Since the Finkel review was announced it has been open season for notion building in the energy space. While Malcolm has been spruiking Snowy 2.zero pumped hydro, Craig has been promising death by renewables, quite literally. Josh seems to be for just about everything, besides Labor state governments of course, and reckons we are on track to meet Paris commitments. Barnaby, true to form, is backing coal, and presumably thinks Paris will take care of itself, while Electricity Bill is keeping mum.
The one I like the best, but really hasn’t been nailed quite the way I thought it should, is Tony’s call for nuclear subs. Imagine, our first truly dispatchable power system, capable of delivering a few hundred megawatts just about anywhere you need it. “Float and plug” – just what we need to shore up our fragile energy system. A tour of dispatch last year including Tasmania from January through June, South Australia June through November, and then on to Queensland for the summer would have been a nice little money spinner for the Navy, worth around quarter of a billion dollars on the energy markets. And that doesn’t include offsets, such as the purported $44 million Tasmanian government spent on diesel gensets. Could it be our best notion yet for meeting Paris?
It goes without saying that our political masters don’t need much provocation to indulge in a bit of notion building. After all, it is what they do best.
But, in case you are wondering why this sudden release of energy, it might be useful to reflect on some recent analyses that paint a truly disturbing picture for our energy sector.
The first comes from the European Commission’s latest electricity market update, providing the comparison of wholesale electricity prices shown below.
As recently as three years ago our electricity wholesale prices were low by any measure. In fact according to the EC’s analysis,
our market prices then briefly dipped below those in the US. Then, ours were just 20% of the Japanese price.
How times have changed.
According to the EC’s latest analysis our prices tracked pretty closely with the US until the second half of 2015. It seems things to start going awry just about when Josh was received the poison chalice as Minister for Energy and Resources.
Six quarters later and the EC now estimates that for Quarter 1 this year our prices were a staggering 400% higher than in the US.
This last quarter we even managed to top Japan, which is some achievement considering that across the quarter we exported some20 million tonnes of our thermal coal and over half a million tonnes of LNG to help them sure up a power system still reverberating from the shock waves of Fukushima. That’s about half as much thermal coal as used to power our system.
The second comes from BP’s latest Statistical Review of World Energy released in June, which provides national figures for all things related to energy production and consumption, including sector wide emissions.
According to BP’s latest figures, our energy sector produced about 409 million tonnes of CO2 in 2016. That amounts to 16.7 tonnes for every Australian. On a per capita basis, that puts our energy sector a touch above the next most emissions intensive economy in the developed world – the US at 16.5 tonnes. Even Canada, which has a resource based economy more comparable to our own, gets away with only 14.6 tonnes per person.
Worryingly, relative to 2005 levels our energy sector emissions are up about 10%, which stands in stark contrast to most other advanced economies, and especially the US, down 12% over the same interval.
So the notion that we are on track to meet Paris is, at best, notional.
To achieve such extraordinary wholesale price outcomes, one might imagine something remarkable had happened to our energy system since 2014. Our Coal-cons such as Craig Kelly would believe it is because our power system is groaning under the weight of renewable production.
But perhaps it the absence of renewables. Or maybe it is both, peskily masked in a cloak of invisibility. Check out the figure below, which shows our electricity production by key fuel group (coal, gas and renewables) over the period since our power prices have risen from the lowest to highest on the international pecking order.
Can you determine a trend that could account for anything? I’m damned if I can.
And that in itself is sure to be worry enough to keep it open season on notion building for a long time to come.
For those interested, some more detailed discussion of the crisis besetting the National Electricity Market (NEM) in eastern Australia can be found in my Anatomy of an Energy Crisis series, Part 1, Part 2 & Part 3.