What Does The Liberal Win Mean For Clean Energy in SA?

marshall and weatherill - renewable energy in SA

Labor’s Jay Weatherill is out. The Liberal’s Steven Marshall is in. What does this mean for the future of renewable energy in South Australia?

The South Australian Liberals have won the election.  The results seemed clear on Saturday night and are looking very definite now on Monday morning.  They have a small but clear majority allowing them to govern in their own right.  Now that the power is theirs, will solar and wind continue to expand in South Australia or will Premier Marshall peel off his face to reveal he is Mecha-Abbott underneath and set about destroying the renewable energy industry in South Australia?

The good news is the SA Liberals are not the same as the Federal Coalition and so, fingers crossed, we shouldn’t see the same renewable bashing behavior we saw under Abbott and which has continued with Turnbull.  It simply won’t benefit the state or the SA Liberals to attack renewables.  It will not cause coal to become environmentally friendly or make nuclear power pay for itself.  This doesn’t mean they won’t bash renewables.  But hopefully self interest will keep them from doing anything too stupid.

So what will SA Liberals do?  Well, I find what people say they will do is a pretty good predictor of future behavior, both in real life and politics.  This means the state is likely to end up with:

  • An interconnector with NSW that will cost at least half a billion dollars all up.
  • $100 million in home battery subsidies at around $2,500 a home.
  • $50 million in grid battery subsides.

The good news is there has been no mention of a return to coal power, but they do say they are going to expand natural gas production in the state.  I have no idea how much money they are planning to sink into this, but Australia already produces far more natural gas than it consumes, so any extra production is just going to be exported overseas.  Hopefully the Liberals will realize it doesn’t make any sense to spend Australian money to subsidize the cost of natural gas in Japan.

The SA Liberals Are Not The Federal Coalition

The Federal Coalition is dominated by members of Parliament from the three most populous states — NSW, Victoria, and Queensland.  Each of those states mines and burns a lot of coal.  Australia is the largest exporter of coal in the world.  Indonesia had us beat for a long time, but we appear to have pulled ahead1.  At the moment Australian coal exports are a $30 billion industry.  But in a few months it could be a $15 billion industry.  It’s not the most stable of commodities.

But South Australia has no coal industry.  Low quality coal used to be mined at Leigh Creek but that was closed down, along with coal generation in the state, two years ago.  This means there are no coal companies to appease and no coal jobs to protect.  While there are natural gas producers, they get paid the same if gas is sold here or overseas, so they should be mostly indifferent about expanding renewable energy cutting gas consumption in Australia.  When Turnbull’s interference in domestic gas markets starts to bite they may actually have an incentive to promote renewables to decrease domestic gas consumption, as they will be able to make more money selling it overseas.  However, gas generators won’t be quite so sanguine.

Of course, just because there is no there’s no strong incentive for fossil fuel producers to warp policy doesn’t mean the SA Liberals won’t get in the way of renewable development.  After all, the Federal Coalition’s opposition to renewable energy doesn’t make a lot of sense either.  They had enough political power to arrange for coal interests to be paid to close down mines and power stations but instead chose to oppose renewables instead.  I think that sometimes people just like to fight.

Is Steven Marshall Mecha-Abbott?

Mecha-Abbott looks a little like this, except not quite so pretty.

The SA Liberals will have no strong reason to support fossil fuels and lots of reasons to support renewables.  Trying to hold back renewable development is likely to maintain high electricity prices and reduce investment in the state.  So unless we are very unlucky, this should be a pro-renewable Liberal state government.

The NSW Interconnector

The SA Liberals appear determined to build an interconnector with NSW.  This is likely to cost at least half a billion dollars with the expense shared between the two states.  The new interconnector would allow South Australia to import mostly coal generated electricity from NSW and export mostly renewable generated electricity to NSW.  This will slightly lower the cost of electricity in both states but won’t be cheap to build.  The Liberals say it’s worth it and they must be very confident of this because they are spending $150 million dollars to subsidise battery storage, which will reduce the need for and the profitability of the interconnector.

