Government Policies

First of all, a couple of new questions. What about geothermal, wave energy, hydrogen etc and the regular one, is coal cheaper than wind?

Geothermal has not proved effective in SA, despite many attempts and hundreds of millions of dollars invested. It works well overseas where recent volcanics provide a near surface heat source, something we don’t have in SA.  Similarly wave generators, offshore wind, tidal generators are not near term possibilities in SA to any significant degree.

Hydrogen production from using excess renewable energy to electrolyse water is probably a good plan. The hydrogen can be added to our natural gas pipelines, used to make ammonia or fertiliser or in hydrogen powered vehicles.  I am not sure about how the economics stack up, as it is cheaper to produce hydrogen from methane.  I am also a little concerned about leakage of significant hydrogen.  It is the smallest molecule (H2), easily escapes most containers and if it leaks in a large quantity it reaches and destroys the ozone layer.

Subsidies

I am no expert here but will do some research and see if I can come up with something more definitive.  Or someone else might help?  For Renewables, the RET scheme started in 2000 and is expected to continue to 2030.  It is a highly complex trading scheme, that starts as a (10-20%) Federal Government payment to anyone putting in a renewable system.  For private enterprise it goes to the company installing your system.  State governments also pay a feedin tariff which is essentially buying the power off of you at somewhere around the going wholesale price (9c / kWh).

Much is made of subsidies to the fossil fuel industries.  A large component has been the tax relief for farmers and miners not paying the fuel excise.  This is seen as a road tax, and therefore anyone not using the roads should not be paying it (eg farm and mine vehicles).  Other subsidies include geological studies and direct payments (eg state government supporting gas drilling).

I can’t imagine a nuclear industry being viable without serious government support.  Our first Nuclear power plant would probably cost $20-30 Billion!  In order to get the same power output and safety, modular systems would have to cost more!

Coal Fired Power Price

And the coal price question? The problem is, that it is really two questions.  Fossil fuel supporters will answer the question, is legacy coal cheaper than current wind?  Electricity purchased from old coal fired power stations is about 4c / kWh while that from wind is somewhere between 5-7c.  So the answer to that question is yes, coal is cheaper.

In SA we have no legacy coal power, so the question becomes is energy from a new coal fired power station cheaper than wind? As we have not built any new coal fired power stations recently this has to be an estimate, but the common view is that it will be around 7-10c.  So the answer to that question is no.

There are always more sides to the question, and wind will also require backup, as will legacy coal.  SA has had 100% reliability over the summer period, with no major emergency issues.  Legacy coal has not been so lucky with a number of sudden shutdowns affecting Victoria and NSW.  SA has been selling electricity to Victoria to cover their coal problems and the big battery has been quite useful on that score.

Keeping an old coal power station past its intended use by date will not help, as shown by the WA experience, and so as old coal shuts down Vic and NSW will have serious issues to contend with. Both seem to be opting for renewables and storage as the answer.

Natural gas

The Australian National Energy Emissions audit published graphs in 2017 that clearly showed the rise in electricity prices in SA followed the gas price rise chart nearly perfectly for the past twenty years and made the statement that energy prices are substantially controlled by gas prices. Wholesale electricity (spot) prices have gone from about 4c per kWh up to a high of about 16c and settled at around 9c in 2017.  Gas prices have jumped from about $3 / GJ to about $9.

While the price of renewables is relatively cheap, filling in the gaps in supply can be very expensive, and this has largely fallen back to the gas price.

We have large reserves of gas and an even greater resource. Reserves have been proven by drilling, but are often stranded.  For offshore gas for example a price of $3 is too low for a company to profit from it.  A resource is what we think might be there, but until we drill it is uncertain.  For entirely new areas the chance of finding profitable gas is about ten percent, so it is quite an expensive and economically risky business and always, only an estimate.

