Canary in the coalmine shows way on renewables

South Australia is discovering the harsh realities of being the world leader in integrating high levels of intermittent renewable energy.  In the name of action on climate change, South Australia is an accidental experiment in how far you can push technologies like wind and solar PV into the grid before something breaks.  It is, quite possibly, the most important energy story in the world. The popular rhetoric around big renewable ambitions is now being tempered with the long-warned-of realities: higher costs, increased risks around reliability, or, as our parents used to say, “it’s all fun and games until someone gets hurt”.

Those getting hurt are, of course, the state’s industrial customers who are reeling at the higher cost of electricity in SA, and behind them households who are facing steep increases in energy bills. It is a “crisis" that has been years in the making, like getting run over by a steamroller.  Suddenly the inevitable blame game begins. Popular targets include the privatisation of energy assets, the National Electricity Market (NEM), high gas prices, unreliability in the interconnectors between SA and Victoria, or all of the above. The simple reality is this: increasing intermittent renewables at scale reduces emissions but ultimately increases prices and increases reliability risks.

More than 41 per cent of SA’s generation now comes from wind and solar.  This is very, very high compared to most large industrialised grids.  Until now, the only big renewables regions were like Vancouver in Canada or Tasmania, powered predominantly by controllable hydroelectricity. Denmark talks big on its wind energy, but when the wind doesn’t blow it can import almost all of its power needs from neighbouring Sweden or Germany. South Australia, by contrast, sits at the edge of Australia’s National Electricity Market.  It is connected by two transmission lines, which can supply around 25 per cent of SA’s maximum demand from Victoria.  The rest has to be generated inside South Australia.

In the pre-renewables days power was supplied by brown coal generators at Port Augusta and gas power stations located around the state.  It was much like the rest of the Australian electricity sector:  cheap, stable, and high in greenhouse emissions.   As solar and particularly wind increased capacity, they intermittently took more market share from the conventional power stations.  Instead of running all or most of the time as they were designed, the conventional fossil fuel generators have increasingly jumped in and out of the market.

This reduced emissions, but it also reduced the viability of these generators.  At low levels of renewables they could afford to operate.  At higher levels, they have begun to exit the market permanently.  The coal generators have now gone, and half of the gas plants of Torrens Island and Pelican Point were scheduled to be mothballed, the first step to permanent exit.

As it is, South Australia is now more reliant on a smaller group of gas-fired generators to meet demand along with high levels of renewables in the grid.  Higher gas prices have exacerbated recent spikes in electricity costs, but, even allowing for this, the underlying trend in South Australia is more expensive base-load power. Large industrial customers could and probably should have done more to sign on to fixed price contracts for their future power needs.  They probably didn’t sign on because they thought the prices on offer were too high.  Hindsight is a wonderful thing. But wait, there’s more. As if this wasn’t enough, there are more potential challenges facing South Australian electricity customers in the future.

First, there is the threat of a looming gas shortage in south eastern Australia, exacerbated by a moratorium on new gas fields in Victoria. The risk here is the ability and cost of South Australia’s increasingly peaky gas generators to operate in the teeth of a supply crunch.

Second, there are question marks now and into the future about South Australia’s ability to supply power during times of peak demand, like we saw during the extended heatwaves of 2014 and 2011. Wind generators can only be guaranteed, if at all, to run at a fraction of their name plate capacity during these times.

This looks even more perilous after 2020 as the Victorian Government’s plan to drive its own aggressive renewables targets means its ability to supply surplus electrons into South Australia may be impaired. The market operator is currently forecasting a decline in supply from Victoria after 2020.

Third, there is the less understood but critical issue of maintaining power quality (voltage and frequency) at times of low demand.  It was a power quality event that resulted in the Adelaide blackout on 1 November last year. Electricity systems are complex. Decarbonising them, particularly in places like South Australia, is challenging.  We shouldn’t stop the transformation the minute it gets difficult.  But the sooner we can return to a co-ordinated, national approach to energy policy, and away from populist state targets and symbolism, the better.