It has been a particularly interesting six months for energy markets in South Australia. A series of events have catalysed a national review of energy markets by the Chief scientist (Prof Finkel) and more recently an active intervention into the market by the South Australian government. Interesting times!
SA Power Networks reports that over the last six months South Australia has experienced nine major weather events impacting on energy supply, there had been 23 in the previous three years. Major events included tornadoes with winds of over 250 km/h that toppled transmission towers which then triggered a state-wide blackout on 28th of September 2016. Curiously this gave rise to claims from the Federal government that South Australia’s high reliance on renewable energy was the cause for the resultant “system black.”
Between 27th and 30th of December 2016 many households and businesses experienced extended periods of loss of electricity supply due to major storms on 27 December bringing trees down on a number of distribution lines. Then on 14 February 2017, about 90,000 households lost electricity due to load shedding on a very hot day while major gas generator was all but idle, literally down the road from the suburbs without supply.
Needless to say there have been many reports commissioned dealing with these and other events impacting on South Australia’s energy supply. The bottom line is that as a relatively small market at the end of the NEM, South Australia is at greater risk of loss of supply than other jurisdictions, due in part to high dependence on a major interconnector with Victoria and some reduced dispatchable supply due to higher levels of renewable energy generation. Arguably however the major factor is that South Australian electricity supply has long been gas focused, despite the attention given to closure of northern power station which is coal-fired, and gas prices are much higher now due to extensive gas heading north as exports of LNG, being taken from the Moomba gas fields is not available for domestic gas use including for electricity generation.
There’s been a major blame game as commentators, politicians and consumers try and work out what’s gone wrong and who is to blame. The SA government has been widely identified as the party most at fault, despite the South Australian market being privatised from 2004.
Interestingly the SA government has chosen to respond with a significant energy action plan with six major elements:
- funding of a new state owned gas generator
- support for a very large groups scale ‘battery’
- State government electricity supply tender to actively promote new generation
- incentives to increase domestic gas supply
- energy security target
- new legislation to increase the ability of the SA Minister to intervene in the market.
Calls for expressions of interest for grid scale storage have resulted in 90 proposals being submitted to the State government while a further 30 proposals have been lodged to construct and operate the new gas generator.
Response from commentators about the South Australian government’s intervention into the market has ranged from fulsome support, eg Frontier economics, to strident criticism including from the Federal government and some national newspaper commentators. The reality is that the market has reacted with considerable vigour and enthusiasm.
Meanwhile the SA government has sent a clear message to the market operators and other members of the COAG energy Council that State and Territory jurisdictions can still play an active role in privatised national energy markets. With an election less than 12 months away they have demonstrated that when it comes to electricity a “leave it to the market” approach still gives responsibility, from the public and industry point of view, with jurisdictional governments. This is an asymmetry in responsibility to which the SA government has responded vigorously, while maintaining a commitment to a low carbon energy future.
To be continued ….