Transitioning from Coal to Renewable Energy – CAM’s Submission to Senate Inquiry
Climate Action Moreland has made a submission to the Senate Inquiry on the Retirement of Coal-Fired Power Stations. It is reproduced below.
Our submission discusses and is guided by the following principles:
- Australia needs to rapidly transition to zero net emissions. The closure of coal fired power stations is an essential first step in this process.
- All of Australia’s communities need to plan a transition to a zero net emissions society based on 100% renewable energy and slashing energy wastage through energy efficiency and conservation.
- Communities that rely on coal power need a just transition plan that will not only mitigate the job losses experienced, but also help transform their economies to allow their communities to prosper in the future.
- In conjunction with the closure of coal-fired power, governments must complement these policies with strategies to ensure that our electricity systems are secure and reliable, and that electricity is affordable for all Australians.
- Rather than relying predominantly on market mechanisms, the transition will also require national planning, strong regulations and direct government investment and ownership.
1. Urgent Climate Action: Rapid Transition to Zero Emissions Essential
The need for immediate action to slash Australia’s carbon emissions cannot be overstated. The Paris Agreement, requiring the global average temperature increase to stay well below 2 °C, is now in force. Modelling has shown that this will require a rapid reduction in emissions plus deployment of negative emissions technologies. Australia is a wealthy country with high per capita emissions, and a large historical per capita contribution to the increase in atmospheric CO2 concentration. Thus we have an obligation to reach zero net emissions as rapidly as possible, while also urgently pursuing mechanisms to absorb CO2 through deployment of negative emissions approaches.
Coal-fired power stations are a major contributor to Australia’s high carbon emissions, and hence a rapid program of closures is necessary. Moreover, new uses of electricity (in particular, transport electrification) could increase the demand for electricity. To avoid locking in natural gas for power generation, Australia needs to move rapidly to 100% renewable energy while also slashing energy usage through energy efficiency and conservation. This rapid transition while maintaining a secure, reliable electricity system will require significant expenditure, planning and strong regulations. We discuss these below.
2. A Fair Transition: No Losers; Maintain Strong Community Support
There is currently strong community support for a rapid transition of Australia’s energy mix away from dependence on coal towards renewable energy. However, unless the transition is managed well, there will be losers – people who are forced to bear unequally the burdens of the transition. This must be avoided, not only for equity reasons, but also because it would erode the strong community support for the transition.
2.1 All Communities Need to Plan a Transition
While much attention is given to the need for communities with coal power plants to adapt, all communities across Australia need to cooperate in efforts to drive a fair transition. While no one wants coal communities to be making most of the sacrifices, neither should they be making the most of the adjustments. Instead, all communities should be taking concrete actions to transition from fossil fuel usage. There are several useful guides for this at the local level. For example, Moreland Council has adopted a Zero Carbon Evolution strategy (n.b. Climate Action Moreland continues to lobby for this to be strengthened), while Byron Shire Council has a Zero Emissions Bryon Project.
2.2 Just Transition for Coal Communities
Communities currently dependent on coal not only need substantial government assistance to establish new industries in the private sector, but also substantial public investment in infrastructure, education and direct creation of public sector jobs. This must be a high priority. We are aware that others are submitting detailed proposals on just transitions.
2.3 Keeping the Lights on – Secure and Reliable Electricity Supplies for All
Secure and reliable electricity supplies must be maintained. If the transition is accompanied by power shortages and blackouts, community support will decline. Regions at the ends of the National Electricity Market (Tasmania, North Queensland and South Australia) should not be vulnerable. Here we draw some lessons from the recent state-wide power blackout in South Australia, and suggest that insufficient proactive changes had been made to ensure that electricity systems remain secure as we transition from coal to renewable energy.
South Australia Blackout: Inadequate Planning Leaves Community Vulnerable
Commentators have made two clear points about the recent South Australia power blackout. First, extreme weather events are exacerbated by climate change, and these make electricity systems more vulnerable to contingencies. Second, fossil fuel interests and conservative commentators can use such crises to frame renewables as the cause of power blackouts in order to slow the transition to renewables. Here we make a third point: that inadequate planning for the transition to renewable energy has left SA with an insecure electricity system.