$150 Million In Battery Subsidies

The SA Liberals are planning to spend $100 million subsidizing home batteries.  They say the average subsidy will be around $2,500, so this is enough for 40,000 homes or around 6% of households.  If the average battery size is 10 kilowatt-hours that will subsidize the installation of 400 megawatt-hours of storage.  In addition to this they are planning to spend $50 million to subsidize large scale grid battery storage.

I don’t know why they are doing this.  Well, actually I do know why.  They thought it would help them win the election.  But the more energy storage there is in the state the less need there is for a new interconnector.  It will also make the interconnector less profitable, which will make NSW less interested in sharing the cost of building one.  NSW’s goal is to buy electricity cheap from SA when renewable production is high and sell it when SA prices are high.  But energy storage will help even out these highs and lows and so NSW might decide the interconnector is not worth the cost.  On the other hand, if battery costs continue to rapidly fall then SA Liberal’s subsidies may have little effect on the total amount of battery storage that is eventually installed.

Batteries Don’t Currently Provide An Environmental Benefit

At the moment batteries don’t reduce greenhouse gas emissions.  While in the future they may help do this, right now they generally only increase emissions.  But we do know what does decrease emissions — wind and solar power.  It makes no sense to subsidize battery storage which is currently an environmental negative, while allowing subsidies for renewable power to phase out.  Market forces alone are likely to result in Australia installing a large amount of battery storage without the need for subsidies and I recommend the Liberals give market forces a go.  (Who knows?  They might even end up liking them.)

Virtual Power Plant

South Australia is trialing a virtual power plant.  The plan is for 50,000+ homes to have solar panels and batteries installed at no cost to the occupants while providing them with lower electricity bills.  I have no idea if the Liberals want to let this go ahead2, but they have no reason not to as it will be funded almost entirely by private investors.

If the Liberals value private individual battery ownership, they may want to make it easy for people who own their own battery system become part of a virtual power plant and get paid for supporting the grid.  This seems fair enough because at the moment virtual power plants have advantages private owners of home batteries do not, such as the ability to be paid wholesale electricity prices which can go over $14 per kilowatt-hour or be paid to charge batteries when there is an oversupply of electricity3.

Fingers Crossed

The SA Liberals have stated they are fine with the expansion of renewable energy.  I am going to assume they are telling the truth about this and Premier to be, Steven Marshall, isn’t currently calculating the scrap value of state’s wind farms.  If the SA Liberals want low wholesale electricity prices for BHP4 and other industry in the state5, then the quickest way to achieve that is by rapidly expanding renewable generation so it will put downward pressure on prices and limit the amount of time that gas generators set wholesale electricity prices.  They can either help this process along or simply not stand in the way.  But if they follow the line of the Federal Coalition and oppose renewables then everyone in the state is likely to pay more for electricity than they need to.

Footnotes

  1. Yay.  We’re number one.
  2. Update:  They’re not going ahead.  But Tesla could continue with its virtual power plant without state government support, if they want to– unless they are actively blocked.
  3. But the more batteries that are installed, the less volatility there is likely to be in wholesale electricity prices as they will even prices out.
  4. BHP is the state’s largest user of electricity and pay prices based on the wholesale spot price of electricity.  What they actually pay is a secret, but it doesn’t appear to be much more than the spot price.
  5. There is other industry in the state.  Just not a lot.
About Ronald Brakels

Many years ago now, Ronald Brakels was born in Toowoomba. He first rose to international prominence when his township took up a collection to send him to Japan, which was the furthest they could manage with the money they raised. He became passionately interested in environmental matters upon his return to Australia when the local Mayor met him at the airport and explained it was far too dangerous for him to return to Toowoomba on account of climate change and mutant attack goats. Ronald then moved to a property in the Adelaide Hills where he now lives with his horse, Tonto 23.

