it does if we’re prepared to ignore factors such as the long-term costs of climate change.
So if Hazelwood departs the market, as one of the cheapest generators in the NEM, it seems logical that electricity prices will increase. The extent of that increase will depend on what takes up the slack. So what can we expect to happen?
On the declineUntil 2007, average electricity demand in the NEM had increased every year since the grid was first built. But after that demand started to fall. The reasons are varied, including increasing takeup of rooftop solar panels, improved efficiency of lighting and appliances, and reductions in industrial demand.
Looking at July (when baseload electricity demand is typically at its highest), the average demand has fallen from 25.4GW in July 2007 to 22.9GW in July 2016, a reduction of 2.5GW.
But there has also been significant retirement of coal-fired generation capacity in Australia since 2010, driven partly by the retirement of old power plants, and partly by the costs associated with the carbon price, which ran from 2012 to 2014.
The retirees include Morwell and Anglesea in Victoria (0.2GW), Playford B and Northern in South Australia (0.8GW), and most significantly Redbank, Wallerawang and Munmorah in New South Wales (2.5 GW). This adds up to a total of 3.5GW of coal-fired capacity shut down this decade.
This means that more capacity has been retired than the baseload demand has decreased. So in theory, the retirement of another baseload power station at Hazelwood would result in even more tightening of the balance between supply and demand.
But if we look at the current average capacity factors of the remaining coal-fired power stations we can see that many of the larger ones, in NSW in particular, are running at very modest capacities. For example, Liddell has been running at 43% of its total capacity for the past 12 months, and Eraring at 59%. Across the NEM the average is 65%.
Now, of course some of this generation is used when the demand increases during particularly hot or cold weather, but most of this “peaking” demand is supplied by hydro and gas. So while baseload is not the only way to meet demand in the energy system, there nevertheless seems to be plenty of baseload available.
Why are coal-fired stations running at such low levels? One reason is that while demand has been falling, there has also been an extra 4GW of wind power capacity added to the grid. Meanwhile, several new plants were commissioned in the years leading up to the peak in demand, with the expectation that demand would continue to rise. These plants include Callide C, Millmerran and Kogan Creek, which add up to 2.7GW.
If Hazelwood shuts down, it would be reasonable to expect that the remaining coal-fired generators in the grid will take up the slack. The generators in Victoria are running at relatively high capacity factors, so we might expect that NSW generators will increase their output. The interconnector between Victoria and NSW currently sends Victorian electricity into NSW, but it can reverse that flow if required.
One reason why Victorian power stations are running at higher capacities is because they are cheaper to run. ACIL Tasman figures from 2010 show short-run marginal cost (the cost to run a power station in addition to fixed costs) in Victoria is around A$2-5 per megawatt hour, compared with A$12-17 per MWh in NSW.
Predicting what will happen to electricity prices in the future is harder than picking the winner of the Melbourne Cup, so making an exact price forecast is tricky. But if the hole left by Hazelwood’s retirement is filled by the excess capacity in NSW, then all things being equal the impacts on the overall costs of running the system would be modest.
Still, the NEM is very complex. Generators (especially in Victoria) are privately owned and will adjust their market strategies to take advantage of the tightening of supply. Meanwhile, the growing market share of renewables, the potential for electricity demand to begin rising once again, and the possibility of further coal closures, all mean that the full impact of the retreat of coal-fired power is yet to be seen.
Roger Dargaville has received funding from the Australian Renewable Energy Agency
The new international whaling resolution will do little to stop Japan killing whales
Australia and New Zealand were claiming a conservation success this week, when their resolution against lethal “scientific” whaling was adopted at the International Whaling Commission’s biennial meeting in Slovenia. But in reality the non-binding decision will do little to stop Japan’s whaling program.
This resolution aims to tighten the loophole that allows nations to catch whales under the guise of scientific whaling. It provides for greater oversight of the currently self-assessed special permits for lethal scientific whale research.
