The Conversation

Labor has promised half of Australia's electricity will come from renewables in 2030. Wind turbine image from www.shutterstock.com

Yet again, electricity prices are set to be a key point of contention in an Australian federal election.

The Coalition responded quickly to Labor’s election commitment to an emissions trading scheme (ETS), with Prime Minister Malcolm Turnbull warning of “much higher electricity prices” and a “very big burden” on Australians.

Other ministers joined in. Treasurer Scott Morrison labelled the plan a “a big thumping electricity tax” and Environment Minister Greg Hunt branded it “Julia Gillard’s carbon tax on steroids”, warning of “even higher electricity prices for Australian families”.

The centrepiece of the Coalition’s climate policy, meanwhile, is the A$2.5 billion Emissions Reduction Fund. An important element of this scheme is the “safeguard mechanism”, which is due to kick in on July 1 this year. This has implications for the electricity sector and may also affect electricity prices.

National summary of retail electricity cost components 2015 Residential Electricity Price Trends

These policies will affect the wholesale electricity market, in which electricity is bought from power generators and sold on to retailers and consumers.

As you can see from the figure to the right, the competitive component of the retail prices makes up about 50% of the typical household electricity bill, and the wholesale component typically makes up half of that. The other major cost is poles and wires.

So how exactly will the different climate policies affect electricity prices?

The safeguard mechanism (Coalition)

The safeguard mechanism will require Australia’s largest emitters to keep emissions below a baseline. This will prevent emissions reductions under the ERF being offset by increases elsewhere. Businesses that go over the baseline will have to pay.

The safeguard is based on the high point in annual emissions from the whole electricity sector between 2009-10 and 2013-14. Generators' individual baselines and associated penalties only come into play if the whole sector goes over the baseline.

As you can see in the figure below, emissions have fallen by almost 20 million tonnes per year since the first baseline year (2009-10), partially in response to years of declining demand.

Electricity Sector Emissions Quarterly Update of Australia’s National Greenhouse Gas Inventory: December 2015

Current projections for electricity growth suggest that the baseline won’t be breached for some years. As such, individual generators are unlikely to be penalised, and wholesale prices would not be expected to change dramatically.

Electricity sector emissions trading (Labor)

Labor’s electricity sector ETS is a “baseline and credit” scheme, based on a model proposed by the Australian Energy Market Commission (AEMC), which actually submitted the proposal to consultation on the safeguard mechanism.

This also places a baseline on the electricity sector, but it is calculated on the basis of emissions intensity (tonnes of emissions per unit of electricity generated) rather than overall emissions. Generators with emissions intensity below the baseline (for example, gas generators) would earn credit, so “cleaner” power plants would generate more credits.

Power plants that go over the baseline (for example, brown coal) would have to buy credits for the amount they go over. “Dirtier” plants would thus have to buy more credits.

This is substantially different to a carbon tax or the previous emissions trading scheme. Under these policies, all generators are penalised, some more than others, as you can see in the figure below.

Impact of carbon price and baseline and credit scheme on different generation technology in the electricity sector. A carbon prices increases all prices, relative to emissions intensity. A baseline and credit scheme increases the price of high-emissions-intensity generation, but lowers the price of low-emissions-intensity generation. Author

This difference is important for electricity prices. Dirtier plants would be expected to increase their selling price to cover the financial penalty on their emissions. But cleaner plants, earning revenue from selling credits, could afford to sell their electricity more cheaply.

This is important, because cleaner plants (typically black coal or gas) set the price. Gas in particular would probably be significantly cheaper under this proposal. As such, the impact on wholesale prices would be small, or negative.

In fact, as the AEMC itself noted, the impact on the wholesale market could be an increase or decrease in prices (depending on where the baseline is set).

The brown coal exit (Labor)

Another component of Labor’s climate platform is a plan to finance the closure of brown coal power stations, an idea first proposed by ANU climate economists Frank Jotzo and Salim Mazouz.

