Accordingly, Victorians and every business that operates in Victoria need to hope and pray that the 2019-20 summer will be mild.
And the energy scandal-ridden Victorian government will join them in those hopes. In the last two or three years the Victorian government has punted that the state’s power system would not break down.
And each time the gambles have been successful and so it believes it can roll the dice again. But in 2019-20 and subsequent years the government actions have actually made the dangers far greater and increased the risk of a total Victorian breakdown, perhaps in the style of South Australia in 2016. If the Victorian situation deteriorates at the same time as it is very hot in NSW and South Australia they too will get caught up in any Victorian disaster.
To detail just how dangerous the risks being taken are I need to first highlight the fact that a few weeks ago (not for the first time) the cost of electricity in Victoria reached an incredible price of $6,000 dollars per megawatt hour because of the shortage of electricity caused by very low renewable output and predictable outages in the Latrobe Valley coal plants. But earlier in the month the price actually went below zero (minus $1,000).
These crazy swings in price are contributing to destroying the system and come about for easily understandable reasons.
First, when the sun shines and the wind blows vast amounts of power are generated, usually well above demand — that is when the price goes into a major negative. When the price goes to nothing or negative coal generators are getting minus revenue for the power they generate and lose heavily so desperately try to reduce their output.
Conversely when the price goes to $6,000 there is a lot of money to be made from coal generation. So the generators go flat out.
In Victoria the Latrobe Valley brown coal generators are old but with good maintenance and proper care they are capable of producing power for some decades.
But with no certainty of their long-term life the owners of the generators spend what is required on the maintenance but no more. And worse still, because of these vast changes in price they are forced to run coal plants more flexibly, like hydro or gas plants. These old coal generators were never designed for such operating style so not surprisingly they are breaking down at a rate that is much higher than would be the case if they were able to operate more consistently.
To make the looming summers more dangerous, coal generators like those in the Latrobe Valley are never at their best when temperatures are high.
Given the maintenance has not substantially exceeded standard levels, the fact that operations have been conducted in a way that does not suit the generators and their age accordingly,the likelihood of them falling over is now much greater than when the Victorian government first decided to roll the dice.
There are a number of ways to offset the high power peaks of a hot summer’s day. Clearly the most obvious is extensive investment in back-up plants but this has not taken place.
In the absence of back-up plants, one strategy is load shedding and the Victorian government along with the NSW have been very successful at doing this. But there is a limit.
Another is to ramp up both gas fired stations and Snowy Hydro. But as things now stand if the wind doesn’t blow and the sun is not shine then these back-up plants will not fill the gap if the Latrobe generators fail, as they have been doing in recent months.
The blackouts will be severe and extended. Of course, Victoria might be once again be lucky.
The federal government’s $4bn Snowy Scheme strategy will reduce the danger but that’s many years away. There is an interim step which should be adopted urgently but even that step will take a number of years to implement.
The Snowy Hydro consists of two basic generating systems: the northern generating system which supplies NSW and the southern generating system which supplies Victoria. Unfortunately and unbelievably they are only weakly connected by transmission lines. If either state runs short of power and needs Snowy hydro then the operators can’t access both sides of the scheme. But even if Victoria could be tapped into the NSW northern systems the transmission lines that carry Snowy energy into Victoria are already overloaded. So we need to first properly connect the northern and southern snowy systems and second increase the capacity of the transmission lines to bring more Snowy power into Victoria.
The $4bn plus Snowy Scheme upgrade involves setting up a third generating system which will buy power in times of low renewable prices and pump water up to levels that enable it to generate power when needed. An essential part of that plan is to connect all three generating systems so not only is there more power but there is more flexibility to deal with a crisis. But that integrated system will not be available until 2025 or 2026. It is vital to bring forward that the grid link and Victorian transmission upgrade even though it will not help next summer.
The Victorian upgrade would also enable other new generation projects to connect to transmission lines.
The expansion of transmission is undertaken by private companies. There is an army of state bureaucrats in both NSW and Victoria who can delay and boost the costs of expanding the transmission grid in each state. NSW has cut through the blockage and given a connection of extra power to its grid a high priority as part of a state transmission strategy. Victoria has responded by saying “she’ll be right mate”. Expanding the grid will make a very small rise in power prices necessary and Victoria does not want that because its current policies have already skyrocketed power costs. What is required of Victoria is to guarantee the companies installing the extra network capacity against the actions of the Victoria bureaucracy (or regulators) to delay the grid. Victoria is refusing to give such a guarantee. Giving bureaucrats power to block the extra power to the grid is beyond belief.
Victoria plans to put even more wind and solar farms in, again with no back-up — nothing. And those farms will make the coal situation even worse and greatly increase the danger of blackouts. My guess is that the state needs an extended blackout (no food, no water) to teach the politicians a lesson. But the voters must pay the price for those lessons.
The Australian Energy Market Operator has told only part of the story and has held back the shocking details of the Victorian power scandal — commercial scandal that ranks with the banks.