After the disappointment of failing to establish a South Atlantic whale sanctuary, the anti-whaling bloc of nations at the IWC meeting have hailed the latest resolution, with Australia’s environment minister Josh Frydenberg describing the decision as “a big win”.
Where next for Japanese whaling?Japan conducts its whaling under a self-issued permit, under Article VIII of the International Convention for the Regulation of Whaling. This article allows a country to grant its nationals special licence “to kill, take and treat whales for purposes of scientific research subject to such restrictions as to number and subject to such other conditions as the Contracting Government thinks fit”.
In 2014 the International Court of Justice ruled Japan’s JARPA II whaling program illegal on the basis that it was “not for the purposes of scientific research” and therefore in breach of Article VIII. But crucially it did not ban all future scientific whaling activities by Japan.
After the decision, Japan created a new research programme called NEWREP-A (New Scientific Whale Research Program in the Antarctic Ocean), which purported to have different scientific methods to its predecessor.
As Japan no longer recognises the jurisdiction of the International Court of Justice regarding “living resources of the sea”, arguments on adherence to the broader principle laid down in the decision would possibly be in vain.
A new tackThis brings us back to the new resolution, which was brought to the IWC by Australia, New Zealand and other anti-whaling nations in a bid to make it harder for nations such as Japan to issue themselves with special permits for scientific whaling.
The underlying principle is Australia’s repeated assertion that “lethal scientific research is simply not necessary”.
Japan’s new NEWREP-A program included the killing of 333 minke whales in the 2015-16 season, and the IWC’s Scientific Committee was powerless to prevent Japan from proceeding, given that the conditions of special permits are currently self-assessed and can proceed without scientific endorsement from the committee.
The new resolution establishes a Working Group under the Convention, which will consider the Scientific Committee’s recommendations in relation to all special permits. It also gives a greater role to the Commission in the process of issuing special permits.
The aim is to apply much greater scrutiny to the granting of special permits, rather than allowing nations simply to award them to themselves. Plans for special permits are requested to be submitted to the new working group at least six months in advance of the Scientific Committee’s meeting, alongside the data used to back up a country’s claims to be running a scientific whaling program. These data will be evaluated both during the program’s development, and during ongoing and final reviews.
These inquiries into the special permit will then be presented to the IWC itself, which will form its own official view on the proposed whaling program and publish its findings.
Overall, the resolution gives the Commission a much greater role in deciding whether a given nation should be allowed to kill whales. But resolutions are not legally binding, and there is no function to penalise those who do not follow them.
Non-binding resolutionsIn response to the new resolution, Japan’s Commissioner to the IWC said that Japan “will abide by the Convention itself”. This implies that Japan will continue to apply its own interpretation of the Convention, and will not follow the extra steps outlined in the new resolution.
So despite the new emphasis on applying scientific scrutiny to whaling permits, at a higher level than before within the IWC’s structure, this actually doesn’t mean much in practical terms for Japan. The reality is that Japan will continue to act independently of IWC advice due to its view on what Article VIII means.
As a result, Japan is unlikely to stop killing whales any time soon, despite the efforts of Australia, New Zealand and other anti-whaling nations to shut the program down.
Indi Hodgson-Johnston receives funding from the University of Tasmania and the Antarctic Climate & Ecosystems CRC.
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When Monty Don recently put his wellington boot into self-sufficiency, writing in Gardeners’ World magazine that living off the land was a “non-starter”, I was surprised. I didn’t believe anybody actually followed John Seymour’s 1976 Complete Guide to Self-Sufficiency to the letter any more. That’s the type of all-consuming, no-consuming living off the land that leads – in Monty’s eyes – to failure, bad breath and possibly malnutrition.
But if the good life is still your dream, diggersanddreamers.org.uk lists UK communities that are looking for members. These communities are outstanding examples of permaculture – sustainable, self-sufficient agricultural ecosystems – and provide inspiration for those of us who don’t subscribe to the hard labour of the full downshift but do fancy trying “self-provisioning”, usually defined as growing part of your diet yourself.
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