Jay Weatherill gambling his future on $550m power crisis plan which PM Turnbull terms costly way to say sorry
PREMIER Jay Weatherill has gambled his political future on a $550 million power crisis plan, which Prime Minister Malcolm Turnbull has attacked as “a very expensive way of saying sorry”.
- EASING PRESSURE: Gas giants agree on raising production
- THE REJECTS: What didn’t make the cut
- THE MONEY: Fears key cost of power station will kill of projects
- THE BILLIONAIRE: Companies invited to tender for giant battery
- THE VERDICT: Reaction to the State Government’s dramatic plan
- ANALYSIS: Labor facing blackout without a quick fix
PREMIER Jay Weatherill has gambled his political future on a $550 million power crisis plan which Prime Minister Malcolm Turnbull has attacked as “a very expensive way of saying sorry”.
The centrepiece of the long-awaited blueprint, which comes more than five months after the statewide blackout, is a $360 million plan for a taxpayer-owned gas-fired power station.
However, the new plant is not expected to be in place in time to cover expected power shortfalls next summer. Industry is already raising concerns there may not be enough gas to run it, as the entire nation faces an imminent shortage, and it could become an expensive white elephant.
The State Government has also revealed it is considering using massive diesel generators to keep the lights on across SA as coal-fired power stations close and renewables remain unreliable.
Mr Weatherill was unable to detail the effect his plan would have on power bills, but insisted they would be lower under the measures than without them. The cost to taxpayers, which equates to about $730 for each business and household, will be funded from planned State Budget surpluses.
The Government will also give Treasurer Tom Koutsantonis wideranging authority to force power stations to turn on, as well as decide how much power SA receives from Victoria.
But Federal Energy Minister Josh Frydenberg is investigating suggestions this was unconstitutional and whether it breached the rules governing the national grid.
A bulk buy public sector energy deal is expected to spark development of a new, privately owned power station, and Mr Weatherill is promising to help build Australia’s biggest battery.
The package comes just over a month after Mr Weatherill pledged to stage a “dramatic intervention” in the state’s energy market, hours after another load shedding blackout hit the state. It is also a major political gamble that will be a key factor in the fate of the Labor Government in the state election nect March.
Tuesday’s annoucement was greeted with caution from some in the business and social sectors, who fear already-high prices are costing the state jobs and making it harder to make ends meet.
Mr Weatherill said SA would now “lead our nation’s transformation to the next generation of renewable storage technologies and create an international reputation for hi-tech industries”.
He said the state must act now, rather than wait for policy changes in Canberra.
“The sorts of timelines and decisions that need to be taken are much more urgent,” he said.
“We have next summer to deal with. In fact, some of the pressures may emerge even before next summer, so we need to act immediately. “We’re going to put people first.”
Mr Weatherill said the new taxpayer-funded plant was necessary to “stabilise” the grid, meet demand on hot days and fill in gaps should the ageing Torrens Island gas station be mothballed.
“Obviously, our objective is to have it in place if possible before summer. That’s a stretch,” Mr Weatherill said. “It may well be that we need some temporary generation in the meantime.”
SA Power Networks was investigating options that could be diesel or gas backups, he said.
Mr Turnbull, who has condemned Mr Weatherill for rushing into the development of intermittent wind energy without backups, said the new plan was “a very expensive way of saying sorry”.
“This is the price, perhaps only a first instalment, of Labor’s failed experiment to take 50 per cent of their energy from renewable resources without the necessary storage or back-up,” he told The Advertiser.
“The SA Government has proven they cannot keep the lights on and they cannot keep power prices for households down. Jay Weatherill gave South Australians the most expensive and least reliable energy by embarking on his grand, unplanned solo energy experiment.”
“The measures he has announced will not make SA energy-independent — far from it.
“SA would be better off working with us on a national approach rather than going it alone on a state-based approach. We are working on a national plan that will benefit all Australians by working together to make energy secure and affordable while lowering emissions.”
Energy Users Association of Australia chief executive Andrew Richards said the Government may struggle to find the gas to run a 250MW power station as a national shortage emerged.
