Ferguson's energy future is now

Nothing is more important for Australia's economic future than getting the energy supply equation right. As the clock ticks, this week's white paper should spark some serious questions.

When’s the future? This is not a trick or flippant question and can be applied across a gamut of areas, not least energy planning.
In a week in which Martin Ferguson has revealed that the final version of the federal government’s white paper will appear in October and TRUenergy (aided and abetted by ACIL Tasman) has identified a $25 billion question about the renewable energy target when extended to 2030, clarity about our energy horizons and the paths to them is not unimportant.

After all, the whole economy hangs on not stuffing up energy supply.

The federal government, in the form of the prime minister, the treasurer and Climate Change Minister Greg Combet, would rather like us to focus on a "clean energy future” that is 2050 – at which point, we are told, current policies will deliver great things.

Some of us churlishly point in response to 2035 – used by the government’s Bureau of Resources & Energy Economics for its forward projections – and note that the "clean energy future” will involve burning more than a billion tonnes of black coal, about half a billion tonnes of brown coal (probably more now that the power station closure plan has collapsed) and an estimated 10,000 petajoules of natural gas over the next 25 years.

More than a few of us, around business board tables and household kitchen tables, are more focussed on paying the current bills than on what may be a decade away.

'When’s the future?' is certainly not a flippant question for electricity network developers across Australia because infrastructure they installed 30 to 40 years ago is running out of usefulness and there is another "price shock” waiting round the corner if we repeat the experience of the past 10 to 15 years.

Our perception of the time horizon depends critically on where we are standing.

At a personal level, for example, my view is coloured by the fact that I turn 70 this week – and therefore don’t really expect to be around in 2035 to argue who got what wrong in predicting power supply – and I am also a father and grandfather.

Members of the federal government, looking at the opinion polls, will have a rather different perspective from members of the O’Farrell or Newman governments, sitting on huge majorities that could keep them in office into the next decade.

Tony Abbott is anticipating joining them in scaling this peak, but does he have a workable energy perspective to 2020, let alone 2035?

Down in the engine room, if you are a TransGrid, for example, where managers are charged with ensuring the security of power supply for the largest sub-market in the country, you certainly can’t afford to be insouciant about the 2030s.

TransGrid provides the backbone for electricity delivery to NSW as a whole, but critically to the Wollongong-Sydney-Newcastle coastal strip that consumes a third of all the power used on the east coast and is home for a large chunk of our manufacturing as well as hundreds of multinational corporate offices – plus some three million homes, a third of the nation’s total.

How much manufacturing will remain in this region a decade hence?

This sector accounts for a third of demand.

Just removing the Tomago aluminium smelter from the demand equation would represent a reduction of about 10 per cent in NSW consumption.

What will the region’s population be in 20 years?

Population growth in Sydney is highly cyclical. It has varied from 18,000 to 63,000 a year over the past half century.

It is expected to reach five million at the decade’s end and go past six million by 2035.

How do you plan efficiently to serve this set-up in an environment where the political and energy policy ground keeps shifting nationally and regionally?

This past week the NSW government, via resources and energy minister Chris Hartcher, promised to treble state renewable energy supply by 2020 without increasing consumers’ costs.

There are many reasons why this is a bit challenging.

One of them is that bringing Cooper Basin geothermal power to the east coast grid would cost a billion dollars just for the transmission line.

Another is where will the National Party let the government plant the wind farms?

The weakness in attempts to plan energy supply is always that the system is a chain, not a benign dictatorship, and that the links include customers as well as suppliers and regulators.

Cost issues, for example, can get down to how many air-conditioning units are bought – east coast numbers are expected to be double today’s level by early in the 2020s – and how the users are confronted by the price of being cool.

The new NSW plan manages simultaneously to talk up the "smart meters, smart grid” trial at Newcastle – paid for by the federal government – and say nary a word about whether the state government will embrace rolling new meters out across the customer base (and charging householders for them), imposing residential time-of-use charges and abandoning retail price regulation, the essential hop, step and jump in warding off further big spikes in peak demand.

A more pressing issue for Hartcher and his government colleagues, is whether the state will have an adequate gas supply by the middle of this decade – and, if so, at what price?

The contracts for 95 per cent of the NSW gas supply, serving 1.1 million household and business customers, run out between 2015 and 2017.

The silver bullet is supposed to be development of the state’s large coal seam gas resource – but resolution of the hassles involved in using it doesn’t seem imminent and the clock is ticking.

Perhaps the biggest service Ferguson’s energy white paper can provide, given that it may well be no more than a gesture from a fading government, is to clearly set out the opportunities and challenges in 2020 and 2035 and the things that need to be resolved in the here-and-now to avoid a very imperfect future.

Then, after the federal election, all concerned can roll the dice all over again. Yikes!

Keith Orchison, director of consultancy Coolibah Pty Ltd and editor of 'Powering Australia' yearbook, was chief executive of two national energy associations from 1980 to 2003. He was made a Member of the Order of Australia for services to the energy industry in 2004.