On September 28, 2016, South Australia’s electricity system experienced a cascading failure. An extreme storm led to transmission lines tripping. This led to over 400 MW of generation being lost. The shortfall in generation was taken up by the SA–Victoria interconnector, which then became overloaded and tripped. The subsequent imbalance between supply and demand caused the system frequency to drop very rapidly – at a much higher rate than the power system’s emergency control schemes (including load shedding) could withstand. Consequently, the whole state blacked out.
While we await AEMO’s final report on the blackout, it seems likely that low levels of power system inertia in SA (following the interconnector tripping) contributed to the failure of the emergency control schemes. (Inertia is a measure of a power system’s ability to withstand a serious disturbance – called a contingency event – such as the loss of a generator or transmission lines failing. Systems with high inertia are less likely to experience a cascading failure.) Sufficient inertia is required to slow the rate of frequency change following a contingency event to give enough time for emergency action. System inertia has traditionally been supplied by fossil fuel and hydro generators. Low system inertia at the time seems to be due to the electricity market operator failing to provide alternative system inertia within SA to cover both the increasing displacement of SA fossil fuel generation by wind power and a high dependence on imported power.
It was well known that SA’s electricity system was at risk of cascading failure due to the failure to provide alternative system inertia; indeed, this was even being discussed by agencies outside the electricity sector. And yet little has been done to proactively address this problem. It is concerning that the SA cascading failure could have been forestalled had the rules and operation of the National Electricity Market kept ahead of the rapid growth in renewable energy. Indeed, SA, with its high penetration of wind power and “skinny” grid has become an international test case, with South Australians being forced to deal with the consequences.
Our electricity systems are being re-designed and operated on market principles, with technical considerations forced to play catch-up. It is telling that the Australian Energy Market Operator noted that “Decisions to commit generation into the power system are made by generators … [and] AEMO currently has no direct mechanism available to guarantee minimum levels of synchronous generation on the power system [to provide adequate system inertia], other than by using its emergency direction powers”.
While we await the findings of the Finkel Review into the development of a National Energy Market Blueprint, we are concerned that its recommendations may be used to delay the transition from fossil fuels to renewable energy. In particular, while the Blueprint is intended to address the “security, reliability, affordability and sustainability of the national electricity market”, we note that in the October 7 COAG Energy Council meeting, Energy Ministers prioritised security, reliability and affordability, but not sustainability. However, we believe that the transition from fossil fuels to renewable energy will entail significant costs.
2.4 Rethinking Affordability: Ensure Fairness and Help Low-Income Households
Our electricity grid has been designed around large fossil fuel (particular coal) and hydro power stations. Transitioning to an electricity systembased on renewable energy will require a large investment in new grid infrastructure and storage as well as new generators. If the cost of electricity continues to rise substantially, particularly for low income households, community support may decline.
Thus it is essential that the transition be accompanied by measures to assist households to significantly reduce their electricity consumption through regulations, such as strong mandatory energy performance standards for new and existing buildings, and stronger and more extensive performance standards for equipment. Financial assistance schemes and advisory services are also required to help householders reduce their electricity consumption. Measures that target low-income households, such as mandatory energy performance standards on rental properties, are essential.
Electricity network costs are typically covered by electricity consumers’ supply charge. If the supply charge rises as a result of new infrastructure costs, then consumers are less able to avoid these costs through energy efficiency. Moreover, we are concerned that large increases in supply charges may encourage richer households to disconnect from the grid and contribute to a “death spiral”. We suggest new infrastructure should not be funded by an increased supply charge but through increased taxes (or levies) on higher income earners and business. We also note that billions of dollars are spent annually on fossil fuel industry subsidies, funds that could be redirected to assist renewable energy and energy efficiency. Examples are redirecting tax concessions provided for novated leasing of motor vehicles and for diesel fuel for primary producers.
The expiry this month of a subsidy to Alcoa, worth an estimated $90 million annually, also provides an opportunity to redirect substantial funds to reducing power consumption and modernising power generation and storage.
Affordability also requires that new grid infrastructure and renewable energy generators be owned by the government rather than the private sector. Most of these will have a high upfront cost and low operating costs. The cost of borrowing is substantially lower for governments, thereby reducing costs to consumers.
Much grid infrastructure is used to meet peak demand, which typically occurs on a few very hot afternoons per year. Affordability will be improved by reducing peak demand. Methods include mandatory building insulation; encouraging west-facing solar PV systems coupled with small home battery systems; and demand response programs.