In this proposal, brown coal plants would bid for the payment they would require to finance their own shutdown, with the cheapest bid being selected. The remaining plants would pay this cost, in line with their emissions.

Similar to the ETS, it would be expected that this cost would be reflected in increased offer prices to the market from the remaining generators. The direct costs would be temporary (a one-off payment) and small, relative to the overall wholesale price.

Indeed, Jotzo and Mazouz estimated it could cause a one-off rise of 1-2% in retail power bills. Analysis company Reputex found the impact could be between 0.2% and 1.3%.

However, Danny Price of Frontier Economics has suggested that the scheme could push up retail power prices by between 8% and 25%, as the result of a short-term price shock. But given the significant excess capacity in the market, and assuming that the market is indeed competitive, it is hard to see how such a increase would happen.

This point aside, the price argument misses the point of the scheme, which aims to deliver an “orderly transition” away from brown coal. The longer-term effects on supply and price of a brown coal exit will be similar, regardless of how the industry closes.

In fact, if it were left entirely to the market, the sudden retirement of an entire power plant might create even more of shock. This proposal is chiefly about ensuring an orderly, predictable transition.

50% renewable energy target (Labor)

The final element of Labor’s climate platform is a 50% renewable energy target by 2030. At this stage, not much detail has been unveiled other than shadow environment minister Mark Butler’s pledge that it will be “designed in a way that does not disturb investor sentiment around the delivery of the existing Renewable Energy Target” – something that a sector beset by uncertainty would welcome. As such, it is quite difficult to speculate on how electricity prices might react.

The current Renewable Energy Target is a certificate scheme that requires retailers to buy a certain amount of renewable energy. The cost of these certificates is passed on through electricity bills. However, as shown by the government’s own modelling, the interaction with the wholesale market results in a net saving to consumers.

Interestingly, and as the AEMC points out, the electricity ETS is designed to be flexible and integrate with a renewable energy target. Indeed, such an ETS could drive investment in renewable energy, replacing current subsidies through the Renewable Energy Target. The 50% target could theoretically be achieved through the ETS alone, if the baseline was set at the right level.

A bipartisan approach?

As it stands, the government’s climate platform is unlikely to have any impact on electricity prices. However, it will also not have a major impact on the electricity sector’s emissions.

Labor’s policies will have an impact, but as the AEMC notes it may occur “without a significant effect on absolute price levels faced by consumers”.

The government’s current polices will require strengthening to further reduce emissions. To achieve this, the Grattan Institute and others including the Business Council of Australia have supported ideas that would turn the Liberal platform into something very similar to Labor’s.

Indeed, modelling commissioned by the government itself assumes that Direct Action will eventually morph into a similar baseline-and-credit ETS, in order to meet long-term climate commitments.

Political slogans aside, perhaps a bipartisan approach is possible, without a significant effect on power bills.

Dylan McConnell received funding from the AEMC's consumer advocacy panel.

The closure of Port Augusta's Northern Power Plant marks the end of coal-fired generation in South Australia. Gary Sauer-Thompson/Flickr, CC BY-NC

South Australia’s last coal-fired power station closed on Monday this week, leaving the state with only gas and wind power generators.

The Northern Power Station, in Port Augusta on the northern end of the Spencer Gulf, has joined Playford B – the state’s other coal-fired power station which has already been retired.

The coal mine at Leigh Creek that supplied brown coal to the power stations also closed earlier this year, so there is no easy option for re-opening the power stations.

The immediate impact of the closure was a brief wobble in wholesale electricity prices, with more energy brought in from Victoria’s brown coal power stations (adding to carbon emissions).

But how could it affect the state in the long term?

Could South Australia run out of power?

Average electricity demand in South Australia is 1.4 gigawatts, and the state record for peak demand of 3.4 gigawatts was set in January 2011. In the past two years the highest demand was 2.9 gigawatts.

Rollout of rooftop solar panels is one of the reasons demand from the grid has been going down. The impact on the peak demand – the time of day when most people are using appliances – is less clear, because if the peak occurs after sunset, solar panels will not reduce it.

