It is impossible to overstate the stakes if the world’s energy transition runs off the rails—and it will
By Chris Uhlmann, Sky News of Australia, Nov. 19, 2024
The discord between reality and rhetoric is playing out in real time as the politics driving a warp-speed shift from predictable electricity generation collides with the physics of delivering constant power with inconstant supply.
It is impossible to overstate the stakes if the energy transition runs off the rails. Electricity is civilisation’s nervous system; without it, everything will collapse. What is happening is akin to conducting a proof-of-concept experiment on an incubator with a child inside.
And red lights are flashing on energy transitions here and around the world.
In Australia, the target for the eastern grid is huge: Labor wants 82 per cent of generation on the National Electricity Market to come from wind, solar and hydro power in the next six years. That’s more than double what it is now.
In fact the gap is bigger than it first appears, because the maximum generation capacity boasted by weather-dependent energy gatherers is no measure of the power they typically harvest. At best, onshore wind farms will deliver 40 per cent of their nameplate capacity. Solar panels sit at under 30 per cent. So at least twice as much random generation must be built to cover the retirement of every reliable power producer.
Labor’s ambition is also built on a promise: the future will be greener and it will be cheaper. Showcasing his formidable rhetorical skills, Climate Change and Energy Minister Chris Bowen has distilled this to a soundbite: “Renewable energy is incredibly cheap because its fuel is free, because it’s the sunshine and the wind.”
In another flourish, he muses: “The sun doesn’t send a bill. The wind doesn’t send a bill.”
With solar power, prices rise, energy security falls
Alas, electricity retailers do send bills and everyone who owns or rents a property, and every business, knows they are getting bigger. Turns out, turning sunshine and wind into electricity costs money. And converting widely dispersed on-and-off generation into a reliable power supply is staggeringly expensive.
Working on a documentary about the energy transition for Sky News, our team set out to speak to people who have real-world experience with energy and in running electricity systems.
What we found was everywhere wind and solar displace reliable generators to become a dominant source of power, two things happen: electricity prices rise and energy security falls.
The reasons are at once complex and simple. In essence, it’s all about balance. The iron law of a bulk electricity system is that supply must perfectly match demand, every second of every minute, 24 hours a day, seven days a week. That finely tuned balance is reflected in the system frequency.
Energy gatherers cannot match power demand with supply because their fuel is literally as predictable as the weather. To turn occasionally available power into a reliable electricity system, the gatherers have to be connected to a complex and expensive life-support system the old grid did not need.
Wind and solar plants cannot set the grid’s frequency, or maintain its stability. So essential system strength services that were once delivered as a by-product of generating electricity also have to be recreated and financed.
Wind and solar not flexible in delivery
In North Carolina, Michael Caravaggio is a head of research and development at the world-leading Electric Power Research Institute.
“We built our electricity systems around the world with essentially dispatchable technologies for matching frequency,” Caravaggio says.
“What do I mean? If you use more electricity, I can give you more electricity. Use less, I can turn them down. With wind and solar it’s not like that. So the sun rises, that’s when we have electricity. The wind blows, that’s when we have electricity. Doesn’t care what you or I do in terms of that electricity. That’s a small problem when we build some wind and solar. But that becomes a bigger and bigger problem as these technologies scale.”
Sitting in the real world is Jim Robb, chief executive and president of the North American Electric Reliability Corporation. Appointed by congress, his unique job is to oversee the reliability and security of the bulk power system across the entire interconnected American grid, which includes all of the United States and parts of Canada and Mexico.
“There’s a line that a lot of people will latch onto that as we move toward more renewable sources of energy, that costs will decline because we don’t have to pay for fuel,” Robb says. “But we do have to pay for the capital required to convert free wind and free sunshine into electricity. We’re going to have to pay for the capital to distribute it to customers, and we’re going have to pay for the creation of those reliability services.”
Claim of cheap, reliable green power is a fraud
This is no surprise. Anyone watching the cautionary tales of South Australia, Germany and California could read the signals years ago that the rhetoric of a cheap, reliable green power was a fraud. It was obvious when Labor produced its energy policy, including the mythic figure of a $275 drop in power prices. Bowen was privately warned not to claim prices would fall.
And the dirty little secret in the construction of the green grid is that it cannot work as an electricity system without gas.
Daniel Westerman, chief executive of the Australian Energy Market Operator, is the man tasked with developing the system plan to deliver Labor’s pledge to decarbonise the eastern National Electricity Market. He says gas will be essential to ensure the reliability of the grid – to 2050 and beyond – as the cost of trying to cover long periods of low wind and solar generation without it would be prohibitive.
“We will have batteries, we’ll have pumped hydro,” Westerman says. “But we’ll have times like we’ve seen earlier this year where there’s not much wind and there’s not much sun, and the gas-fired power stations are really required to back up the reliability of the grid. They are there as the ultimate backstop.”
The energy transition road map is the Integrated System Plan developed by AEMO. It shows that, as coal retires, 15 gigawatts of gas will be needed for the eastern grid to operate securely to 2050 and beyond. This is not just a little bit of gas, it’s enough to power 15 million homes. As a future grid dominated by wind and solar generation cannot form a reliable electricity system without gas, the fossil fuel’s role is more backbone than backstop.