Comments

  1. George Lang says:

    What that all the advocates of renewable energy do not appropriately address is a 24×7×365 supply requirement and the associated cost. When renewable energy is not sufficient short-term requirements can be met from battery storage but there is no substitute for fossil fuel baseload power. Anybody wishing to supply energy on a 24 x 7 x 365 basis should be required to provide continuous supply regardless of the energy source. For renewable energy this means reciprocal arrangements with baseload power providers and appropriate sharing of the costs, not the cherry picking approach which appears to apply at present.

    • Heard of Thermal storage? Heard of pumped Hydro? They are just 2 ways to store energy without batteries. Then there is tidal generation (yeah ok, dodge tides included).

      We do need a proper share arrangement around the States to make use of what’s available but no reason why that could not be all from free energy.

      • Just re. the “tidal generation”:- It’s been said before that utilising the ‘tide’ as it rushes into AND out of (for example) Port Phillip Bay ( an probably 20,000 other similar environments) would not only provide a consistent ‘base-load’ but generate enough power to make it worth exporting.
        ie. ‘Pumped hydro’ with the Great Southern Ocean doing the pumping.
        (and we could sell all our ‘slightly-used’ solar panels on the world market….by undercutting the Chinese. 😉

    • Peter Seligman says:

      Just being a little picky here but don’t you mean 24 x 365?

      • Rod Munro says:

        You know, I’ve heard that saying thousands of times and never thought about that.
        Something else I can be pedantic about in future. I do have a long list already but one more can’t hurt 😉

    • Rod Munro says:

      There’s an article over at reneweconomy today addressing just your concerns.
      You may even want to read AEMO’s ISP document.

    • robert vermont says:

      Baseload is by definition, a generator that can’t be easily turned off. Such as coal and nuclear. Battery, hydro, gas, diesel are not baseload and can be turned on and off in an instant and need to interact with renewables. And with the new cables power can be transported thousands of kms with minuscule losses so a spread across this country will eventually be achieved.And it looked like SA was going to miss out on the rest of this countries liberal energy train wreck but it looks like you jumped on board just in time.

  2. joe lihou says:

    Wait till turnbull starts blackmailing them with we will give you this but only if you do what we want sort of thing. And i see turnbull is already saying This election proves people want Turnbull’s (bullshit) and support his generation model not the renewable model SA was pursuing. And if you doubt it just look at what happens with the RC into the MDBA

  3. Wind farms – SOLD ?
    Solar farms – SOLD ?
    Thermal plant – SOLD ?
    Diesel/Gas generator – SOLD ?
    Feed-in tariffs – REDUCED / ABOLISHED ?

    Frydenberg on ABC Adelaide this morning going on about SA failures yet again and the Federal governments Energy guarantee plan as usual.

    I hope I’m wrong but I see another SA Liberal train-wreck coming. We are already seeing it federally.

    • Patrick Comerford says:

      If you are right, and anything is possible when it comes to conservatives and logic, who’s going to get the blame. My money’s on the punters who voted for it. About time the electorate had a good long hard look at itself and realize their decisions have consequences which if they haven’t paid attention too can come back and bite them on the arse.

    • Harry Camper says:

      Yes these dinosaur liberals will wreck the renewable hopes and plans, and maybe even undo what is in place in spite.

      • joe lihou says:

        Harry that’s how they have operated ever since Abbott got trounced by Gillard Spite spite and more spite nothing to do with what is better Just that it was not of Coalitions doing so out it goes

        • Harry Camper says:

          So sad to see many lost opportunities due to their (liberals) pigheadedness.
          No wonder as a nation we are floundering badly with record low wage growth.

    • Virtual power plant plan – KILLED OFF (First 2 stages only = 1100 households)
      75% Renewable Energy target – KILLED OFF
      Tindo jobs – WON’T HAPPEN NOW.
      Low income households – TOUGH LUCK.

  4. I hope you are right about Liberal truth telling.
    I reme4mber Tony Abbott telling the SBS there will be “no cuts to education, no cuts to health, no change to pensions, no change to the GST and no cuts to the ABC or SBS” under a Coalition government.
    Liberal lies would be nothing new.
    (And labor has its faults too with Keating’s LAW promises)

  5. Mike Lippert says:

    “Hopefully, the Liberals will realize it doesn’t make any sense to spend Australian money to subsidize the cost of natural gas in Japan’ – I am missing to see any LNP members that have a conscience or a normal sense when it comes to energy production in Australia as long as it is not ‘black’ or carries the name of coal.