3. The Need for National Planning and Strong Regulations
We are doubtful that market mechanisms are sufficient to drive the transition to zero emission electricity. Indeed, a successful mechanism would have seen the power stations with the highest emission intensity shutting first. Instead we have seen black coal power stations closing before brown coal power stations. Furthermore, the National Electricity Market does not seem to be appropriate for generators with a variable output and zero operational costs (in particular wind power.) Hence we believe that a planned approach is required to move from coal to renewable energy.
3.1 Planning for What Will Replace Coal-Fired Power
Currently a number of black coal generators are running at low capacity. The shortfall in electricity from the closure of some coal power stations could well lead other coal power stations picking up the extra generation. Hence the emission reductions would be marginal.
If all coal power stations were retired, but replacement generation were left to the market, electricity supply is likely to be filled by gas-fired power stations. There is the danger that gas will become locked in, and hence our transition to zero emissions will be delayed. It is too late to be considering gas as a transition fuel – rather we need to transition directly to renewable energy.
The highest priority for replacing coal-fired power must be “Negawatts”, that is, energy saved through energy efficiency and conservation measures. Many of these savings can be captured only through strong regulations, not through market mechanisms nor carbon pricing. This is clearly demonstrated by the fact that a significant amount of energy efficiency measures could actually make money, yet they are not implemented due to a range of other barriers.
Pursuing energy savings vigorously is essential not only because many energy efficiency and conservation measures represent the least-cost (or negative cost) ways of reducing carbon emissions. We also need to slash energy usage, to avoid building too much renewable energy capacity. Unlike fossil fuel plants, virtually all the energy required by renewable energy plant is used before the plant start generating, i.e. during the material extraction, manufacturing and construction phases. It is likely that this additional energy will mostly come from fossil fuel plant in the early stage of the transition. Thus, unless energy savings are prioritised, a rapid switch to renewables could increase carbon emissions in the short term. Increased electrification of transport could also increase demand for electricity. Thus, substantial investment in public transport is required to displace private cars.
3.2 Mechanisms for Closing Coal-Fired Power Stations.
While we believe that the most emissions intensive power stations should be the first to close, it is likely that this would have more effect initially on Victoria’s electricity security, given that Victoria is home to the remaining brown coal power stations. Thus planning for renewable energy alternatives in Victoria (and South Australia) are important.
Currently the most emissions intensive power stations are in private hands. The closure of privatised power stations require indirect mechanisms. We do not advocate paying power station owners to close. Rather, we suggest that all power stations be subject to carbon emission performance standards, which tighten over time. We suggest that for existing power stations, emission standards that limit the total annual amount of CO2 per GW of installed capacity are preferable.
3.3 A Planned Approach to Growing Renewable Energy
The growth of renewable energy has taken place within a market-based electricity system, and has been driven by a market-based mechanism. Problems with this approach are now emerging, both in terms of the pricing mechanism and the location of renewable energy plant.
The National Electricity Market was designed around the characteristics of traditional generators. The NEM seems unsuited to technologies such as wind power, which are variable and have almost zero operating costs. Wholesale prices tend to be low when wind farms are generating, while high wholesale prices occur when there is little wind power available. So wind farms would tend to earn less than the average wholesale price. Renewable energy generators also depend on renewable energy certificates. However, the price of renewable energy certificates is reaching the value at which retailers may find it preferable to pay the penalty.
The current Renewable Energy Target has led to the location and type of new renewable energy plant being in effect left to the market. This has led to a rapid growth in wind power, much of it located in South Australia. However, variable generators should be geographically dispersed to smooth out the variable output. Australia also needs renewable energy generators that are dispatchable and offer inherent system inertia – in particular solar thermal, geothermal and biomass generators. Moreover, to avoid vulnerable regions bearing the brunt of the transition to renewables, there needs to be substantial investment in alternative sources of power system inertia and fast frequency response, and in new transmission lines that would complement renewable energy technologies.
Thus mechanisms to grow the amount of renewable energy require a national planned approach rather than being left to market forces.
3.4 Need for a Body that is Ultimately Responsible and Accountable
The current reliance on market principles in the National Electricity Market means that there are many organisations that are making individual decisions. When something goes badly wrong – such as the recent cascading failure in South Australia – there is not one body that is ultimately accountable, nor is there one body with the power to make the necessary changes. The transition from coal to renewables will require electricity system re-design. This needs to be based on engineering rather than market principles, and there needs to be a body with ultimate planning responsibility.