Analysis
Posted
Everyone, it seems, is a critic these days.
With
an election looming and energy and climate policies that at best appear
confused, Prime Minister Scott Morrison last week went on the
offensive, with a dizzying array of policies that gave a nod to both his
predecessors. Tony Abbott's Direct Action policy was given a top-up and rerun before Malcolm Turnbull's two pet projects — a massive ramp up of the Snowy Mountains hydroelectric scheme and a kick-along for a power link between Tasmania and the mainland — were rolled out for the cameras.
At Tumut in the Snowy Mountains last week, the Prime Minister described hydroelectricity as "real, fair dinkum power".
It seemed like an attempt to keep everyone happy. Green groups derided the initiatives, particularly the $2 billion extension of Direct Action, an emissions reduction fund focussed primarily on forest replanting and waste initiatives.
In their haste to highlight legitimate concerns about the scheme's effectiveness and its impact on the Budget and national debt, however, environmental groups appear to have overlooked the impact of the two hydro initiatives.
Both hydro schemes are slated to be in place before the end of the next decade. Should that happen, however, it's likely they will hasten the demise of coal fired electricity generation, an outcome that appears starkly at odds with repeated commitments to coal fired electricity generation.
Just four months ago, the Federal Government left open the prospect that it may underwrite new coal fired power stations.
And it's difficult to erase the image of Mr Morrison as Treasurer, brandishing a lump of coal in Parliament, and accusing the Opposition of suffering from "coalaphobia".
Why hydro? Why now?
Both hydro projects are hugely expensive. Snowy 2.0, as it's been dubbed, has been billed as a $2 billion project, although it's possible that estimate is conservative. Taxpayers will foot the bill for about $1.3 billion.On top of that, at least another $2 billion would be required for poles and wires to ferry the power around the network.
It will be capable of providing 2,000 megawatts of power on demand.
The Tasmanian project, called the Marinus Link, involves running a cable across Bass Strait to plug as much as 1,200 megawatts of the island state's hydro power into the mainland electricity grid, as part of Tasmania's "Battery of the Nation" program.
While Mr Morrison pledged to kick in $56 million to help fast track the project, the total cost has been estimated to be as high as $3 billion in a feasibility study compiled by the Australian Renewable Energy Authority.
The hydro projects essentially act as batteries. Given the unreliability of wind and solar electricity generation, a back-up is essential to maintain a constant flow of power in the electricity market.
When excess power is being generated, it's used to pump water up an incline. This acts as a store of energy which can be tapped when demand outstrips supply. Crude but effective. The question is: are they cost effective?
While these projects will be buying power when it's cheap and selling into a tight market, their viability in the next 10 to 15 years will depend very much on how many ageing coal-fired generators are scrapped.
Why water and coal won't mix
Here's where the numbers don't quite gel with the Coalition's long-standing commitment to coal.At such huge expense, for either project to be economical — let alone both together — a large slab of our existing coal fired generators would need to be retired early.
That fact was highlighted in the Tasmanian project's feasibility study, released last week. It states that "the largest single factor" influencing the viability of the project is the timing for coal fired power station shutdowns. And not just a couple.
"The benefits of Marinus Link are likely to be greater than costs when approximately 7,000 MW of the National Electricity Market's present coal fired generation capacity retires, which could occur from the mid 2020's [with early retirement] to the mid 2030s [with retirement at the end of design life]," the report states.
It adds this: "There are plausible circumstances where Marinus Link could be economically feasible from the mid 2020s."
That's a huge amount of coal fired generation to be taken out of the system in a short space of time.
According to Green Energy Markets director Tristan Edis, two previous feasibility studies into the Tasmanian project concluded it didn't make sense until well into the 2030s, because you don't need such massive battery storage unless you plan on having 50 per cent renewables in the electricity system.
The federal government has committed to a 23.5 per cent renewable energy target by 2020 and has argued a 50 per cent target would result in widespread blackouts.
To put the proposed 7,000 megawatt shutdowns into perspective, Victorian coal fired generators produce a little over 4,600 megawatts, NSW pumps out a little over 10,000 megawatts and Queensland a little over 8,000 megawatts.
Mr Edis argues that if the Morrison government backs the Tasmanian project, it would be looking at the equivalent of a complete shutdown of Victoria's coal fired plants plus a fair whack of those in NSW.
If the closures aren't forthcoming, the cable will be a multi-billion dollar-white elephant.
It's a similar story with Snowy 2.0. The feasibility study in that case estimated that even after the retirement of the Liddell power station in the Hunter Valley, a further three large scale coal fired plants need to be decommissioned within the next 14 years.
The Australian Energy Market Operator expects three coal fired plants — Vales Point, Eraring and Yallourn — to close by no later than 2032. Combined, these produce 5,410 megawatts.
That's not enough to make even the Tasmanian project viable and the time frame is way too distant. Put both projects together, and it all spells a pretty bleak outlook for coal.
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