Australia’s Energy Crisis: Hazelwood Closure Means Higher Prices & More Blackouts
The Federal Large-Scale RET has just claimed another scalp in the shape of 1,600MW of reliable base-load plant at Hazelwood, Victoria – as well as more than 1,000 well-paid blue-collar jobs and an entire regional community.
That loss follows hot on the heels of the breathtakingly stupid decision by South Australia’s hapless Labor government to reject, out of hand, offers by Alinta to keep its Port Augusta plant up and running.
While Labor is keeping the terms of what was offered under wraps (fighting freedom of information applications being pursued by SA Liberals and the media), STT’s SA operatives inform us that the owners of Port Augusta, Alinta would have accepted around $27 million to keep its plant running for another 5 years, representing the dismissal of what would have been a canny investment – compared with the $550 million of taxpayers’ money that Weatherill is determined to throw at a 100MW battery that would power South Australia for all of four minutes and 200-250MW of diesel generation capacity which would cost over $400 per MWh to run, compared with the $40 per MWh that power from Port Augusta cost to produce.
Alinta shut its plant as a direct result of the REC subsidies paid to wind power outfits under the Federal government’s LRET (the value of which underpins the guaranteed fixed prices in their PPAs with retailers of around $110 per MWh), whenever the wind blows in South Australia, wind power outfits were able to underbid Alinta (on plenty of occasions paying the grid manager to take their skittish wares) which inevitably killed their profits and drove them out of business. The same perverse ‘market’ forces were what killed off Hazlewood.
The closure of Hazelwood removes a reliable supplier from the market and will, inevitably, drive up power prices in both Victoria and South Australia, bringing South Australia’s teetering grid and moribund economy to its knees; and setting Victoria on a pathway of economic and social destruction known all too well to South Australians.
Here’s former PM, Tony Abbott with another warning to South Australians and Victorians: if you haven’t already bought a portable generator, there’s no time like the present.
Keeping Hazelwood open makes sense, so just do it
24 March 2017
If we are serious about tackling Australia’s looming energy crisis, the last thing we should be doing is closing 20 per cent-plus of Victoria’s (and 5 per cent of Australia’s) baseload power supply. Yet that’s what’s scheduled to happen next week unless there is an 11th-hour intervention by government or a last-minute change of heart by the station’s operator.
Sure, brown coal is more emissions-intensive than gas. Yes, coal lacks the “big new thing” allure of pumped hydro. Still, it’s given Victoria and South Australia cheap, reliable baseload power, making those states our country’s manufacturing hubs. And until we have cost-effective and reliable alternatives, closing Hazelwood is sheer, avoidable folly.
Keeping Hazelwood open would make a lot more difference than pumped hydro, which is trying to solve today’s problem in some years’ time. Still, the Prime Minister’s Snowy Scheme 2.0, plus the South Australian commitment to a new gas-fired baseload power station, show that our leaders are finally thinking about what might be done to keep the lights on.
So far, though, no one in authority is talking about the one thing that could boost baseload power by almost 2000 megawatts immediately: not closing Hazelwood. If we want secure and affordable power supplies, we can’t lose the ones we have, even if they involve burning coal. The past few months, with the statewide blackout in South Australia and the blackout that badly damaged the Portland aluminium smelter in Victoria have shown the damage that intermittent and unreliable wind and solar energy is doing to our power supply.
There’s no doubt that climate change obsessions have played havoc with Australia’s energy policy. Fifteen years ago, thanks to a largely privatised and deregulated energy market, our power prices were among the world’s lowest.
With the world’s largest readily available reserves of coal, gas and uranium, we were an affordable energy superpower. Since then, climate-induced political fiddling has put prices through the roof and removed our manufacturing’s one big comparative advantage. It’s damaged our standard of living and it’s destroyed thousands of jobs.
My government scrapped the carbon tax and reduced the renewable energy target but the preference given to wind and solar power continues to drive coal- and gas-fired stations out of business and put security of supply at risk.
Depending on conditions, wind varies between providing nothing and everything SA needs. Because of wind’s preferential status and minimal marginal cost, more reliable and cheaper overall forms of power generation can’t compete.
SA’s private Pelican Point gas-fired power station is mothballed because policy-driven market distortion and Greens-driven restrictions on gas supply have made it uneconomic. Meanwhile, renewable energy-obsessed Labor governments, dramatically increased coal royalties and political risk have made coal-fired power unbankable here, even though it’s still the most affordable and reliable source of energy.
If price rises are to moderate and if jobs are to be preserved, energy policy needs a complete rethink. The renewable energy target, in particular, needs to be reconsidered so that unreliable power is no longer shutting down the reliable power everyone needs.
As always, it’s the unintended, unanticipated consequences of well-intentioned policy that turn out to be the most significant. The dream of “clean, green” wind and solar power over “dirty, dangerous” coal — and the subsidies to bring it about — has led us to the verge of catastrophe.
Once Hazelwood is gone, the plant mothballed and the workforce dispersed, it will be almost impossible to reopen.
Meanwhile, all the other schemes to produce large amounts of coal-free baseload power are years and years from fruition. At least until Snowy 2.0 can produce 2000 megawatts of cost-effective and droughtproof hydro power, Hazelwood should stay open. That wouldn’t be bailing out a failing business. It would be securing the services that Australians need until market forces are once more driving the system.
Keeping Hazelwood open would be a good way for Prime Minister Malcolm Turnbull to show that energy policy in Australia won’t be hijacked by ideological fixations in France. One of the factors in its looming closure — not the only one but an important one — is the French socialist government (which part-owns Engie, which part-owns Hazelwood) wanting to boast that it has closed down one of the world’s “dirtiest” power stations. Keeping Hazelwood open would cap off a good week for the Prime Minister. He’s fought for free speech, announced a new crackdown on union corruption, and released an “Australia First” citizenship statement.
Stopping next summer’s looming blackouts with bold action now is a chance to keep the momentum going.
From Biggles to the Battle of Britain, the coolest aces that engaged in aerial combat worked on the adage that: ‘There are old pilots and there are bold pilots. But there are very few old, bold pilots.’
Back in May last year, when Alinta closed its Port Augusta power plant, South Australia’s vapid Premier, Jay Weatherill apparently convinced himself and attempted to convince his long-suffering constituents that it was ‘no big deal’. A run of statewide blackouts and mass load shedding proved otherwise.
Now the Federal PM, Malcolm Turnbull finds himself engaging in the same kind of hubris. Knocking 25% of Victoria’s base-load power supply off the grid is not only going to punish South Australians, Victorians are going to get a taste of what it’s like to spend countless hours freezing or boiling in the dark and lining up to shop for portable generators.
While Tony Abbott and his fellow Liberal backbenchers are right in their efforts to salvage Hazelwood, STT can’t wait for it to pull the plug and pack it in, because its demise will simply accelerate the end of Australia’s suicidal renewable policies – the Large-Scale RET, for starters.
When Hazelwood closes, power prices will rocket in both Victoria and South Australia (the forward spot price in Victoria already has) and South Australia will find itself ‘islanded’ from the grid even more frequently: ‘islanding’ is the grid manager’s euphemism for shutting the interconnectors off that feed reliable coal-fired power from Victoria to South Australians.
Malcolm Turnbull is talking tough now, but wait until Melbourne starts enjoying the kind of ‘system blacks’ that are now part and parcel of daily life in South Australia.
Just like Jay Weatherill, Malcolm Turnbull is another bold pilot about to run into some serious flak. After Hazelwood closes there will be any number of gunners ready to take aim, albeit at the ballot box.