With the closure of the 520 megawatt Northern Power Station, South Australia is left with 2,800 MW of capacity in its gas-fired generators, which can be fired up when needed, and 1,500 MW of wind farms, which of course produce energy only when the wind blows. Most gas generation capacity comes from the Torrens Island A (480 MW) and B (800 MW) installations, built in the 1960s and 1970s, respectively.

There have been discussions about retiring Torrens Island A (it was mothballed for a period in 2014), but the departure of Northern appears to have delayed those plans.

The state also has a total of about 600 MW of rooftop solar, but, as noted above, this technically counts as reducing demand rather than adding to supply.

South Australia is also connected to Victoria via two transmission lines, one at Heywood (recently upgraded to 650 MW) and one at Murray Link (220 MW). This gives the state access to a potential 870 MW of Victorian power.

If South Australia gets close to record demand, the state clearly outstrips the capacity of the local gas generators. If the wind isn’t blowing, then the state will depend on the interconnectors.

But there is an unfortunate factor that transmission lines tend to fail under very high temperatures, which correspond to the times of highest demand.

It may sound unlikely, but South Australia is at risk of failing to meet demand. This would depend on a very specific set of circumstances:

• record demand (despite the increase in rooftop solar reducing demand)

• no wind

• failed interconnectors (or failure of local generators).

A role for storage

This situation means the state is the most likely location for investment in storage. The Australian Renewable Energy Agency (ARENA) recently published a report on storage that identified several locations in South Australia that would be logical places to install commercial-scale batteries.

We at the Melbourne Energy Institute have previously written about pumped hydro storage options, in particular the novel approach of using salt water. This may be of particular use in a very dry state such as South Australia.

But batteries are only going to be attractive investments if there is sufficient volatility in the market to provide arbitrage opportunities. Arbitrage, put simply, is the process of buying low and selling high.

Storage systems need be able to be charged with low-cost energy (for instance, overnight when demand is low, or when the wind is blowing hard) and dispatch the power back onto the grid at a sufficient profit to cover the investment costs.

We are currently in a low-demand period of the year (the shoulder seasons have both low heating and cooling requirements). This means there has not been much shift in electricity prices coming out of South Australia with the removal of Northern. It might not be until next summer, with hot temperatures and increased demand from air conditioners, that we are able to see the true magnitude of the impact of this exit on electricity prices and market volatility.

To date (only a couple of days since the closure), the wind has been blowing hard and there has been no need to increase substantially the generation from other fossil generators. Likewise, there have been no discernible shifts in the spot market prices.

Finally, the impact on carbon emissions will also be interesting. This will depend on how the remaining generators respond. The gap left by Northern may be filled with South Australian gas, in which case total emissions will fall, but more likely the gap will be filled with Victorian coal power via the interconnectors, resulting in no reduction in net emissions.

We will know the net result in due course – watch this space.

Roger Dargaville receives funding from the Australian Renewable Energy Agency (ARENA).

Dingoes on Queensland’s popular Fraser Island are healthy and well, contrary to local claims. In fact, they consume one of the widest size ranges of prey in the animal kingdom, according to recent research published in Scientific Reports.

Dingoes are a national and international icon of great public and conservation interest. As Australia’s largest terrestrial predator, they enjoy similar popularity to other top predators such as lions, bears and wolves.

Fraser Island’s dingoes helped to resolve the Azaria Chamberlain case and are regarded as one of the purest remaining strains of dingoes in Queensland.

About 100-200 dingoes, representing about 19 packs, live on the island at any one time. Most dingoes are seen on the popular eastern beaches, where the occasional euthanasia of dangerous dingoes always fans the flames of controversy and conspiracy.

Observations of “skinny” dingoes have led some to voice concerns that Fraser Island dingoes are starving with nothing to eat and some predicted they would even be extinct by now.