    And as for the storage ‘supercapacitor’ development would probably be the way to go in future

  6. Don’t underestimate voter backlash at Bill Shorten’s ill-timed, ill-conceived policy aimed at the elderly. We’re swinging voters, who have voted Labor, Nationals and Greens during the last two decades.

    We’d have voted for almost _anyone_ but Labor on Saturday.

    NB: We have _no_ shares at all, but older Aussies have become easy targets for both two major parties.

    • Rod Munro says:

      You based your vote on a tax change I highly doubt you fully understand. There is a good article on the Guardian re the dividend imputation cash credits.
      I pay no tax yet get a cash credit on shares that I have already received dividends on.
      I am affected but I agree it is an overly generous rort and it needs to go.

    • joe lihou says:

      Lets not forget the coming cuts to pensions thru the supplement that is coming Nor how the senator failed to answer this when questioned today. And I see Josh and mal are already crowing about how the libs won because of his energy policy. Must have a short memory because both he and his arch enemy Tony are both on record as saying state politics have no bearing on federal policies or is that only when they lose a state election. He will be in for a shock come next fed election if he downgrades renewables

      • We both agree. Hockey fell because he targeted pensioners… and failed The Fairness Test. Shorten has made the same mistake and at the worst possible time!~

        Targeting any vulnerable group, in this case seniors (whether pensioners or self-funded retirees) is a major mistake. Well-heeled politicians, immune from the decisions they foist on others in retirement, are (ir)responsible for voter anger… .

        On the positive side, more-and-more Aussies are rejecting fossil fuel initiatives. Auto manufacturers are just starting to see the writing on the wall. More and more are launching EVs. eBikes are now assuming significant market share of the bicycle market worldwide. Tenants are slowly but surely seeking rentals with solar FiTs. We’re approaching the ‘tipping point’.

        Gone are the days when we _regularly_ donated money to Labor. Fortunately the party has a lineup of able replacements for the incompetent who just cost Jay Weatherill premiership of SA.

  7. Joe Blake says:

    With the spate of natural disasters over the past couple of years (Cyclone Marcus in Darwin, bushfires in Victoria just within the last week) which have rendered thousands of households/ businesses without power for lengthy periods of time, many people are reconsidering their options. The politicians (on both sides of the spectrum) have failed to address the reliable/ cheap power issue and Turnbull’s attempt to con the Australian public with his latest thought bubble of the energy guarantee (haven’t heard much about Snowy Hydro 2.0 of late) will no doubt go nowhere and do nothing – he’ll try and blame the States by saying if they don’t all get on song together then he can do nothing. (Western Australia, fortunately, is not a part of this farrago, thanks to the tyranny of distance).

    It’s all very well saying that the SA Liberal Govt is not the Federal Coalition Govt – true, but there is still a fairly deep common gene pool and no doubt when their first budget is being cast there’ll be some excuse to wind back the promised subsidies for batteries etc, “thanks to the economic mess handed to us by the previous incompetent government” and nothing will continue to get done.

    So in reconsidering power options, many households and businesses will say (or already have said) a pox on both your houses, and the move to domestic power generation/ storage will travel apace. Who knows, maybe there will be so much renewable energy that an interconnection between South Australia and NSW and Vic will become even less financially viable.

    In the West, I’m quite comfortable to have 9 months of the year when I generate more than 100% of my household requirements for power (including several electric vehicles) and have paid nothing for electricity since about 2010 – even though I ceased getting any government subsidies in October 2013 – and have never had a single minute without power. Has to be the way to go.

    • Rod Munro says:

      Yep, if these clowns keep up their games they will turn around one day and wonder where all their customers went. I could go off grid tomorrow on a piddling 2.5kW system (if I add storage) but the PFiT cash I get every quarter is the only incentive to stay on.

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