Marinus key to national energy security

Mervin C. Reed says the writing is on the wall for coal, but that at this stage there is very little being done to replace the energy that will be lost to the national market

AUSTRALIA’S eastern seaboard is heading for an electricity shortage.

Coal-fired power stations have been socially unlicensed, and those assets are seen as tainted assets. Even the banks walk from energy generation.

A while ago the Victorian government had to put a deal together to subsidise Yallorn Power station (1480MW).

That’s right, subsidise it to keep it open, or else 20 per cent of Victoria’s generation would have gone overnight.

Blackouts were guaranteed as the result. The company owning the station had had enough from politicians, and the signal nationally was that energy companies are not in the social security business.

Boards from all energy companies have now shifted their stance to one of asset run-down, given the lack of a coherent federal government energy policy.

We now have a national energy system balanced on the edge of a cliff. The federal government knows this — 75 per cent of our nation’s electricity is produced from brown or black coal or gas.

The stories you have heard about renewable energy replacing coal-fired power stations is nonsense. The problem is renewable energy generation construction is slowing down. The price of energy has dropped and with it the incentive to invest in renewables. Energy prices will now flatline.

Renewable energy is losing its social licence, with phases such as “It spoils my view of the coast” or “Why do we have to have the wind turbines here?” running around the media.

Indeed, international investors have sold their renewable asset portfolios in Australia in recent times to local super funds.

As the power price falls, the investment return falls. It’s that simple.

This do-not-invest market signal is now firmly in place nationally, with the largest energy company, AGL, recently splitting in two — one with renewables and one with coal and gas assets.

Clearly, this is being done to protect shareholder funds.

Indeed, we have few options in renewable wind generation, because the sale of high-voltage interconnectors from government to private ownership many years ago in three states has led to a substantial under-investment, which now impedes renewable energy progress.

Fiddling at the edges with solar and home batteries is also not the answer.

Total large and small solar generation produces about 8 per cent of our energy needs, but only for half of the day.

So where do we go from here?

The reason Marinus was proposed was to create the Battery of the Nation, and the question of who pays will not be an issue in the middle of a blackout three days long in Melbourne or Sydney.

The alternative for both if there is inaction is no power.

Economists take the view that the market will provide a solution and the market will, and it’s called a blackout.

Let’s look at the solution presently facing the National Energy Market. In the next nine years 4500MW of coal-fired power will shut down, and right now there is no replacement generation for this supply that will disappear from the NEM. There will, of course, be some folk who will say that there are solutions everywhere.

Mostly they have not been built, and in a lot of cases the projects proposed will never be built. It takes years to get approvals.

The batteries being built now are nothing more than cash-flow safety for the generation and interconnector companies, who cannot get high-voltage interconnectors to carry their output at peak times due to age and lack of capacity.

They are running an arbitrage game with peak power prices.

Thus, they build batteries close to the point of use, for short-term bursts of an hour or two to keep their profits up and the amount of high-cost peaking power generation down. This further degrades base load investment.

Mervin C. Reed is a chartered financial adviser, and former federal and state public sector executive and political adviser.