The Australian Energy Market Operator last week forecast a 20 per cent fall in gas production in the next five years and warned that SA faced imminent shortfalls. Part of Mr Weatherill’s package includes funding to help explorers find and develop gas resources, which must be used in SA.
SA Opposition Leader Steven Marshall said measures were needed to reduce SA’s peak energy demand, removing the need to fund an expensive new power station build.
Federal Labor Leader Bill Shorten commended the Premier for showing leadership and making renewable energy “part of the solution to secure supply for SA”.
Business SA spokesman Anthony Penney said there may be cheaper and more effective ways to provide additional energy than a new power plant, and the plan to give Mr Koutsantonis new powers over the market could create a dangerous standoff with other states on the grid.
“It’s infuriating and frustrating that it’s taken us this long to get to this point. Businesses have been feeling the affordability side of things 18 months ago,” he said.
SA Council of Social Services executive director Ross Womersley said the Government was right to fund the plan from tax revenue, rather than place additional charges on energy bills.
“It’s very important that we examine the technology behind the battery storage proposal to ensure we get a system based on the latest scientific knowledge available,” he said.
The $500 million power plan in detail
NEW GAS-FIRED POWER STATION
Taxpayers will fund the construction of a new power station run on gas, at an estimated cost of $360 million. Premier Jay Weatherill says that price tag is based on the best estimates currently available. He could not put a figure on how much it would cost taxpayers to run the plant every year, or whether the Government has identified a site. It is unlikely to be in place before next summer. The plant would be used in emergency situations, such as high demand on hot days or when other stations are shut down for maintenance. At 250MW, it would be able to supply about 7.5 per cent of SA’s maximum energy demand. The load-forced blackouts that turned off 90,000 homes last month occurred when 300MW was cut.
BATTERY STORAGE & RENEWABLE ENERGY FUND
$150 million of taxpayer funds will be set aside for projects that “make renewable energy available 24 hours a day, seven days a week”. The first project being promised, currently at unknown cost to the taxpayers, is a 100MW battery, which would
be the biggest in Australia. Wind and solar power are inherently unreliable technologies, which produce power only when it is windy and sunny. Together they make up about 40 per cent of SA’s supply. The fund will hand out $75 million in grants and the same amount in loans. The Government says it could also be offered to hydrogen, pumped-hydro and solar-thermal storage proposals.
NEW MINISTERIAL POWERS
The State Government will attempt to bring in laws that give the Energy Minister, currently Tom Koutsantonis, new powers to intervene in the market when an emergency arises. It would need the support of either the Liberal Party or the Upper House crossbench to become law. The Government says it would give the minister power to order power plants to come on and cover energy shortfalls, as well as force the national regulator to drop or increase power coming to SA from an interconnection cable with Victoria. Mr Koutsantonis has accused the national regulator of failing to act in SA’s best interests.
NEW GENERATION TO CREATE MORE COMPETITION
A bulk-buy public sector power contract, to be locked in for 10 years, has been put out to market. The Government hopes this will provide enough security for a new power plant to be built and privately owned. Mr Weatherill yesterday said three serious bids had been received, which included a mix of fuel types. Further detail on when it could be operating are unclear. The Government also hopes that bringing a new operator into the market would create more competition and put downward pressure on prices.
ENERGY SECURITY TARGET
Energy retailers will be forced to get 36 per cent of their energy from “cleaner generators” based in SA that provide reliable energy. The Government anticipates this will lead to new investment in the state in technologies including gas and potentially batteries, and hopes that will reduce SA’s need to get reliable backup power from Victoria when wind and solar aren’t producing enough. It will come into effect from July 1.
GAS INCENTIVES
Australia is facing a gas shortage as much of what it produces has already been contracted for sale overseas, through major new export terminals at Gladstone, Queensland. The State Government has long had the PACE scheme in place, which helps miners and resource companies to search for and produce natural resources. Taxpayer backing for that scheme was yesterday doubled to $48 million. However, the Government has added a new condition requiring the local use of gas sourced from PACE investments. This is intended to supply new gas power stations that the Government hopes will be built and those already operating. Landowners are also being offered a 10 per cent share in royalties, which it’s estimated could deliver a payday of up to $300,000 per well, in a bid to help overcome conflicts with farming uses.