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Finkel says Europe, US well advanced on energy policy, technologies
South Australia's energy plan deals a blow to state-federal relations
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The last couple of days have brought the differences between state and federal energy policy into stark contrast. South Australia has unveiled an energy plan in which the state takes a much greater role in the energy industry. The plan includes storage, a new gas plant and greater powers for the state over the National Electricity Market.
SA has the highest proportion of wind energy in Australia – and the federal government has consistently blamed this for the widely reported blackouts last year.
In a acrimonious joint press conference with South Australian Premier Jay Weatherill on Thursday, federal energy minister Josh Frydenberg reiterated that states are responsible for the stability of their electricity system. The federal government has cast doubt on the legality of the plan.
Is reliability a state responsibility?The federal government has repeatedly claimed that the SA government can’t keep the lights on. More generally, it has implied that the states are responsible for electricity system stability.
Under the National Electricity Market (NEM) framework, these statements are somewhat misleading.
The SA electricity industry is entirely privatised. The NEM governance framework is run by national institutions under the Council of Australian Governments Energy Council, a forum of federal and state energy ministers. This framework is supposed to ensure the system reliably delivers electricity to all consumers.
System security and reliability are the responsibility of the Australian Energy Market Operator. Network investment is the responsibility of private network businesses, overseen by the Australian Energy Regulator.
This governance system leaves little space for the SA government to take action to ensure system security. On the contrary, the NEM was set up to remove direct government involvement in the electricity sector. This was because a market was considered more efficient to achieve the same service.
The federal government has blamed wind energy for SA’s reliability issues. But, even if wind is one factor among many, did the SA government exacerbate the risk of blackouts?
South Australia has actively encouraged co-existence of wind farms and farming activities in its planning legislation. Land use planning laws can have great influence on the uptake of large-scale renewable energy, as Victoria shows.
While state renewable targets have been blamed for uneven investment in renewable energy, the SA target of 50% by 2050 is not actually backed by a particular mechanism. Wind generators settled in South Australia because it has good wind resources and favourable planning laws.
They were financed under the federal Renewable Energy Target, but also by the ACT reverse auction schemes, which led to considerable investment in SA.
The review of the NEM, chaired by Chief Scientist Alan Finkel, will consider how climate and energy policies can be aligned. As the policymaker for the NEM, the COAG Energy Council should be the responsible authority, not individual states, to resolve any mismatch.
Is South Australia breaking the rules?Apart from public investment in storage and gas, SA’s energy plan aims to give the state energy minister “strong new powers to direct the national market in case of an electricity supply shortfall”. The federal energy minister has implied that some of the SA plans may be illegal and that the government will be seeking legal advice.
But is SA breaking any rules?
The governance arrangements for the NEM are based on an intergovernmental arrangement, which relies on federal-state cooperation. The Australian Constitution contains no clear powers to regulate for energy. This means that having both levels of government work together to overcome these constraints was necessary to set up and manage a national electricity system.
The intergovernmental agreement that sets up the NEM is the Australian Energy Market Agreement (AEMA). All governments – state, territory and federal – have signed this. The AEMA covers the setting up of the market institutions and legislation. Based on this document, all states have passed state legislation that contains the National Electricity Law.
The AEMA includes provisions for amending legislation. These mean that only the COAG Energy Council can amend energy market legislation. Whether the council would agree to SA ministers getting special powers is doubtful.
However, the agreement is political and not legal. Indeed, one clause states that “this agreement is not intended to give rise to legal obligations” for the state and federal signatories.
Where does this leave SA’s plan? It does not break the law, but, depending on how the actual legislation is drafted, it may well fail to pass COAG.
A dangerous development or much-needed leadership?Due to the limits of the constitution, intergovernmental arrangements play an important role in Australian policy-making. An increasing number of agreements covers areas such as water, environment or trade.
As we’ve seen with debate about the Gonski deal on education funding, these agreements require trust between all parties and should not be lightly departed from.
SA’s frustration with the lack of COAG leadership and the blame game for the blackouts is understandable. The SA energy plan may galvanise energy market reform and lead to a better system. It can be interpreted as taking leadership in the energy-climate debate, where none has been forthcoming from the federal government or COAG.
On the other hand, a danger exists that other states decide to follow SA’s example. With a review of the market in process, one-sided action seems counterproductive.
An agreement on a timely and fair energy transition needs all parties at the table. It will need national coordination and a whole-of-system perspective. Finkel’s task of overhauling the electricity market may just have been made even harder.
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Anne Kallies does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.
