Beware of rushing to install roof solar panels to avoid the higher power charges that stem from the Finkel report.
The power planners in eastern states are already one step ahead and are looking to cover the cost of the massive renewables back-up investment required by Finkel by increasing service charges rather than putting the whole amount on the voltage of power used.
Unless the distribution of costs is changed, the bill for those who can’t afford solar panels/batteries or who live in apartments would explode because they would be required meet all the burden of back-up plants.
This is one of the issues that has been raised in the wake of Finkel as the NSW, Victorian and Queensland governments examine how they establish back-up plants for their ambitious renewable energy projects.
And, as I pointed out yesterday, they also have to explain and distribute the inevitable big rise in electricity prices that must follow from erecting back-up plants as the real cost of renewable energy comes to the surface.
In the meantime, because back-up has not been installed on most existing renewables, energy security is falling in Victoria, South Australia and NSW, forcing enterprises requiring power for survival to install back-up diesel generators.
To make it worse, in NSW and Victoria the old coal generators are likely to break down in times of high power usage on hot days, as NSW discovered on February 10 this year.
In advance of the Finkel report, currently Victoria, NSW and Queensland all have major plans to increase their renewable energy generating capacity without proper back-up.
Assuming the Finkel back-up recommendations are adopted they now must install back-up plant for new installations.
Most of the capital costs of renewable backups plants will need to be met by the large energy companies in the private sector.
But, as things now stand, power generation and grid investment in Australia are high risk. Not only are our state and federal governments unstable when it comes to energy policy, but whereas in the past investments in power generation and grids could be amortised over half a century, now the pace of technology change means that they must be amortised over a much shorter time frame. That increases the costs.
Power utility providers will seek returns that are both secure and large. And in many cases the back-up power plants will lie idle for large amounts of their life so unless subsidised they will be totally uneconomic.
It is possible such “uneconomic” investments may require state rather than private capital at a time when health, education and transport facilities are demanding investment.
We saw in the Victorian desalination project that the owners of the plant required an iron clad, take-or-pay supply contract. Victoria used desalination water this year but in previous years has not required desalination water, but the state paid for the water that was not produced under an agreed formula that gave a return to investors.
If private sector capital is to be used for back-up plants then the Victorian desalination plant may be the model. It is possible communities will fund their own back-up on a similar basis.
Sitting on the green side of the fence the very best back-up system is a geographic spread back-up. That way you install wind and solar generators around the country and gain your security by geographic diversity. Such a system would be 100 per cent renewable with token operating costs. But to undertake such a task would require a truly massive investment in the grid, costing many tens of billions — more than the actual wind turbines and solar panels. And remember that even if conventional “uneconomic” back-up plants are erected there still needs to be massive grid investment because our power grids are designed for centralised coal and gas fired generation. But the cost of that investment is not as much as the 100 per cent renewables geographic spread alternative.
Swinging from green to non-green alternatives, a “clean coal” base load power station would substantially reduce the required investment in back-up and the grid. But while the capital investment requirement maybe less than renewables the operating costs in a coal plant are much, much higher than the near-zero operating costs of renewables. The Minerals Council is urging that clean coal be included in the renewable energy target mix.
More conventional thinking has back-up plants being devised via a series of fuel alternatives, of which the most popular are hydro or pumped hydro schemes. The federal government announced such as scheme for the Snowy and gained great credit but it appears to be bogged in the public service morass.
A second alternative is gas but to achieve that alternative will require a completely different attitude by state governments in NSW and Victoria.
Australia, including NSW and Victoria, has plenty of gas although extraction costs are now much higher than the easy gas that was extracted in former decades. The NSW and Victorian governments have environmental policies that have the side effect of pushing up the price consumers and industry must pay for gas by stopping the development of their gas.
Finally there is battery back-up. Battery back-up is usually used to even out the usage of electricity so that there is power available when the wind slows and the sun goes down. The danger is that if on very hot days the wind does not blow then the batteries may not have sufficient stored power to cover the emergency gap. On current technology they are certainly a help but on their own they are not the answer.
Australia is moving from a low-cost to a high-cost energy nation at a time when India and China are still erecting large numbers of coal burning power plants.
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