Angus Taylor short-circuits dissent and narrows the scope on COAG debate

On Saturday, the ABC’s AM radio program announced that Federal Energy Minister Angus Taylor had “emerged triumphant” from Friday’s meeting with COAG Energy Ministers, perhaps because, in advance of the get together he had neutralised — paid off — New South Wales’s Matthew Kean and his call to revive an integrated national climate and energy policy; or perhaps because he had successfully turned the agenda away from carbon emissions towards a National Hydrogen Strategy and the spectre of electricity unreliability.

NSW Energy and Environment Minister Matt Kean’s reward for supporting his Federal Liberal colleague will be fully revealed in December, but prior to the COAG meeting, he spoke openly to the Australian Financial Review about the Commonwealth bid “to buy me off”, saying the bilateral deal he had negotiated would be “far more beneficial” to NSW than the NEG or a similar policy would have been.

Friday, 22 November saw the long-awaited COAG meeting, which is expected to occur on a quarterly basis but hasn’t been held for 12 months, finally convene in Perth, Western Australia — a state so far free of the “unprecedented” bushfire catastrophes experienced by eastern states this spring, and also independent of the National Electricity Market (NEM).

At the meeting, in addition to endorsing Australia’s chief scientist Alan Finkel’s National Hydrogen Strategy (with the sting that hydrogen generation can be green or grubby — technology neutral), Federal and state energy ministers responded to concerns that the pace of energy transition has overtaken the rules governing system reliability by tasking the Energy Security Board (ESB) to undertake an immediate review of the NEM reliability standard and report back to the next COAG Energy Council meeting, proposed for March 2020.

By the morning of Saturday, 23 November, the Australian Industry Group (AIG) — a peak employer organisation representing some 60,000 businesses around the country — had prepared a statement that began by congratulating the COAG Energy Council on adopting the hydrogen strategy, which AIG Chief Executive Innes Willox described as “a range of sensible steps to prepare the ground for what could be Australia’s next big resources boom”.

It then launched into AIG’s concerns about re-reviewing the reliability standard just 18 months since it was last tested, in a process that will this time be given only four months over the Australian holiday period to “consult meaningfully with all stakeholders and take costs seriously”, said Willox.

COAG Energy Council “asks for too much of a good thing” — AIG

“Reliable electricity is a good thing, but it can cost a lot,” Willox cautioned.

“Ministers should be aware that if they wind up signing a blank cheque for reliability, they will condemn Australians to paying through the nose for surplus generators and transmission lines that will sit idle for most of the time.”

It has happened before: previous so-called “gold plating” of the grid, or over investment in grid infrastructure, is part of the reason Australians pay such high electricity prices today.

In recent times, the Australian Energy Market Commission has opened discussions into the potential for distributed energy resources — including coordinated residential and commercial rooftop solar resources supported by battery storage — to moderate the need for investment in large-scale renewable generation at the current pace, and to further inform the need for transmission build out and large-scale storage

The National Hydrogen Strategy would be influential here, too, potentially stimulating further investment in renewable generation that is surplus to the country’s immediate electricity needs by creating export demand for green hydrogen.

Such developing but potentially complementary forces are just part of what makes Australia’s energy transition so exciting, and so complex to navigate.

AEMO underscores the challenges

The Australian Energy Market Operator (AEMO), which is at the front line of ensuring electricity supply to consumers in this volatile transitioning market, initiated the proposal for a higher electricity reliability standard.

The current standard requires that there is enough generation capacity and interconnection of transmission to guarantee that 99.998% of forecast demand in any financial year can be supplied.

Both AEMO and the Victorian Minister for Energy, Lily D’Ambrosio, have called for review of the standard such that dispatchable reserves in each region should be available to ensure that unserved energy is less than 0.002% in nine out of 10 years.

Victoria was subject to blackouts earlier this year when high summer temperatures stimulated energy demand by people switching on their air conditioners, which could not be met by the system because three coal-fired electricity generation units in the La Trobe valley were out of action and, on that occasion, hot weather also hobbled the efficiency of remaining coal-fired plants, further exacerbating the shortfall in energy.

AEMO wants to be able to contract for additional reserves when such a breach of the standard is forecast up to a year in advance.

Higher standard, bigger price tag

On 19 November, prior to the COAG meeting of Energy Ministers, the Grattan Institute’s Tony Wood, restated that implementing “a higher reliability standard will mean higher costs” for buyers of energy, which is absolutely against all current state goals of energy ministers and regulators.

Ultimately, Wood’s argument came out in favour of the review, saying it was needed to “crystallise the debate and clear the air on a complex and important issue”.

First, however, he pointed out that lack of generation capacity on hot days has so far “caused only 0.1% of all power outages over the past decade”, and that, “Research indicates that more consumers are concerned about price than reliability.”

He added that, “No-one should forget that households in NSW and Queensland are still paying for a decade-long over-investment in ‘gold-plated’ distribution networks that achieved only very small improvements in reliability.”

Large energy consumers, are not in favour of a higher energy standard, said Wood; and Willox, writing on Saturday as the representative of many such electricity customers, would not let the greatest bone of contention regarding the outcomes of the COAG meeting to be buried.

He said, “Ministers made no progress on a coordinated, durable and integrated approach to energy-related emissions policy — the lack of which remains the most persistent barrier to energy investment and opportunity.

“The intense focus on reliability paradoxically comes as the Australian Energy Market Operator reassures Ministers that there are now enough electricity resources in the market and in reserve to reduces the risk of the power system failing this summer,” notes Willox.

For the time being, Taylor has bought an ally in NSW and thereby influenced the tenor of the Federal Government energy- and emissions-related dealings with other NEM states — for the sake of their constituents, they will not want to be cut out of access to Federal funding and brokering of deals.

But the strategy of using division to conquer dissent, and to obscure the most important issues of a co-ordinated approach to emissions reduction is so much less than Australia should expect of its leaders.