To make any money, companies need to sell the gas as quickly as they can after drilling, so they are unlikely to drill wells in areas or at times where there is no reasonable probability of a market. So, while there is no shortage of gas there is often a shortage of a guaranteed market.  For a company to build a gas fired power station today, they need a definite market for a 40- 50 year period and then they can drill wells and build or maintain pipelines.

There have been a few major changes to the gas business in recent years. Drilling is now substantially more expensive due partly to regulatory issues, land access, lack of easy targets, more difficult production etc.  A number of offshore and onshore LNG plants have also been built, allowing stranded gas to be sold offshore at world parity prices.  And new sources of gas have been identified and the technology improved to allow these to be accessed.

The US has benefited mostly from the newly identified shale gas and CSG reserves. As they had no LNG plants or overseas sales possibility, gas prices in the US have remained at a historic $3 / GJ giving the US plenty of cheap energy, with an added benefit of reducing their GHG output.  There has been significant public outcry, mostly due to the industrialisation of rural areas and water disposal issues.  Much has been made of other environmental issues, but none have been shown to be substantial.

SA Labor Government

If gas and renewables are our best (only?) options and gas price is a major culprit in costs, what do our political parties propose to remedy the issues?

Labor have been a major supporter of renewables, although the subsidies to renewables all come from the Federal Government, not from the state. Election policies include a home based storage scheme and they have pushed renewables to an even greater share, aiming for 75% of electricity supply (not total energy) in the next ten years and 25% storage.  100% renewable would require 100% storage in 100% renewable containers.

Producing renewable energy and selling it within the state and via interconnectors would appear a no brainer, and it is probably now supported by all the parties (except possibly the conservatives). Selling renewables at a time after they are produced, requires storage.  So the amount produced and used in SA compared to the amount imported and exported will always be a problematic calculation.

The SA government is the most effective supporter of gas drilling and production in the country, followed closely by Qld. There are no blanket restrictions, land access is encouraged and exploration drilling supported by cash subsidies, so long as the gas stays in SA.  Our government department receives accolades world-wide for professionalism and industry support and offers very strong regulatory control.

Land access is encouraged by offering a ten percent share of royalties to the landowner. Drilling is encouraged by the government paying a share of drilling costs for high risk exploratory drilling.  This is adequately demonstrated by the recent successful drilling of Haselgrove 3 near Penola, with government support.  It has discovered a major new gas field which will go a long way to improving the job situation in the SE.

Regulatory controls are strong, with clear and transparent drilling and stimulation plans to be published and approved each time. This requires all planned fraccing fluid additives for example, to be listed and made public.

The current State Government supports the potential for drilling for gas (or oil) in the Bight, although regulatory control lies with the Federal Government.

No other state government comes close to this amount of support for the gas industry.

Liberal

I have tried to summarise the Liberal’s policy below and will attempt to define the differences. It is always more difficult for an incoming party to define its plans, than for understanding plans already in place.  Their stated policy discusses wholesale electricity prices in $/mWh.   For electricity prices in $/mWh divide by ten and call it c / kWh (eg $1 / mWh equals 10c /kWh).  Victoria is now up and SA down from these year old figures and all are within the 8-10 c range (OK 7.7c is the cheapest).

The plan is for unspecified $50 m for storage, unspecified 276 MW of energy for emergencies, create a $200 m interconnector fund, a demand response fund (smart meters with higher price in emergencies?), support for a national energy strategy and other management issues, scrap the state owned diesel / gas generating plant, a market based solution for energy (?), support for unconventional gas in the Cooper Basin.

The renewable energy policies appear to be very similar to the current Labor government, with perhaps more support for management and national strategy issues and less support for going it alone. While Labor wants to hook the state generator up to a permanent natural gas link, Liberal will scrap the plant after the 2019 summer.  The plant currently runs on diesel but it has not been required this summer for SA.  It was switched on to support Victoria across the interconnector.  I am not sure if it is a good idea or not, but if it is already in place, wouldn’t we just keep it until it is obviously unnecessary?