This plan is being built on the railroad tracks laid down by the government. And, lest we forget, last year Bowen told the world climate summit that “fossil fuels have no ongoing role to play in our energy systems” if the Paris targets are to be met.
One begins to wonder if the minister understands that words have meaning. The distance between what he says and what is real is as vast as the generation gaps Labor’s decarbonisation ambitions are punching in the electricity system.
Promoters of ‘green’ power don’t know what they’re doing
There is another, terrifying, possibility that would explain this reality gap: that the minister, his staff, his department and all the states and territories that have been pushing ambitious renewables targets for a decade have no idea what they are doing.
Proposed renewables projects, land clearing
That Australia’s political class, and the bureaucrats who advise them are breathtakingly, stunningly energy illiterate. That they have been ruled by virtue signalling and not facts.
This is now my working theory. Here is the evidence.
If any of them did understand the limitations of the technologies they champion, then all states building a wind and solar-dependent grid would have also vigorously pursued the development of domestic gas supplies.
As they raised their targets for more wind and solar, they would have raised their ambitions to secure plentiful gas.
More supply would mean lower electricity costs and would have buttressed the grid, to allow for the orderly retirement of coal generation.
They did the opposite. Victoria imposed a ban on gas exploration and NSW did nothing to encourage it. Worse, energy ministers demonised the fuel. The critical gas shortages all now face is entirely a product of not just bad, but culpably ignorant, policies.
If any of the energy ministers who signed up to Labor’s Capacity Investment Scheme actually knew what they were doing, then gas would have been on the menu of vital technologies needed to support the energy transition. Yet they delivered a plan which specifically excludes gas. Uniquely in the world, Australia has a capacity investment scheme which forbids investing in dispatchable capacity.
If the politicians and bureaucrats had paid attention to what is happening in any jurisdiction attempting a similar transition, then they might have picked up a pretty significant signal.
In June 2022, The New York Times reported that the EU had “endorsed labelling some gas and nuclear energy projects ‘green’, allowing them access to hundreds of billions of euros in cheap loans and even state subsidies”.
Matt Kean was the NSW energy minister and is now Climate Change Authority chairman. As recently as last month he said “people calling for gas to be included in the capacity investment scheme are trying to stop renewables”.
“That just seems like a recipe for much higher electricity bills for Australian consumers, and they’re bills that we can’t afford to pay,” Kean said.
So one of the key figures pushing for a weather-dependent grid appears not to have read, or does not understand, the future system plan he champions.
For his benefit we will return to Westerman: “What we know is that as we get to a net-zero system, it’s really expensive if we don’t have a dispatchable source like gas.”
‘Green’ energy doesn’t work without natural gas
Is it not just a tad disturbing that Kean’s views are so profoundly discordant with the analysis that underpins the system he is promoting? Again, for his benefit, his preferred grid does not work without gas. And, without gas, it will be even more expensive.
Kean also clearly has no knowledge of what’s happening in other countries attempting the same transition, unless he now believes that by subsidising gas the EU is “trying to stop renewables”.
It gets worse. Under questioning before a recent Senate estimates hearing, Kean repeatedly asserted that the system plan “is a look at the counterfactuals as to other sources of generation to provide the cheapest replacement cost of an existing system”.
This is wrong. Examining the cost of coal and nuclear power is explicitly prohibited because the plan is confined by the guardrails of every state and federal policy, including the 82 per cent renewable target. What is being built is not the cheapest system for consumers, it’s the “lowest-cost pathway”. They are two very different things, which is why Westerman will not follow his political masters’ lead in promising lower power prices.
The thought that those leading the net-zero charge might be clueless has clearly occurred to another inhabitant of the real world, Woodside chief executive Meg O’Neill.
“One of the things that I think has been challenging is we’re not using data to have the conversation,” O’Neill says.
“We’re using aspiration. We’re using goals. But the fundamental data that will help us understand what’s required to get to the place we want to be, that’s not been laid up for the Australian people.”
And how much back-up of gas, batteries and pumped hydro will be needed to support the so-called net-zero grid?
“What we’ve seen is that you need to manage those zero output hours from wind and solar,” Caravaggio says. “Unfortunately they always happen. So you need essentially a hundred per cent back-up for different periods to cover that need. That is an evolving challenge to figure out the economics and how to make that affordable. Right now, what we typically see is a significant gas build out.”
One hundred per cent backup.
To avoid brownouts and blackouts, we will need two electrical systems
So we are building two systems. The one being advertised and the shadow system needed to ensure the security of supply. And, in a profound irony, the crucial second system has been actively undermined by those championing the first.
In an electricity system, the term for a catastrophic event is cascading system failure. It begins with an initial fault which amplifies through the grid and ends in a widespread blackout. The lights can go out within a minute.
If the mob wakes up to the fact that what was promised by Bowen can never be delivered, or the lights go out, then Labor will learn what a cascading system failure looks like when it is applied to politics. It will put the lights out on the government in a heartbeat.
The Real Cost of Net Zero premiered on Australia’s Sky News on Tuesday 19 November. Stream at SkyNews.com.au or download the Sky News Australia app.