Daily Bulletin


The Conversation

  • Written by Alan Pears, Senior Industry Fellow, RMIT University
image

If you’ve been watching the news in recent days, you’ll know we have an energy crisis, partly due to a gas crisis, which in turn has triggered a political crisis.

That’s a lot of crises to handle at once, so lots of solutions are being put forward. But what do people and businesses actually need? Do they need more gas, or cheaper prices, or more investment certainty, or all or none of the above? How do we cut through to what is really important, rather than side details?

The first thing to note is that what people really care about is their energy costs, not energy prices. This might seem like a pedantic distinction, but if homes and businesses can be helped to waste less energy, then high prices can be offset by lower usage.

The second thing to note is that energy has become very confusing. A host of short- and long-term problems have developed over decades of policy failure, meaning that there is no single solution.

Take gas prices, which were indirectly responsible for South Australia’s blackouts last month. Last week, SA Premier Jay Weatherill responded by unveiling a A$550-million plan including a new state-owned gas power station, while Prime Minister Malcolm Turnbull claimed to have secured a promise of secure domestic supply from gas producers.

Short-term thinking

It is crucial to keep the ultimate goals in focus, or else our short-term solutions could exacerbate long-term problems.

For electricity, we want to avoid blackouts and limit prices and overall costs. We need to do this in ways that allow us to meet our climate constraints, so we need solutions with zero or very low greenhouse emissions.

For gas, we need to ensure enough supply for local demand, at reasonable prices, and give large consumers the opportunity to negotiate contracts over reasonable time frames.

This means we need to allocate more of our gas to local consumers, because increasing overall gas production would just add to our long-term climate problems.

Peak gas and electricity prices are entangled. In our electricity markets, the most expensive generator needed to maintain supply in a given period sets the price for all the generators. So if an expensive gas generator sets a high price, all of the coal and renewable energy generators make windfall profits – at the consumer’s expense.

So either we need to ensure gas generators don’t set the price, or that they charge a reasonable price for the power they generate.

Quick fixes

Demand management and energy storage are short-term fixes for high peak prices. Paying some electricity or gas consumers to use less at peak times, commonly called “demand response”, frees up electricity or gas, so prices don’t increase as much.

Unfortunately, policymakers have failed to introduce effective mechanisms to encourage demand response, despite the recommendations of numerous policy reviews over the past two decades. This is a serious policy failure our politicians have not addressed. But it could be fixed quickly, with enough political will.

Energy storage, particularly batteries and gas storage, can be introduced quickly (within 100 days, if Tesla’s Elon Musk is to be believed). Storage “absorbs” excess energy at times of low demand, and releases it at times of shortage. This reduces the peak price by reducing dependence on high-priced generators or gas suppliers, as well as reducing the scope for other suppliers to exploit the shortage to raise prices.

The same thinking is behind Turnbull’s larger proposal to add new “pumped hydro” capacity to the Snowy Hydro scheme, although this would take years rather than weeks.

Thus South Australia’s plan, which features battery storage and changes to the rules for feeding power into the grid, addresses short-term problems. Turnbull’s pumped hydro solution is longer-term, although his handshake deal with gas suppliers may help in the short term.

The long view

When we consider the long term, we must recognise that we need to slash our carbon emissions. So coal is out, as is any overall expansion of natural gas production.

Luckily, we have other affordable long-term solutions. The International Energy Agency, as well as Australian analysts such as ClimateWorks and Beyond Zero Emissions, see energy efficiency improvement as the number-one strategy – and in many cases, it actually saves us money and helps to offset the impact of higher energy prices. Decades of cheap gas and electricity mean that Australian industry, business and households have enormous potential to improve energy efficiency, which would save on cost.

We can also switch from fossil gas to biogas, solar thermal and high-efficiency renewable electricity technologies such as heat pumps, micro-filtration, electrolysis and other options.

Renewable energy (not just electricity) can supply the rest of our needs. Much to the surprise of many policymakers, it is now cheaper than traditional options and involves much less investment risk. Costs are continuing to fall.

But we need to supplement renewable energy with energy storage and smart demand management to ensure reliable supply. That’s where options such as pumped hydro storage, batteries and heat-storage options such as molten salt come in.

This is why the crisis is more political than practical. The solutions are on offer. It will become much more straightforward if politicians free themselves from being trapped in the past and wanting to prop up powerful incumbent industries.

Authors: Alan Pears, Senior Industry Fellow, RMIT University

Read more http://theconversation.com/gas-crisis-energy-crisis-the-real-problem-is-lack-of-long-term-planning-74705

Writers Wanted

Why some people find it easier to stick to new habits they formed during lockdown

arrow_forward

Why is it worth playing at an online casino?

arrow_forward

What is Self-Education? + 4 Ways to Improve Yourself

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Prime Minister Interview with Kieran Gilbert, Sky News

KIERAN GILBERT: Kieran Gilbert here with you and the Prime Minister joins me. Prime Minister, thanks so much for your time.  PRIME MINISTER: G'day Kieran.  GILBERT: An assumption a vaccine is ...

Daily Bulletin - avatar Daily Bulletin

Did BLM Really Change the US Police Work?

The Black Lives Matter (BLM) movement has proven that the power of the state rests in the hands of the people it governs. Following the death of 46-year-old black American George Floyd in a case of ...

a Guest Writer - avatar a Guest Writer

Scott Morrison: the right man at the right time

Australia is not at war with another nation or ideology in August 2020 but the nation is in conflict. There are serious threats from China and there are many challenges flowing from the pandemic tha...

Greg Rogers - avatar Greg Rogers

Business News

Cybersecurity data means nothing to business leaders without context

Top business leaders are starting to realise the widespread impact a cyberattack can have on a business. Unfortunately, according to a study by Forrester Consulting commissioned by Tenable, some...

Scott McKinnel, ANZ Country Manager, Tenable - avatar Scott McKinnel, ANZ Country Manager, Tenable

InteliCare triple winner at prestigious national technology awards

InteliCare triple winner at prestigious national technology awards Intelicare wins each nominated category and takes out overall category at national technology 2020 iAwards. Company wins overal...

Media Release - avatar Media Release

Arriba Group Founder, Marcella Romero, wins CEO Magazine’s Managing Director of the Year

Founder and Managing Director of the Arriba Group, Marcella Romero, has won Managing Director of the Year at last night’s The CEO Magazine’s Executive of the Year Awards. The CEO Magazine's Ex...

Lanham Media - avatar Lanham Media



News Co Media Group

Content & Technology Connecting Global Audiences

More Information - Less Opinion