No guarantee of cheaper bills after energy transition, AEMO chief executive says
The energy market operator boss’ admission that there are no guarantees that adopting renewables to replace coal will lead to lower power bills will stoke already fierce debate about how best to replace ageing coal and reduce emissions.
The chief executive of the Australian Energy Market Operator has conceded there is no guarantee that the country’s transition will deliver cheaper power bills, which is likely to inflame debate about the merits of adopting renewables.
AEMO’s transition road map, which the Albanese government has endorsed, states renewables, backed up by large-scale batteries and gas, is the cheapest way of replacing coal power stations – many of which are under sustained economic pressure and already nearing the end of their technical lifespan.
But Daniel Westerman, chief executive of AEMO, said he could not offer any guarantees that delivering the transition would lead to lower power bills when asked.
“I can’t guarantee that, no” Mr Westerman said.
“The integrated system plan, which considers these things – generation storage and major transmission upgrades – is the lowest cost pathway. It doesn’t refer to whether it’s cheaper or more expensive for that wholesale component,” Mr Westerman told a Senate inquiry.
The comments will be seized on by critics of Australia’s energy transition as evidence that the move to renewable energy is folly.
Proponents for the transition have insisted the transition to renewables will deliver cheaper bills, making any disruption to some communities worth it.
The development of large-scale renewables and associated high voltage transmission lines are already causing upheaval to some regional communities, and with the transition set to accelerate the disruption is set to grow.
Already, sentiment is showing signs of souring, and suggestions that the disruption is ultimately unwarranted will further alienate those feeling aggrieved.
While Mr Westerman was unwilling to place a cast iron guarantee, proponents highlight that the cost of developing new renewables is a major component of future bills. Should Australia develop more expensive alternatives, households would have to cover the cost.
Critics, however, counter that when considering the total cost, including transmission infrastructure, renewables are not cheaper.
The economic debate shapes as critical as Australia evaluates contrasting visions for the country’s future grid.
The Albanese government has committed to renewables, earmarking the fuel source to generate 82 per cent of Australia’s electricity by 2030.
In contrast, the Coalition has proposed seven nuclear power stations – the first of which would be ready by 2037. Fossil fuel generators would be used until nuclear is ready, the Coalition has planned.
Labor has attacked the plan as too expensive. The Coalition has acknowledged that its plan will need higher upfront costs. However, unlike renewables, nuclear will run for many decades and will not need replacing in the meantime – the Coalition also highlights.
The Coalition has vowed to reveal its costings for its nuclear plan before the end of the year, and there appears growing signs that it is winning favour with voters.
Australia’s energy industry is sceptical, though. Australia’s largest three electricity and gas retailers this week all raised concerns about social licence delays and worries about how nuclear would compete financially.
Australia has the world’s largest proliferation of rooftop solar, which means wholesale electricity prices are often at zero or below during the day. A large, traditional nuclear power station runs much like coal – throughout the day and producing largely steady amounts of electricity.
It would therefore encounter the same financial pressures as coal, industry executives have warned. Coal is increasingly unprofitable as its comparative inflexibility means it has to produce electricity during the day when it is losing money.
The Coalition has insisted nuclear will stack-up with renewables and it critically addresses reliability concerns.
Renewables are dependent on favourable conditions, ample sunlight of gusty winds. When conditions are unfavourable, electricity production falls. During these periods known as renewable energy droughts, nuclear could be there to produce electricity.
Labor insists batteries, and gas will be the backstop in its plan. But batteries only have a capacity to produce electricity for around four hours, and gas supplies are rapidly depleting across Australia’s east coast.
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