The interconnector idea has been proposed for many years and is probably a good idea, but shouldn’t we ask the Federal Government to pay for it in order to allow us to access the Snowy Mountains pumped hydro? Your decision is whether you see $200 -500 million better spent on an interconnector or on local storage.

The gas policy would appear to be similar to Labor, but no word on whether they will keep the 10% royalty for land owners or the investment in gas drilling projects. Steven Marshall has previously stated that he would have a moratorium on fraccing in the SE but this does not appear in their policy.  I am not sure if this includes conventional drilling or just for shale gas projects.  The current drilling is for conventional gas only and there is no CSG in the SE.  Today’s Advertiser suggest the moratorium is still part of Liberal Policy.

SA Best

Their stated policy is to have an Emissions Intensity Scheme, move to a cleaner and more affordable energy future (?), research new technologies, a domestic use allocation for gas and to stop the import of substandard renewable energy products (?).

I am not sure what some of them mean, and I think that Nick is probably unsure himself. Wait and see and complain about what others are doing is probably not a great energy policy.  Domestic gas allocation is problematic.  Price and contracts are the issue, not the resource itself.  Imagine if we had a domestic wine allocation with everyone in the state receiving a bottle of Grange before it can be exported!

Nick has at times bagged wind farms and has been against drilling in the Bight but has offered no positive way to achieve his stated aims. No real idea on which government initiatives he would support.  I understand he supports a moratorium on fraccing in the SE.

Breaking News – Nick has an Energy policy.  He will not support whatever Party governs if they can’t reduce energy prices by 20%.  Derr!

His other policy sounds like a good idea and is apparently also supported by the Greens.  Create a not for profit Government Energy Retailer.  Not sure what it would do for competition and the other retailers though!!

Conservatives

Technology agnostic but support nuclear, will let market forces decide and are subsidy averse and they will exit the Paris agreement (only Party to do so).

I am not sure what this means in practice and whether it includes mining subsidies and assistance. If market forces work then the likely outcome is that we will have plenty of renewables and storage and no nuclear.  Market forces will probably not alleviate high spot gas prices.  on support for gas drilling or fraccing.

Greens

100% renewable by 2025 (assuming this means electricity generation and storage only), support new projects including battery storage (will these be 100% renewable?), oppose new coal or unconventional gas, ban underground gasification, support the right for landowners and traditional owners to say no to coal and gas projects, protect farmland from gas extraction, investigate health and climate aspects of unconventional gas (but wouldn’t this already be banned?), support for a variety of solar enabling projects, support interconnector for electricity export, end fossil fuel subsidies and upgrade the Eyre Peninsula transmission network.

While these appear to be enviable objectives, I am not convinced of the practicality. I am pretty sure they are also anti nuclear and anti offshore drilling.  I do not know if they are against fraccing conventional gas wells but they have made the statement “In South Australia, companies want to frack for gas in South East farmland…”.  I know of no company that has expressed a desire to frac or submitted a proposal to frac in the southeast farmland.  Not to say it won’t happen in the future.  If fraccing and offshore drilling  are banned in SA, the industry will be decimated.  Most of our Cooper basin gas wells have been fracced over the last forty years.

We would need to import more oil and gas, with subsequently more shipping running on fuel oil. More oil is spilled into our oceans from shipping than from drilling!

Dignity

Dignity Party do not appear to have advertised energy policies, but a speech by Kelly Vincent in 2016 suggested they would ban fraccing. As most Cooper Basin gas is fracced this would possibly spell the end for the SA gas industry and weekend barbecues.  It would have to be replaced by diesel or coal.

I am not sure why they have this notion, as surely less industry in the state means less money for disability issues.

And

Can we achieve a bipartisan energy policy?  Probably not, it is politics after all.  The best solution for all of us is if everyone compromised and chose a workable, effective policy across all states.

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