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Australia plays safe

The Australian government has opted for reliability over renewables in the power sector

In the wake of the "System Black" power failure that knocked out South Australia for up to two days in late 2016, the country's government has dumped the existing clean energy-based policy in favour of a radically different one. This relies more on oil and gas in the interests of grid stability.

Known as the National Energy Guarantee (NEG), the new policy will set power suppliers explicit percentages of their energy mix that must be supplied from dispatchable sources such as coal, gas, oil, hydropower and batteries. Previous policy encouraged higher percentages from intermittent renewables such as solar and wind.

Although not abandoning emissions goals, the new strategy designed by the Energy Security Board marks a clear break with the regime that, many believe, has set electricity transmission up for failures. For instance, it appears there'll be no subsidies or tax concessions for any type of renewables or indeed any other energy source including coal, a long-standing staple in Australia.

As law firm McCullough Robertson pointed out in a mid-October briefing, the NEG means the federal government has walked away from a clean energy target. "The driving force from this move away from the federal government's preference for renewable energy to fuel neutrality is the need for consistent and reliable energy to keep the lights on, full stop," it summarises.

The Energy Security Board devised the replacement policy after a series of scares over reliability of power supplies during the past two years. As well as the South Australia failures, the system in New South Wales had a near miss during a heat wave. Critics also say that market-based economics have skewered stability.

But it was the System Black event that first provoked a searing debate in Australia and a backlash against the renewables lobby. As the preliminary report by the Australian Energy Market Operator (AEMO) pointed out, multiple failures occurred in the transmission system when a violent, but predicted, weather front hit South Australia on 28 September 2016.

In just two minutes—between 16.16 and 16.18—three major 275-kilovolt transmission lines north of the state capital of Adelaide went down, triggering a series of knock-on events of such significance that the main interconnector in the neighbouring state of Victoria couldn't meet the shortfall. It took more than two days to restore full power to the state.

The federal government has walked away from a clean energy target

In the aftermath, hard questions were asked about South Australia's high dependence, by world standards, on renewables, notably wind and solar. In fact, questions had been asked earlier. A year before the outage, the state's dependence on solar and wind generation per capita was more than three times higher than the rest of Australia on average and four times higher than even sun-drenched states such as Western Australia and New South Wales. Rather than a concern, the state government saw this as a matter of pride.

However, as Deloitte Economics pointed out in 2015 in a prescient study for the Energy Supply Commission of Australia, unintended consequences from existing levels of renewables were already starting to emerge in terms of grid stability. The four largest power stations in the state, all of which run on conventional energy such as gas and coal, were then being mothballed. As a result, Deloitte warned, "the South Australian system is becoming increasingly reliant on interconnection with Victoria for stability to compensate for intermittent generation".

The oil and gas industry's trade body, the Australian Petroleum Production and Exploration Association (Appea) broadly supports NEG, but emphasises the importance of conventional dispatchable power. "On-call gas-fired electricity generation will continue to back up intermittent renewal generation," the organisation said in mid-October. "Renewable projects will also have a new incentive to create firm dispatchable power."

To allay fears about reliability of power supply, Australia's oil and gas industry has pledged to provide all the back-up necessary. But Appea's chief executive Malcolm Roberts also used the unveiling of NEG as an opportunity to take a swipe at long-running agitation against the industry: "A mix of policy indecision, restrictive regulation and politically motivated bans and moratoriums has stymied gas exploration and development, threatening Australia's transition to a cleaner energy future."

The NEG policy will make the issue of renewables more of a hot political potato than it already is. States run by Labour governments, for instance, favour increased use of renewables in the mix—Queensland has set a target of 50% renewables, but without specifying how this will be achieved.

But there is also the possibility of a new federal government, which might take things back to square one. The federal Labour party, which is heavily anti-emissions, is leading in the current polls and it hasn't committed to NEG.

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