800px-IMG_4001_Windy_Hill_Wind_Farm.JPGEconomy Energy & Environment 

Lessons From Australia’s Energy Crisis

By Craig Moran  

With Australia’s Hazelwood Power Station closing last week, an energy debate currently roiling the country has been kicked into overdrive. Environmentalists are ecstatic that Hazelwood, a thermal coal plant built in the 1960s, was shuttered: The outdated power station produces more emissions than any other coal plant in Australia. But at the same time, the loss of Hazelwood opens a significant gap in the state of Victoria’s energy capacity and will potentially force it to import electricity from other parts of the country.

The concerns over an energy shortfall are so acute, in fact, that one of Australia’s leading business groups launched a last-minute campaign to keep the plant open, and aluminum analysts are expressing concerns about the industry’s future in the country. The campaign points to a hotly contested question: With energy prices soaring and industries damaged by unstable access to power, how can Australia build a reliable grid while reducing emissions?

Authorities in Victoria are looking to neighboring South Australia, which has adopted renewable replacements on a large scale, but this example also demonstrates the dangers of a hasty switch. South Australia’s energy grid gets more than half its supply from wind and solar power, a ratio that comes with a problem: 125 days of electricity shortages and summer blackouts are expected over the next two years, according to new data from the Australian Energy Market Operator (AEMO). The grid is also highly susceptible to extreme weather. AEMO determined South Australia’s dependence on renewable energy—specifically wind turbines—played a role in a major statewide blackout last September, when falling trees took down power lines and set off a chain reaction of malfunctions, ultimately cutting off an interconnector.

During the September blackout, the frequency fluctuations caused by the storm activated a trip mechanism in the wind farms and 456 megawatts of power generation were lost. Traditional fuel generators could not provide the necessary backup, particularly because some of the state’s biggest gas generators weren’t operating at the time. With much of the state knocked offline, the economic damage was severe (estimates range as high as $280 million). But even when the grid is functional, there is great cost to South Australia’s energy infrastructure; South Australia has the highest energy prices in the country and the average household pays over $1,500 (2,000 Australian Dollars) a year for power.

AEMO’s findings have fed into a debate between those who want to phase out fossil fuels and others who argue that coal and gas can play a part in the country’s energy mix while still meeting carbon reduction commitments. The government falls into the latter camp. Citing blackouts like the one in September—just one of several in Australia in the last year—as well as rising energy prices, Prime Minister Malcolm Turnbull announced new investment in clean coal: “As the world’s largest coal exporter, we have a vested interest in showing that we can provide both lower emissions and reliable baseload power with state-of-the-art clean-coal-fired technology.” He also criticized the governments of Queensland, South Australia, and Victoria for weakening Australia’s energy resilience by rushing headlong toward renewable sources without ensuring adequate backup from traditional fossil fuels.

Many of the markets to which Australia exports its coal are demonstrating how to simultaneously pursue coal energy and emissions reductions. Japan, Australia’s largest market for coal, shut down nearly all of its reactors following the Fukushima nuclear disaster, fearing another catastrophe. But this left a major energy gap. Before Fukushima, 25 percent of Japan’s energy needs were met by nuclear power, but now that figure stands at only 1 percent. To make up the difference, Tokyo began importing natural gas, but this caused electricity prices to rise, negatively affecting Japan’s trade balance. At the beginning of this year, the Japanese government announced the construction of 45 new coal-fired power stations to diversify supply and bring down costs. The plants come equipped with high-energy, low-emissions technology (HELE) that can cut carbon dioxide emissions by up to 40 percent compared to traditional plants.

India is also a major consumer and a key market for Australia. To mitigate carbon emissions, the Indian government announced a plan this March to convert coal power plants over 25 years old to so-called “supercritical plants.” The generators in these plants, like the HELE plants in Japan, burn coal at a much higher temperature than conventional plants, generating more electricity but using less coal. Energy Minister Piyush Goyal argued that supercritical generators could reduce emissions more effectively than installing solar panels because some 11 gigawatts come from generators older than 25 years (out of India’s total installed coal capacity of 189 gigawatts).

Similar initiatives are also underway in China. Coverage of the Chinese energy sector has focused on either industrial pollution or expanding wind and solar capacity, but the Chinese economy is still heavily reliant on coal, and initiatives to boost efficiency have been encouraged by the central government’s concern with pollution levels.

Asia’s three largest economies’ advances in boosting efficiency and leveraging emissions reduction technologies could offer the Turnbull government a roadmap for how to sell its energy plans to the public. Like its regional partners, Australia can make its own coal facilities more efficient by adopting carbon capture and storage (CCS) or carbon capture and utilization (CCU) as new breakthroughs make these technologies more economically viable. After all, both the Australian industry and individual consumers see a reliable, affordable energy supply as a matter of economic necessity. Hazelwood’s closure, for one, will not just impact those working at the power station. It could also shutter major regional employers like Alcoa, Portland’s aluminum smelter, taking 2,000 jobs with it. To understand why Turnbull is so committed to integrating clean coal into the national power mix, look no further than developments like these; the combination of rising household energy prices and lost jobs makes for a poisonous political cocktail.



Craig Moran is an independent geopolitical consultant. He has experience in energy and natural resources planning, assessing and advising on political and security risks, and handling constitutional and legislative issues across multiple territories.

[Photo courtesy of Wikimedia Commons]

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