South Australia’s planned Virtual Power Plant appears to be largely misunderstood, as these things always are. It is basically a system that creates an energy supply from solar and batteries which is tied together by software.  This allows the system to provide electricity for the state.  The end product is the same as having a solar power station with storage.  How the system is paid off is not for this blog, but suffice it to say that it will be paid for in a similar manner to any other privately owned power station.  That is, investors will pay for it to be built and recoup their money by selling electricity over a period of time.

Is it a good idea? The easiest way to look at it is to consider the alternatives, and that starts with a bit of history.  Australia’s coal fired power stations were largely established in the 1960s and seventies, making many of them now obsolete (or passed their proposed 40 year lifespan).  Restoring them to keep them running is fraught with economic and safety problems and no eastern states governments have seen fit to invest in the process (and inherit the liability).  WA did try with its Muja AB power station and waste hundreds of millions of dollars on a fiasco resulting in its imminent closure.  Look it up if you want the details.

If we want to keep coal in the mix we need to build new coal fired power stations. SA is the least able to supply quality coal and is probably the last state you would look at to do this privately. So what else do we have?

The three big ones are renewables, natural gas and purchasing from interstate. We have an interconnector to Victoria and are looking at an interconnector to NSW.  These are great for emergency supplies but do come with a high cost burden.  The basic problem with them is that both Victoria and NSW are shutting down more coal fired power stations than SA with renewables picking up the slack.  Both states have more production issues than SA and have more blackouts (or phased power cuts).  The pumped hydro scheme will help the eastern states, but not for ten years or so and at a substantial investment cost of about $7 billion.

Which really leaves SA with renewables and gas in the near term.

Gas is a great fossil fuel, having the least pollution, greenhouse gases and we have plenty of it. The recent Otway Basin (Penola) gas discovery is evidence of that, and to the SA government’s credit they have helped pay the drilling cost and ensured that the gas is used locally.  If we used it for transport, SA could be basically self sufficient for its energy needs.  It is also the best backup for electricity generation in SA, particularly with modern generators the can be turned on and off readily.

Renewables are inarguably the way of the future for both sustainability and cost. Fossil fuels will inevitably increase in cost and renewables are steadily decreasing in cost, although storage is a major issue.  As wind and solar are intermittent a storage system is necessary.  Many different systems have been proposed (and discussed in previous blogs) with a number of SA options.  Simon Hackett’s Rediflow Batteries and Kevin Moriarty’s 1414 degrees are two possibilities, but both would agree that they cannot yet compete with Elon Musk’s Tesla batteries for reliability and cost.  They both gave the green light to Tesla over their own systems at this point in time.

AGL tried to get a similar VPP going in 2017 but found that they did not have a suitable battery technology. So Tesla Power Walls and Tindoo Solar Panels would appear to be a great option for SA at the moment.

With regard to electricity generation costs, Australia is around the same as most western countries and renewables vs fossil fuels are about equal.  Average wholesale costs in Australia, across the states are about 8 cents (Australian) per kWh.  They have been as high as 11 cents and as low as 6.  In US dollar terms this is about 5-8 cents depending on exchange rate.

When we talk about 42 c per kWh this incudes distribution, poles and wires etc. So any talk of highest power prices is all about distribution costs not generation costs.  Queensland generation is state owned and mostly coal fired but is still 8 c per kWh average wholesale cost.

SA must supply its own power so that it can control costs and access. There is no point relying on another state with its own supply problem. Federally we need a sensible bi partisan policy that includes coal, natural gas, oil (petrol, diesel and avgas), biofuels and renewables.  The State Government has done a pretty good job of sorting the Federal Government energy issues.