The outcome of the South Australian government’s bold energy policy could be key to the future of renewable energy throughout the nation. By Max Opray.

Renewables and South Australia’s power policy

The premier of South Australia, Jay Weatherill, left, and federal energy minister Josh Frydenberg, right, at this week’s press conference in Adelaide.
The premier of South Australia, Jay Weatherill, left, and federal energy minister Josh Frydenberg, right, at this week’s press conference in Adelaide.
Credit: ABC

The tension was stretched tight across Josh Frydenberg’s face, his mouth not certain what to do. For months he and South Australian premier Jay Weatherill had hurled blame at each other over SA’s energy problems. Now they found themselves side by side at an Adelaide press conference that both claimed the other was not expected to attend.

One of the assembled media asked Frydenberg – there to promote a federal contribution to an AGL battery storage project – if this was all a bit awkward.

As the minister laughed it off, Weatherill muttered: “It’s about to be.” 

What followed was a dramatic escalation of what has become an energy policy civil war – Weatherill savaging Frydenberg for having the “gall” to promote a renewable energy project in SA after months of blaming the state’s wind farms for a series of mostly unrelated blackouts.

Frydenberg returned fire by calling Weatherill “desperate” and accusing his state of negligence for reaching 41 per cent renewable energy penetration without “the necessary back-up”. 

Weatherill said the Frydenberg announcement of a reinvigorated Snowy Mountains hydro scheme showed the federal government was in a “white-knuckled panic” about energy policy. “It is a $2 billion admission that the national energy market has broken and there needs to be public investments to actually fix it up.”

And later, in the same answer: “It is a disgrace the way in which your government has treated our state.”

The showdown came after a week in which the Weatherill government had broken ranks with the National Electricity Market in declaring a “South Australia first” energy policy. 

The state has endured a cursed run when it comes to keeping the lights on. Earlier this month an explosion at AGL’s 40-year-old Torrens Island Power Station B nearly caused what would have been the second statewide blackout in a matter of months, according to an Australian Energy Market Operator report released on Wednesday.

In February, load-shedding issues hit 90,000 people due to the combination of a drop in wind, a software glitch and a privatised market that decided it would be best not to boot up the Pelican Point gas generator waiting in reserve.

In January, December and September the lights went out due to extreme weather – of the kind increasingly likely due to climate change – wreaking havoc upon powerlines.

Most of these issues were not the fault of the South Australian energy grid’s high level of renewable energy penetration, but that hasn’t stopped the Turnbull government and other clean coal cheerleaders using the state as a cautionary tale about green energy. 

The February blackout was the only example where renewables were a factor, if only in that it was a demonstration of how the energy market can fail to manage them correctly. 

For all the white noise about renewables – from The Australian’s campaign against non-existent wind farm syndrome to Barnaby Joyce’s gross misrepresentation of the storm that plunged all of South Australia into darkness in September – the network does rely on sun and wind and needs backup when there is neither.

On such occasions, South Australia taps into Victoria’s largely coal-fired network, but such imports are projected to get even more expensive than they already are given the impending closure of the Hazelwood coal-fired power station on March 31. 

Luckily, the South Australian government has a plan. Unfortunately, it was only announced on Tuesday, just over two weeks in advance of Hazelwood’s final cough. 

Speaking at the Science Exchange in Adelaide, Weatherill unleashed an array of proposals including a new $150 million renewable technology fund – part of which has been earmarked for Australia’s largest battery storage system – plus $350 million for a government-built gas plant to sit on standby in case of emergency. There will also be changes to regulations that allow the state government to intervene in the energy market when required, a new energy security target that requires local retailers to use a certain proportion of South Australian power, and reforms that encourage fracking provided the gas is used in SA.

In a state facing further unemployment as the manufacturing sector declines, the plan also promises to add 630 jobs.

Weatherill wants the battery storage system up and running in time for summer – a deadline that won’t faze Elon Musk, the co-founder of battery storage producer Tesla, who famously bet on Twitter just over a week ago that he could solve South Australia’s power woes within 100 days of signing a contract. The billionaire co-founder of tech firm Atlassian, Mike Cannon-Brookes, has entered as a kind of fixer for the project and Musk and Malcolm Turnbull have had an hour-long phone conversation about the technology.

