South Australia turns to diesel generators as gas shortage and price spike hits
Australia’s east coast gas shortage has forced South Australia to turn to diesel generators in order to meet demand, prompting calls for a faster transition away from “volatile” fossil fuels towards renewable energy and storage.
According to the energy mix tracker published by the Australian Energy Market Operator (Aemo), South Australia’s energy mix around 9am Thursday morning was made up of 61% gas and 11% diesel, with wind and solar providing the rest.
This occurred after Aemo issued a Threat To System Security market notice on Wednesday morning flagging a lack of gas supply on the east coast and prompting the energy market to take measures to increase supply.
At the same time, a cold snap across south-eastern Australia resulted in low pressure in some eastern states leading to lower wind speeds, and cloudy days which limited the amount of sunlight.
By 1pm on Thursday, the amount of diesel being burned had reduced to 3% but the proportion of gas remained high at 61%.
South Australia has been a global pioneer in the transition to renewable energy, breaking records at the start of this year when it sourced all its power from renewable energy in the six days leading up to 29 December.
Dylan McConnell, a research fellow at the University of Melbourne’s climate and energy college, said South Australia was burning more gas than it had in the past two years.
“They absolutely were burning a lot of gas yesterday, including diesel,” McConnell said. “Normally this is not unusual, but in the context of an extreme gas shortage and gas prices, that makes it noticeable.
“Diesel peakers have always been there, and they occasionally come online, but they only come on in those super peaks when prices go extremely high, maybe a couple hours a year.”
McConnell said the shortage on the east coast had caused the price of gas to spike to about $40 a gigajoule in recent days.
This was several times higher than the typical average price of about $10 a gigajoule, or the historical price of $3 a gigajoule that existed before the development of an export market.
These prices meant it was economically viable to burn diesel for power generation.
“It’s an important thing to point out that even though South Australia is high on a proportional basis, there’s more gas being burned in Queensland and similar amounts in New South Wales and Victoria on a megawatt basis,” McConnell said.
“This is partly because there’s been outages at coal plants. It points to the importance of weaning ourselves off oil and gas and the volatile prices they cause.
“Certainly if we had more non-coal or gas resources, prices would be lower.”
McConnell said better storage options and more transmission to bring in renewable energy from different regions would help South Australia. “If those things were there earlier, you’d be burning less gas,” he said.
The South Australian treasurer, Stephen Mullighan, on Thursday credited heavy investment in renewable energy for putting the state in a better position to avoid huge increases in power prices hitting other states across Australia.
“Renewable energy is cheaper energy,” Mullighan told the AFR. “There’s been no increase in [the cost of] wind power or solar power.”
The development comes after the new South Australian Labor government formally declared a climate emergency on Wednesday, the same day the energy minister, Tom Koutsantonis, scrapped two programs designed to encourage uptake of solar panels and batteries.
South Australia’s Home Battery Scheme, designed to subsidise the installation of batteries in people’s homes, and the Switch For Solar program, allowing people to trade government concessions for installation-free solar arrays, were both abandoned.
Koutsantonis described the battery scheme, which received bipartisan support, as “failed” and the solar scheme as “appalling policy”.
“This was a cost-saving measure to try and get people off their concessions – I’m glad we’re killing it,” he said.
No replacement scheme was announced ahead of the budget.
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Craig Wilkins, chief executive of Conservation Council SA, said the decision was “driven” by a desire to cut costs, and that it appeared the state government was positioning large, grid-scale projects against the broader installation of small, decentralised systems like PV solar arrays.
“It feels like … unnecessarily pitching grid big works against the traditional South Australian interventions at the small end of the market,” Wilkins said. “And they are artificially making it a battle between the two. It shouldn’t be. The energy transition needs both to thrive.”
During the recent state election, the South Australian Labor government pledged to build a $593m hydrogen plant at Whyalla.
Wilkins said the government should compensate for the lost programs by redirecting the money into greater electric vehicle subsidies as their batteries are five times the size of those installed in homes.
“If they are well integrated into the system, they could provide good stability as well as reducing transport costs,” Wilkins said. “It’s a significant win-win.”