Should SA fear the closure of coal power?

Federal politician, Rowan Ramsey, seems to think South Australia is suffering price hikes and is at risk of power blackouts as renewables push out coal. In truth, SA has nothing to fear and much to cheer.

Politics has no lack of fools willing to talk on topics they know little about.

The speech printed out in full below from Rowan Ramsey, member for the South Australian seat of Grey in the federal parliament, is a case in point.

In this speech and other public comments, Ramsey has been trying to suggest that South Australia is about to suffer power blackouts, and has the highest electricity prices in the country because of the high penetration of renewable energy in the state.

This is built on some bizarrely contradictory points.

According to Ramsey, Alinta’s plan to close the ancient clunker of a coal-fired power station – Playford – and only operate Northern coal power for six months of the year:

“(Is) being forced on Alinta by the depressed prices brought about by the very high levels of wind generation in South Australia.”

Now this might be true, but how at the same time can Ramsey also assert that the high penetration of wind is the reason for South Australia paying very high household electricity prices?

“So the real question is: to what extent is the concentration of renewable energy in South Australia leading to what will be … the world's highest price for retail electricity by July 1. It is difficult to see that South Australians are not making a larger contribution to reaching the MRET targets than the rest of the nation.”

What Ramsey doesn’t seem to realise is that the rest of Australia is in fact paying for just about all the Renewable Energy Certificates from South Australian wind farms. Meanwhile, South Australia gets the lower prices for wholesale electricity as well as all the jobs and investment that come with building those wind farms. It also probably doesn’t help that Ramsey has difficulty in translating his energy units from megawatt-hours to kilowatt-hours and has therefore overstated in his speech the cost of renewable energy certificates in kilowatt-hour terms by 10 times. 

In the end the Renewable Energy Target is an absolutely fantastic deal for South Australia. And the incredibly restrictive planning rules from Victoria and possibly also from NSW are like a huge free gift to the SA economy and households.

Indeed, it never ceased to annoy me how former SA premier Mike Rann used to steal the credit for John Howard’s Renewable Energy Target (RET) with his “legislated” targets for renewable energy. These legislated targets involved no obligation on anyone, and did nothing to encourage renewable energy. Instead the level of the target was very deliberately set based on what his government knew would be delivered by Howard’s RET, rather than anything Rann had done. This has to be up there as one of the most incredibly bold and disgraceful pieces of PR spin ever perpetrated by an Australian politician.

As to Ramsey’s concern about the loss of Playford and Northern Power station – how big an issue is this?

To help answer the question below are the capacity factors for all the scheduled generators located in South Australia.

Capacity factors for South Australian scheduled generators

Source: Australian Energy Market Operator (2011)

Firstly, it’s worth noting that neither of these plants were ever expected to operate forever, as their coal supply from Leigh Creek was, until recently, expected to run out by 2017.

As the chart illustrates Northern is an important source of supply. Its 544 megawatts operate for a large proportion to the year. However, Alinta has announced that it will continue to operate Northern during the summer months (not the winter months as error-prone Ramsey asserts), and this is when SA’s electricity supply experiences noticeable constraints. Winter is not an issue, contrary to Ramsey’s assertions, for a very fact that Ramsey acknowledges – Adelaide residents rely largely on gas for home heating purposes rather than electricity.

In terms of Playford, it is nearly 50-years-old and is already badly limping as a coal-fired generator. Indeed it had already been mothballed once in the past before an attempt to revive it in 2002.  Over the period illustrated it has averaged a capacity factor of 33 per cent which is extremely low and sub-optimal for an old generator reliant on low grade coal.  This plant lacks the ability to rapidly ramp its output up and down compared to gas-fired plant, so it has never been well suited to operating at such low capacity factors.

While Ramsey seems keen to rubbish wind farms as rarely generating at their rated capacity, the capacity factor of Playford is noticeably lower than the last few wind farms constructed in SA by AGL, which average around 40 per cent.

Because Playford is so inefficient, it requires copious amounts of coal to generate a unit of electricity and unlike the Victorian generators, this has to be transported from more than 100km away. Also the mine’s coal is harder and more costly to extract. Consequently Playford is only just competitive with gas-fired generators, but with about three times the carbon emissions.

Ramsey needn’t bother AEMO to ask about whether the grid is about to be crashed by wind power. AEMO investigated this issue quite thoroughly in 2011 and came to the conclusion that very high penetrations of wind are imminently manageable for the NEM.  

As a small, inflexible, infrequently operated, and costly plant, Playford will not be greatly missed.

Transcript of Mr Rowan Ramsey’s address to the Federal Parliament – 18 June 2012

Mr RAMSEY (Grey) (20:58): I rise tonight to speak about the escalating electricity prices in South Australia with the recent announcement of an 18 per cent increase and the effect that government policies in the renewable energy area are having on our electricity grid. Retail electricity rates are set to rise by 18 per cent. The Energy Users Association of Australia has said that after 1 July—that is, carbon tax day — the retail price of South Australian electricity is set to become the dearest in the world, with an average retail price in excess of 31c a kilowatt hour.

