How Christmas prawns explain Australia’s power blackouts
Just as the Howard government once claimed incorrectly that refugees were throwing their children into the water, the Turnbull government is deliberately misleading the public about the cause of blackouts and energy shortages around the country. Blaming renewable energy for causing the storms and heatwaves that cause blackouts is simply the latest attempt by this government to blame the victims of their policies. Unfortunately, victim blaming has a long but proud record in Australia.
On Thursday afternoon, the Australian Energy Market Operator first signalled that the latest heatwave was likely to lead to “load-shedding events”, which is a weasel word for a small blackout, caused deliberately by the operator, to prevent a large blackout caused by a mismatch between supply and demand. To be crystal clear, the planned “load shedding” was not because of the “intermittent” nature of wind energy; in fact, it was discussed days in advance because it’s just so hot in eastern Australia. As there are so many air conditioners now, the fact is that all of the generating capacity running flat out might not be enough to satisfy demand for energy on hot afternoons, when the kids get home from school and the factories are still running.
In a market, when there is a surge in demand the price usually surges as well. But because of (or thanks to) the contracts that most Australians have with their electricity retailer, when the demand for electricity surges the retail price paid by households doesn’t change. But something has to give.
Before explaining how the Australian electricity market does (or doesn’t) work, let me start with a simpler example: prawns. Every Christmas for the last 20 years, Australians have decided that you couldn’t have a better Christmas than having a prawny Christmas. Before that, roast chicken and lamb were widely considered to be the best things to eat on Christmas Day but, hey, times change.
But prawns don’t change. Because they don’t celebrate Christmas themselves, the prawns eat, swim and breed in patterns that in no way reflect the recently changed pattern of Australian prawn demand. So when the demand for prawns spikes in late December there isn’t much that can be done to significantly increase the supply of fresh prawns. Unsurprisingly, the price of prawns goes through the roof.
Like the demand for prawns, the demand for electricity is far from stable. We use a lot more electricity in the daytime than in the night-time. We use a lot more electricity on very hot and very cold days than we do on average days, and the biggest peaks in demand occur in the late afternoons on very hot days, when homes and factories both want power. Sound familiar?
The problem with supplying energy at times of “peak demand” has absolutely – repeat, absolutely – nothing to do with the availability of “baseload power stations”. Indeed, there is a hint in the name “baseload”. The Turnbull government’s efforts to blame a temporary shortage of electricity on a permanent shortage of coal-fired power stations is wrong on so many levels that it’s hard to explain the extent of the error simply. Of course, the longer time needed to tell the truth than to repeat a lie was instrumental to the cynic’s dictum “if you are going to tell a lie tell a big one”. But we have a few minutes, so let me try to set things straight by starting with another prawn analogy.
If Australia wanted to avoid a “prawn shortage” of the kind we experience on December 25, we could invest in “baseload” prawn farms that would produce too many prawns for the other 364 days of the year. It would be expensive and unprofitable for the farmers, but it would prevent the December queues and price spikes.
Malcolm Turnbull wants to subsidise the construction of new “baseload” coal-fired power stations even though the problem we face is a “peak demand” problem. Of course, some people point out that there are forms of power generation, like solar, that provide most of their power at times of peak demand events. But since those people are not on the Prime Minister’s backbench, and don’t have a vote in the next leadership ballot, their views are being ignored right now.
Other people make the point that the roll-out of batteries, at both the household and industrial scale, give the electricity market an incredible capacity to instantly provide a surge of extra power whenever it’s needed. Indeed, at night-time, when the “baseload” power stations we already have are busy generating more electricity than we sometimes need, they could even be the ones filling up the batteries.
And then there’s gas. When South Australia experienced “load shedding” this week, which left tens of thousands of households in the dark, the Pelican Point gas power station was not running at capacity because – wait for it – changes in government policy now allow our gas to be exported from the east coast, which means the owners of gas-fired power stations van make more money exporting our gas to Japan than from making electricity for Australians. True story.
And finally, there’s demand. Some of the spikes in demand that put so much pressure on the national grid last as little as five minutes. But a blackout caused by an instantaneous spike can take hours to repair. Luckily, there are very large industrial consumers of energy who would be more than happy to be paid to temporarily shut down some of their equipment for five or 10 minutes. Indeed, Sun Metals, a Queensland-based zinc producer, has asked for the national electricity market rules to be changed to facilitate a far less disruptive form of “load shedding”.
“The owners of baseload power stations oppose efforts to reduce demand spikes, because they make a fortune out of the price spikes that come with them.”
Technology also allows for the remote switching of appliances that use a lot of power, such as air conditioners and pool pumps. At peak times, these appliances, rather than whole suburbs, could be remotely switched off by the regulator. But, of course, the owners of the baseload power stations are opposed to using rule changes or technology to reduce demand spikes, because they make a fortune out of the price spikes that come with them.
As the rest of the world invests heavily in solar, wind, batteries, energy efficiency and the redesign of electricity markets to ensure that consumers and the environment are protected, the Turnbull government is doubling down on its protection of Australia’s coal industry. As coal demand from India and China winds down, our subsidies for new coal mines and new coal-fired power stations are just beginning to ramp up.
Just as no babies were thrown into the water by their parents in 2001, even the coal-fired electricity lobbyists agree no new coal-fired power stations will be built in Australia. But the purpose of lying isn’t to solve a problem: it’s to hide one. Turnbull once said he wouldn’t lead a party that didn’t take climate change as seriously as he did. That’s why he’d rather a phoney debate about the cause of blackouts than a real one about his abandonment of support for carbon pricing, renewable energy and has newfound desire to subsidise coal mines.
Richard Denniss is the chief economist for The Australia Institute. Twitter: @RDNS_TAI