True renewables cost is set to shock

Chief Scientist Dr Alan Finkel speaks during a Senate estimates committee. Pic: AAP

Right now most of the focus on the Alan Finkel report concentrates on its low-emissions target (LET) pricing scheme, but longer term Australia will realise that the chief scientist’s biggest achievement will be to force the nation to calculate the true cost of renewable energy.

And when we make the calculation Australians will be shocked at how badly they were misled. While the renewal operating costs are minimal the true capital costs are high.

Let me emphasise that longer term we are headed for a renewables-driven power network, but it is vital that we have the power available to handle extreme demand situations that occur when renewables operate way below capacity.

Finkel’s recommendations, if adopted, will end the vandalistic activities of state governments headed by Mike Baird and Gladys Berejiklian in NSW, Daniel Andrews in Victoria and Jay Weatherill in South Australia. All three states jeopardised their energy security by installing vast amounts of wind and solar generators without sufficient storage or back-up capacity

Alan Finkel is recommending that renewable energy projects install batteries or back-up systems to fill the gap if their wind or solar generators fail. These systems are costly because they are only required for a few days each year.

Readers of my commentaries will know that I have been pleading for the state government vandals to install back-up systems and/or batteries but until Finkel only South Australia fully grasped the problem. South Australia learned via blackouts.

The sad part about the Finkel report being released today is that he only goes half way. He should require the state governments to repair the damage they have done by installing back-up capacity retrospectively. And of course installing back-up is only part of what is required --- the power grid also requires costly investment to handle decentralised generation.

Those who invest in these back-up facilities or in the grid will require a return on their investment so inevitably power prices are set to rise — even before we have a LET pricing scheme. But we should now have much-needed investment in power — often by local communities harnessing self managed superannuation funds.

The best way to show just how important installing back-up facilities and a more appropriate grid structure is to study what happened to NSW on February 10 this year

According to the NSW chief scientist, on that day NSW had 17,000MW of installed capacity. In theory it should have been easily sufficient to cover the 14,521MW peak demand, which came at 5pm on that very hot day. Instead it fell horribly short and NSW had to “import” 1745MW from other states, mainly Victoria, where temperatures were mild. Had Melbourne been hot both states would have suffered extensive blackouts.

The NSW system at February 10 had 2080 in renewable capacity, excluding the Snowy, but only generated 707MW from that capacity at the peak demand time because the wind did not blow and at 5pm the sun had lost power. And because so much of the solar was decentralised on rooftops the grid was not able to marshal it.

As it happened, the failure to upgrade old NSW coal power plants caused the coal generation to fall 3000MW below capacity. Next summer we do not have Victoria’s Hazelwood power station and there has been an increase in renewable investment without proper back-up.

Victoria reckons the wind will blow on hot days and both states are making adjustments to their procedures for hot days. Hopefully they will now be forced to invest in back-up — what they should have been doing from day one.

During the week ahead my engineering advisers will be looking closely at how the Finkel recommendations will work and what business and consumers must do to adapt.

I will return to the subject.