South Australia is home to more than 50 per cent of Australia's installed wind generation capacity, more than 1,200 megawatts. The photovoltaic rooftop solar subsidies and state based feed-in tariffs have been spectacularly successful in South Australia, with one in seven houses having PV cells installed and an installed capacity of 120 megawatts in total. That is, six in seven households that do not have rooftop solar are in effect subsidising these systems through feed-in tariffs. The theoretical total generation available to the grid, including the interconnectors, is about 3,400 megawatts.

Historically, the Playford power station of 240 megawatts and the Northern power station of 540 megawatts — these are brown coal power stations, I might add — operated by Alinta Energy at Port Augusta have provided around 40 per cent of the state's electricity. In recent years this has been supplemented by two interconnectors to Victoria — Murraylink, 220 megawatts, and Heywood, 460 megawatts. On average, the Alinta power stations still produce more than 30 per cent of the state's demand. On 1 July both power stations will be taken off line by Alinta.

South Australia's electricity demand fluctuates from less than 1,000 megawatts to about 3,500 megawatts. Prices fluctuate from minus $500 up to $12,000 a megawatt hour. Normally, this electricity retails at around $250 to $300 a megawatt hour. The Essential Services Commission informs us that 194,000 South Australian householders are seeking assistance with their power bills. A further issue—it is a side issue but I must bring it up, Mr Deputy Speaker Scott; I know you will understand about this community—is that the Coober Pedy Council, which operates an off-grid generator, is being forced to raise electricity prices for commercial customers by more than 30 per cent from 1 July.

Those are the facts. I believe that the South Australian electricity grid is, at best, in an uncertain state and its problems are almost all caused by a mishmash of government policy overlapping and double-dipping on the back of the push to reduce our CO2 emissions. The RECs, the solar PV subsidies, the solar PV feed-in tariffs and now the off-budget Clean Energy Finance Corporation and the carbon tax are effectively a double triple whammy on the industry. If Labor should win the next election—I certainly hope they do not—and keep the carbon tax in place they should wind back the other expensive renewable schemes and provide a far simpler signal to the marketplace.

Let us just for a start have a look at Alinta Energy's coal fired power stations at Port Augusta. Since 1954, 58 years ago, first Playford A then Playford B and later the Northern power station have provided a substantial part of the state's electricity. As at the end of this month that will cease. Playford will be permanently closed, so 248 megawatts off the system, and the Northern power station will be operated for only six months of the year—the winter months—so 540 megawatts off this system. Many will cheer this in Australia as evidence that we are moving away from fossil fuels. However, the questions are: what kind of future do we move to, is it sustainable and what is the price? The closures are being forced on Alinta by the depressed prices brought about by the very high levels of wind generation in South Australia.

I have spoken about the wind generation in this place before, but I want to go back over some of the facts. More than 50 per cent of Australia's installed capacity in wind generation is in South Australia. Even more importantly, about 35 per cent of the state's installed capacity on the electricity grid is wind. For those who do not fully understand 'installed capacity', before we had such things as renewable energy and intermittent power supplies we just talked about the capacity of a power station. Now we talk about installed capacity because it may or may not be available, depending on the weather conditions. With a solar cell, for instance, it is not available at night but it is available during the day, and then it depends on the intensity of the sunlight. So it is with the wind—it may blow, it may not.

With more than 1,200 megawatts of installed capacity being provided by wind, that means that it is capable of providing more than 100 per cent of the demand on a windy day in winter. So when we have low demand it can provide over 100 per cent of the demand—and as little as two per cent on a still day in the middle of summer. So the grid has become unpredictable and difficult to market and to operate in for baseload generators, who are by their very nature incapable of load chasing. There are plans in South Australia to build another 1,000 megawatts of wind energy. Renewable energy always sells first on the grid, because of the RECs, which add around $38 or $39 a megawatt hour or 38c or 39c a kilowatt hour in returns to the generator, on top of what they can sell their electricity for. Of course, the industry is being forced by the regulations and the laws of this parliament to move towards a 20 per cent renewable target. So I am seeking more information at the moment from the Australian electricity market authority as to the sustainability of the grid and what the 760 megawatts coming offline at Port Augusta as of 1 July is likely to mean to the operation and supply of electricity in South Australia.

Even more important than the price is the question: when workers get home after a hard day, at whatever the coalface might be for that particular person, and flick the switch will the light come on? Or will that industry be rationed because the grid is not able to supply the power? So the real question is: to what extent is the concentration of renewable energy in South Australia leading to what will be, according to the Energy Users Association of Australia, the world's highest price for retail electricity by 1 July. It is difficult to see that South Australians are not making a larger contribution to reaching the MRET targets than the rest of the nation. Even further, what are the risks of brownouts in the middle of winter if we get a cold, frosty string of days? One of the things not everybody understands is that the other baseload generator in South Australia is gas fired. Gas power stations do not have big containers of storage; they use their pipelines. So, if we get a cold snap of weather, the pipelines actually depressurise over a period of days, because that is the holding tank. The generators crank up the power station at Torrens Island, people come home and turn on their gas fired heating and will run down that supply. Should the weather continue, that is where we are likely to face shortages. And AEMO, the Australian Electricity Market Operator, have the ability to command Alinta to turn the generators back on. That sounds all right, except it takes two weeks to fire them up. I have read the legislation closely, and I have talked to the industry, and there is absolutely no understanding in the industry as to who would pay Alinta to restart these generators.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles