A year ago, the power system went down in South Australia. Homes and businesses across the state were without electricity for hours, some for days. While its specific causes have already been worked through, the nation’s most widespread blackout in decades quickly became a symbol of “Australia’s energy crisis”.
One year on, it is time to ask: how far have we come and what have we learned? Some progress has been made, but there is still a long way to go before Australians can rest assured that they have an affordable, reliable and sustainable energy system.
While politicians have been beating their chests, companies pleading their case, and energy institutions busying themselves with the search for solutions, five lessons have emerged from the great SA blackout.
1. Big storms cause blackouts – and blackouts cause big (media) storms
There’s nothing quite like a blackout to focus the minds of politicians and industry alike, and generate momentum for energy policy reform.
In the blackout’s immediate aftermath, federal and state energy ministers together commissioned Chief Scientist Alan Finkel to review the National Electricity Market. Finkel presented his findings in June this year.
So far, 49 of his 50 recommendations have been accepted – all except the contentious Clean Energy Target. The blackout served as a reminder that electricity obeys the laws of physics, not of governments, and that system security is paramount. It has already prompted some important reforms that reduce the chances of future blackouts, such as new rules for extreme power system conditions and new obligations on network businesses.
2. Energy is now a political plaything
While being in the spotlight has created the opportunity for much-needed reforms, it has also made energy policy a political plaything.
Consider the petty public stoush between Labor SA Premier Jay Weatherill and Liberal federal energy minister Josh Frydenberg in March, or the lump of coal that was passed around Federal Parliament back in February. Politicians have created a false contest between coal and renewables, instead of working together to fix the real policy problems.
Meanwhile, consumers have been left in the dark, both literally and metaphorically. Energy institutions and companies have largely failed to explain themselves, and what is going on, to the people that matter most.
Reports from the market operator, written in technical language for industry, have triggered media panic, and politicians have seized these moments to point the finger rather than reassure the public.
Read more: The day Australia was put on blackout alert
It’s not easy. These problems are complex, and no decent explanation will fit a media soundbite. But consumers must be brought along on the journey; confusion creates unnecessary fear, unhelpful reactions, and false expectations.
3. In a crisis, politicians will act – whether or not it helps
Politicians are understandably keen to act to keep the lights on. The SA government responded by announcing a go-it-alone Energy Plan. Some other states, and the federal government, are now buying or contracting for new electricity generation and storage.
Some interventions help, but others could make matters worse. We have seen a lot of policy on the run in the past year, yet state and federal governments continue to ignore the policy changes that would make the biggest difference.
New generation and storage will be needed to bring down electricity prices, reduce emissions, and avoid supply shortfalls as older power stations are closed. Governments are jumping in to build that generation. But this could force existing generation out of the market, making the problem worse.
Industry has made it clear that policy stability, including a credible emissions reduction mechanism, is needed to enable appropriate investments to be made. Yet stability and predictability in energy and climate change policy have been sorely lacking over the past decade.
If governments can collectively agree to implement Finkel’s plan in full, this would give the market more certainty on how emissions will be cut over time, and how the entry of new technologies and the exit of old power stations will be managed.
Laying out a path from where we are today to where we want to be in future is essential. Without it, uncertainty will continue to paralyse investors and drive up electricity prices.
4. All hands are on deck, but no one is steering the ship
There is a lot going on, but it is still not clear where it is all headed. Since the blackout there has been unprecedented attention on the energy sector. Everyone is busily trying to solve this, but from their own “silo”.
The sector has always suffered from a bit of a leadership vacuum. The top policy body, the COAG Energy Council, can be compromised by partisan politics and conflicts of interest, or simply bogged down in process.
Yet it is important that Canberra works with the states and territories, because each government has different legislative levers and political priorities that affect the national energy system. Policy leadership will be crucial throughout the transition to a cleaner energy future. The COAG Energy Council needs to focus on the core strategic issues, and it will need clear guidance from the sector to do so.
5. We should be able to avoid blackouts this summer, but longer-term solutions are still needed
We are certainly better prepared for the coming summer as a result of lessons learned from the SA blackout and the renewed attention on energy policy reform. Back-up generation and demand-response schemes are being organised, new energy storage is being built, and this week Prime Minister Malcolm Turnbull struck a deal that should ensure adequate domestic gas supplies.
If all goes to plan, we should be able to avoid problems this summer. But we shouldn’t be relying on emergency measures every year. Longer-term solutions are needed, and these will require continued action, building on the momentum of the past year.
The SA blackout was a wake-up call for the sector, triggering much-needed new thinking and some early reforms. But it has also thrown energy into the spotlight, requiring the sector to lift its game, particularly in communicating with the public and each other.
Looking back on the past year, we have come a long way, but it is still not clear where we are going and who will steer us there. Australians must hope that the new Energy Security Board, which includes the heads of the three main energy institutions, can help state and federal governments chart a steady course.
A shared sense of direction, across states and across party lines, is needed to focus the sector on the horizon, rather than on the waves below.
Authors: Kate Griffiths, Associate, Grattan Institute