So why are they still alive and doing well in good numbers? The answer may have something to do with their eating habits.

A dog’s breakfast

Based on 2,196 dingo scats, 144 stomach samples and more than 30,000 camera trap records, my colleagues and I found that Fraser Island dingoes eat prey ranging from tiny insects to giant dead whales washed ashore – and everything in between.

The most frequently occurring food items in scats were northern brown bandicoots (47.9%), followed by fish (26.8%) and large skinks (11.5%).

Eastern grey kangaroos, feral pigs and even feral horses showed up, along with threatened long-nosed potoroos and eastern chestnut mice, confirming the continued presence of these animals on the island.

Plastic food wrappers, tin foil, human faeces, underwear, hats, a variety of different shoes, fish hooks, iPods, beer and soft drink cans, alcohol bladders, steel wool and plastic containers also made an appearance.

Dingo body weight and condition

Given the wide range of food items going down the hatch, it should come as no surprise that Fraser Island dingo body weight and condition are doing remarkably well.

From 455 weight records (the largest known sample of dingo weights ever reported), Fraser Island dingoes over 12 months of age weigh in at 16.6 kg on average, compared to mainland dingoes' typical weight of only 15.7 kg.

And when it comes to body condition scores (ranging from 1 for skinny dingoes to 5 for grossly obese animals), nearly 75% of dingoes scored 4 or 5. Only 5.6% had a score of 2.5 or less.

Parasite loads were also low and comparable to other dingo populations.

So what does this all mean for Fraser Island dingoes?

The available data does not support notions that Fraser Island dingoes are starving, have restricted diets or are in poor physical condition.

Rather, they indicate that dingoes on Fraser Island are capable of exploiting a diverse array of food sources, which contributes to the vast majority of them being in good-excellent physical condition.

Underweight or skinny dingoes are still sometimes seen, and will continue to be seen forever, but this is a normal and natural phenomenon associated with wild populations of dingoes and other wildlife, and is nothing to be concerned about.

Skinny dingoes may represent socially excluded individuals, females that have recently lactated and raised litters, sick or diseased animals, or those suffering from temporary nutritional stress during normal periods of food shortage.

Dingoes also have excess digestive capacity, meaning that they do not need to eat every day and regularly endure periods of several days without food or water. As a result, variable body condition scores and fat reserves can be expected in and between individuals under normal conditions.

It is unreasonable to expect that every individual in a population will be the same weight all the time, or that all individuals will survive. Although some individual dingoes may be “skinny”, the population actually contains far more “fat” individuals. Dingoes on the island are also known to live for over 13 years, which is a long time for a wild dingo.

Returning to natural diets

Comparisons with previous studies also suggested that dingoes have returned to a more natural diet over the past 20 years. This is in line with a range of sound non-lethal management approaches, including increased education and the exclusion of dingoes from open rubbish dumps and other substantial sources of human food (such as townships and campgrounds).

This is all good news for the future of Fraser Island’s dingoes. If dingoes focus more on eating natural food sources (such as bandicoots and stranded marine whales) and less on human-provided food, then we may see fewer negative dingo-human interactions or attacks in the future, and an ultimate reduction in the number of dingoes needing to be euthanased for dangerous behaviour.

Continuing to feed dingoes with human food would be a disaster for Fraser Island. The saying “a fed dingo is a dead dingo” is not far from the truth.

Research from around the world has shown that supplementary feeding of wild animals increases their numbers beyond the point that the environment can handle. This ultimately leads to more animals in need of feeding and subsequently greater numbers of deaths, in both the fed animals and other wildlife too.

This has been observed with dingo populations in other areas of Australia and can be easily avoided on Fraser Island with proper management and ongoing research.

Funding for components of the published study was provided to Ben Allen by the Queensland Government's 'Fraser Island Dingo Research Program' (Grant number: 06251-2015), administered by the Department of Science, Information Technology and Innovation. The funders had no role in the study design, data collection and analysis, decision to publish, or preparation of the published study or this article.