Election power play gets to heart of electricity issue

It is an unsavoury reality that it has taken a tight election campaign in NSW to force the Perrottet government to face up to its energy dilemma and confront the stark realities of the sort outlined by former Productivity Commission chairman Gary Banks. Within hours of Chris Minns declaring energy security to be the priority issue for Labor, state Energy Minister Matt Kean finally grasped the nettle. He said the state government might intervene to extend the life of the nation’s largest coal-fired power station, Eraring, as consumers grappled with soaring costs and a projected energy shortfall. The NSW Opposition Leader said afterwards he “can’t rule out” keeping the nation’s largest coal-fired power station open because “we might need it”. Mr Minns had warned earlier that supply constraints and price increases would be key challenges for a Labor government if it were elected on March 25. He said Labor was really concerned about the stability of dispatchable power for business, industry and consumers.

Mr Minns is right to be concerned and Mr Kean must accept much of the responsibility for focusing too heavily on the renewable energy transition without paying proper attention to what is needed today. As Professor Banks wrote on Monday, Australia has adopted a wrongheaded attitude to the energy transition that will cost the nation dearly. In Ukraine, “power stations are destroyed by Russian missiles”, Professor Banks wrote. “In Australia we blow them up ourselves. And we do this without having a way to replace the critical 24/7 service they provide.” This is an approach that is not being taken by others, notably the biggest emissions nation, China. The conclusion reached belatedly by Mr Kean and Mr Minns is one that Eraring’s potential owner, Canadian investment giant Brookfield, has already reached. Brookfield said it would consider extending the life of Eraring should it prevail with its $18.2bn offer for Origin, which owns the plant. Brookfield has pledged $20bn to fast-track Origin’s move to green sources of power by 2030 but said it remained open to delaying a planned 2025 closure of Eraring if required. Fresh consideration about Eraring reflects a growing sense of realism that the energy transition is not going as quickly as many would have hoped.

Delays and cost overruns at the Snowy 2.0 pumped hydro electric project and Kurri Kurri gas-fired plant demonstrate that it is not all smooth sailing. In an unscheduled update of the electricity supply outlook, the Australian Energy Market Operator warned of power gaps in NSW from 2025 and all states from 2027. Analysis by consulting firm Cornwall Insight warns the situation may be worse than it seems. The firm says the capacity of the national electricity market is being overestimated in the short term and underestimated in the long term. This is because delays being experienced by new connections are not being properly reflected in modelling. Cornwall Insight says most new connections in the NEM would take a year longer than expected to progress from “committed” status to being fully in service. This means electricity capacity in the short term is significantly lower than currently forecast.

The Perrottet government’s change of heart on Eraring is welcome but is a belated response to warnings that have been made repeatedly, including in these pages. The comparison made by Professor Banks regarding Ukraine losing power to Russian rockets while we happily blow them up ourselves without a plan to replace the power lost is a good one. A proper plan for long-term reliable power is needed urgently by governments everywhere. This includes keeping coal-fired plants going where necessary and opening up new supplies of gas where possible.