Musk has developed a reputation for overly ambitious targets, but RepuTex energy market researcher Bret Harper confirms that battery storage can indeed be brought online in a relatively short time. 

However, he cautioned that – depending on the weather – autumn and winter could present peaks of energy demand that might challenge the post-Hazelwood network before battery storage could be rolled out.

“South Australia will continue to be balanced on the edge for a while,” he says.

The Weatherill government isn’t the only one with a 100MW battery storage announcement this week – Victoria followed up with its own $20 million tender, signalling that the long-promised solution to renewable intermittency has finally arrived in a commercially viable form.

Hugh Saddler, honorary associate professor at the ANU Centre for Climate Economics and Policy, says grid-scale battery storage hasn’t been considered cost-effective enough to integrate into the system until now. 

He broadly welcomed the SA plan, but was mystified at its inclusion of a new gas-fired peaking plant, arguing that the proposed battery storage would be sufficient to ride out a drop in wind such as that which occurred on February 8 – the catalyst for the Weatherill government intervention. 

Instead of the gas plant, Saddler wants to see the government back solar thermal with storage, even if existing proposals sit at a significantly higher price bracket, such as the $1.2 billion 170MW solar thermal tower proposal for Port Augusta.

“The situation we’re now in, it is a perfect storm,” he says. “The whole business about rising gas prices has coincided almost precisely with a large proportion of inherited coal-fired generation turning 40 to 50 years old. Before, we’d been living in a completely unreal environment for wholesale electricity prices, which had been sitting at below-replacement-level cost due to the overhang of old generators.” 

A source at SA Power Networks, the operator of the state’s electricity grid, says the partisan politics around energy politics has put the brakes on the evolution of the energy sector.

“I think it’s dividing people and preventing progressive policies from being implemented,” the source says. 

“For instance, there is such a crackdown on electricity prices that the national regulator is forced to reject any funding proposal from a network business to do anything innovative.

“We’re all like, ‘We want it to be green and cheap and always on.’ Something’s got to give in that equation. Personally, I think it’s cost. Harnessing energy is expensive, but we’ve given ourselves a false sense of it being cheap in the early days by paying no attention to the environmental impact of the way we used to generate it.”

With power prices having doubled in SA since 2008, even more expensive electricity is going to be a tough political sell – and Weatherill’s adversaries are circling. 

Senator Nick Xenophon tells The Saturday Paper that he likes the look of Labor’s new plan, but warns that it requires a safe pair of hands.

“If they don’t get it right, they face electoral oblivion – they face being reduced to a cricket team,” he says. 

Xenophon’s state level SA Best party is one of a number of teams lining up to bowl Labor out of government over energy policy. The Liberals and One Nation have also made electricity prices central to their strategy for the 2018 state election.

If the Liberals win, government will be handed over to opposition leader Steven Marshall, a man who chose to characterise Labor’s new energy policy as a “$550 million electricity bill” for taxpayers, blaming Weatherill for “forcing” the closure of the Northern coal-fired power plant in 2016 – an ageing, privately owned facility that relied on a nearby coalmine that had recently been exhausted.

On the left, the Greens have attacked Labor’s plan for its explicit incentivisation of harvesting coal seam gas locked up in the farmland of the south east – a concern also shared by anti-fracking campaigners Lock the Gate.

The incentivisation is tied to a requirement that the gas is used in SA, a pressing concern related to the fact that without gas, gas-fired plants are about as useful as a wind turbine without wind. Multinational LNG giants have found it much more lucrative of late to export Australia’s vast reserves overseas, a trend that has prompted the Australian Energy Market Operator to project severe gas shortages across several states of Australia by the summer of 2018-19, which happens to be when Weatherill hopes to have his new gas plant online. That is, if his government survives long enough to see the plan through. 

In the meantime, Weatherill hopes that the wind blows in his favour and that the state gets a reprieve from extreme weather events. With every incident from statewide blackouts to a disconnected cord at an Adele concert feeding into the anti-renewables narrative promoted by the Turnbull government, the success or otherwise of Weatherill’s power play could determine not only his own political future but the future of Australia’s entire renewable energy sector.

This article was first published in the print edition of The Saturday Paper on March 18, 2017 as "Power struggles".

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