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The federal government has announced a A$2 billion plan to expand the iconic Snowy Hydro scheme. It will carry out a feasibility study into the idea of adding “pumped hydro” storage capacity, which it says could power up to 500,000 homes.
Hydro is one of the oldest and most mature electricity generation technologies. And pumped hydro storage – in which water is pumped uphill for later use, rather than simply flowing downriver through a hydro power station – is the dominant form of energy storage globally.
But there are limitations to how much freshwater hydro can be accessed, so it’s worth looking at what alternate approaches are available. One promising prospect is to use seawater instead of rivers. This tactic could potentially help South Australia resolve its highly publicised energy problems.
Hydro basicsThe principle behind conventional hydro power is straightforward: rainwater runoff feeds a river, which is dammed to create a large reservoir of water. This is then gradually released through pipes to a turbine at the foot of the dam, thus converting the gravitational potential energy into electricity. The water then flows on downriver.
Hydro power is fossil-free and also “dispatchable” – it can be turned on or off at will (provided there is water in the dam). This gives it a significant advantage over wind turbines and solar photovoltaic (PV) panels, which produce power only when the wind blows or the sun shines.
Hydro thus makes an ideal partner for wind and solar PV, as it can adjust its output in response to changes in output from these non-dispatchable renewables.
Pump it upPumped hydro energy storage (PHES) is very similar to conventional hydro power but differs in that rather than being a generator, it’s more accurate to describe it as a battery.
Normally done at smaller scales than conventional hydro, PHES uses excess electricity from the grid (such as during periods of low demand and/or high generation) to pump water uphill from a lower reservoir to a higher one.
Later, this water is released back downhill through the turbine, returning the electricity to the grid when it is most needed – typically during the evening peak. It is this approach that is being considered in the Snowy Hydro 2.0 project.
Pumped hydro storage thus helps to “smooth out” peaks in demand by effectively transferring excess electricity from periods of low demand to periods of high demand. It has a “round trip” efficiency of ~80%, which is comparable to that of batteries.
PHES is the most common form of grid-connected energy storage in the world, accounting for around 97% of the total. It is often built in partnership with “baseload” power generators such as coal and nuclear plants, to help them vary their output to cope with peaks and troughs in demand.
Australia already has three PHES facilities – at Tumut 3 in the Snowy Hydro Scheme, at Shoalhaven in New South Wales, and at Wivenhoe Dam on the Brisbane River in Queensland.
South Australia is arguably the place that is most in need of grid-scale energy storage. Unfortunately, South Australia lacks the rainfall, rivers and mountains to run a conventional hydro system, with or without storage.
However, there is a way to use this technology without rivers and mountains: by using the ocean as the lower reservoir, and building an artificial upper one.
The upper reservoir doesn’t need a river to feed it fresh water; it just needs to be significantly higher than the ocean (that is, there should be a steep slope on or near the coastline, up which the seawater can be pumped). Using seawater also avoids the need to divert freshwater resources into a large reservoir, where a significant amount would be lost through evaporation.
Testing the technologySo far, only one seawater PHES installation has been built anywhere in the world – on the island of Okinawa, Japan. It came online in 1999 and was decommissioned in 2016, after Okinawa’s power requirements changed. Seventeen years for a first-of-its-kind project is a significant success. However, the Okinawa project was combined with a coal-fired power station, so linking this technology with intermittent renewables has never been trialled anywhere.
So could this technology help to ease South Australia’s energy crisis? The Melbourne Energy Institute (MEI) report on Pumped Hydro Opportunities identifies several potential seawater PHES locations in South Australia. This includes a very promising site at the northern end of the Spencer Gulf, with significant elevation close to the coast and close to high-capacity transmission lines.
The Department of Defence manages this land, and discussions are ongoing as to how the project might be designed to not interfere with the department’s operations on the site. A win–win development is the primary design aim.
The MEI study suggests that PHES could be delivered at around A$250 per kWh of storage. This compares well with utility-scale lithium ion battery storage, which currently costs of the order of A$800 per kWh, although recent annoucements on Twitter from Elon Musk suggest this might be coming down towards A$500 per kWh.
The Spencer Gulf site has the potential to provide at least 100 megawatts of dispatchable generation, effectively making the wind and solar generation in South Australia significantly more reliable.
The Australian Renewable Energy Agency (ARENA) will help fund a feasibility study into the technology, working with partners Energy Australia, Arup and MEI. If the facility is ultimately built, it could become a key element in SA’s bid to avoid future power blackouts.
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Roger Dargaville works with the consortium of EnergyAustralia and Arup that have been funded by ARENA to conduct the PHES feasibility study. He has previously received funding from ARENA to undertake energy system modelling studies.
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