Gas Crisis? Energy Crisis? The Real Problem Is Lack Of Long-Term Planning

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If you’ve been watching the news in recent days, you’ll know we have an energy crisis, partly due to a gas crisis, which in turn has triggered a political crisis. The Conversation

That’s a lot of crises to handle at once, so lots of solutions are being put forward. But what do people and businesses actually need? Do they need more gas, or cheaper prices, or more investment certainty, or all or none of the above? How do we cut through to what is really important, rather than side details?

The first thing to note is that what people really care about is their energy costs, not energy prices. This might seem like a pedantic distinction, but if homes and businesses can be helped to waste less energy, then high prices can be offset by lower usage.

The second thing to note is that energy has become very confusing. A host of short- and long-term problems have developed over decades of policy failure, meaning that there is no single solution.

Take gas prices, which were indirectly responsible for South Australia’s blackouts last month. Last week, SA Premier Jay Weatherill responded by unveiling a A$550-million plan including a new state-owned gas power station, while Prime Minister Malcolm Turnbull claimed to have secured a promise of secure domestic supply from gas producers.

Short-term thinking

It is crucial to keep the ultimate goals in focus, or else our short-term solutions could exacerbate long-term problems.

For electricity, we want to avoid blackouts and limit prices and overall costs. We need to do this in ways that allow us to meet our climate constraints, so we need solutions with zero or very low greenhouse emissions.

For gas, we need to ensure enough supply for local demand, at reasonable prices, and give large consumers the opportunity to negotiate contracts over reasonable time frames.

This means we need to allocate more of our gas to local consumers, because increasing overall gas production would just add to our long-term climate problems.

Peak gas and electricity prices are entangled. In our electricity markets, the most expensive generator needed to maintain supply in a given period sets the price for all the generators. So if an expensive gas generator sets a high price, all of the coal and renewable energy generators make windfall profits – at the consumer’s expense.

So either we need to ensure gas generators don’t set the price, or that they charge a reasonable price for the power they generate.

Quick fixes

Demand management and energy storage are short-term fixes for high peak prices. Paying some electricity or gas consumers to use less at peak times, commonly called “demand response”, frees up electricity or gas, so prices don’t increase as much.

Unfortunately, policymakers have failed to introduce effective mechanisms to encourage demand response, despite the recommendations of numerous policy reviews over the past two decades. This is a serious policy failure our politicians have not addressed. But it could be fixed quickly, with enough political will.

Energy storage, particularly batteries and gas storage, can be introduced quickly (within 100 days, if Tesla’s Elon Musk is to be believed). Storage “absorbs” excess energy at times of low demand, and releases it at times of shortage. This reduces the peak price by reducing dependence on high-priced generators or gas suppliers, as well as reducing the scope for other suppliers to exploit the shortage to raise prices.

The same thinking is behind Turnbull’s larger proposal to add new “pumped hydro” capacity to the Snowy Hydro scheme, although this would take years rather than weeks.

Thus South Australia’s plan, which features battery storage and changes to the rules for feeding power into the grid, addresses short-term problems. Turnbull’s pumped hydro solution is longer-term, although his handshake deal with gas suppliers may help in the short term.

The long view

When we consider the long term, we must recognise that we need to slash our carbon emissions. So coal is out, as is any overall expansion of natural gas production.

Luckily, we have other affordable long-term solutions. The International Energy Agency, as well as Australian analysts such as ClimateWorks and Beyond Zero Emissions, see energy efficiency improvement as the number-one strategy – and in many cases, it actually saves us money and helps to offset the impact of higher energy prices. Decades of cheap gas and electricity mean that Australian industry, business and households have enormous potential to improve energy efficiency, which would save on cost.

We can also switch from fossil gas to biogas, solar thermal and high-efficiency renewable electricity technologies such as heat pumps, micro-filtration, electrolysis and other options.

Renewable energy (not just electricity) can supply the rest of our needs. Much to the surprise of many policymakers, it is now cheaper than traditional options and involves much less investment risk. Costs are continuing to fall.

But we need to supplement renewable energy with energy storage and smart demand management to ensure reliable supply. That’s where options such as pumped hydro storage, batteries and heat-storage options such as molten salt come in.

This is why the crisis is more political than practical. The solutions are on offer. It will become much more straightforward if politicians free themselves from being trapped in the past and wanting to prop up powerful incumbent industries.

This article was originally published on The Conversation.

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Comments

    The Real Problem is greed and lack of political willpower by all sides of politics. Because political point scoring is a better way of getting elected and being elected is much more important than governing...

      In Australia the problem is our government is being run by the Fossil Fuels industry. The amount of money and power they wield is huge. When any politician proposes anything that may effect their profits they are destroyed. The Greens are the only option if you want change in this area.

        Agree @ lee978, except if the greens ever formed government they would become just like the liberals/labor...

          No point telling that to Lee here. That user still rejects the fact the Greens are grossly uninformed and are an even worse option to the majors.

          The last few weeks alone prove this with their leader suggesting private health insurance is not worth the premiums and people should ditch said insurance.

            Your so Wise aren't you :-)

              Yes, I am. And I take pride in not deluding myself in thinking the Greens are an option when in reality they have no idea and are waking from soap box to soap box to make noice while contributing less than our majors.

              Discussion over; I'm not entertaining your fantasy.

            I do think some of the green's policies are way out there but most are much closer to my values than the other players. In the case of private health insurance, I actually agree with them. I would rather pay more to medicare than prop up this very strange private health structure that requires profit as its driving motive and subsidies by the government. Kinda like our energy privatisation I guess.

          If the Greens took a lot of money from the Fossil Fuels industry I agree. That's why people donate money after all isn't it, because they get to influence policy. It's a modern form of Bribery & Corruption. Right now they are not. That's all I was suggesting. Ideally we need to kick all this money out of politics. Not only is it corrupting democracy but the politicians spend half their time working to get more $'s for their party. It's a loose, loose situation for us all.

    Lack of Long Term planning is a problem for all governments as they only really care about four years. Take the NBN as an example

      This ^^^ 4 years.
      That's how long a term runs. No government cares much about a legacy any more. It's all about short term vote winning. And hell you don't even need to do it in 4 years, just promise you will do it when re elected.

        It's actually much worse than that. Governments actively oppose long term planning. Plans prevent them from making nation building, pork barrelling, announcements at the next election. The public service is not allowed to plan in many areas.
        Tunbull's announcement of the Snowy expansion illustrates this perfectly. This sort of project should have been in an energy plan 20 years ago. But then Turnbull couldn't have flown there by helicopter for a press event. Politicians have no interest in announcing that something is going to happen in 20 years time.

    Pump hydro has a significant advantage over batteries in that it has much longer life. What's the expected life of a Tesla battery? The Snowy Hydro has already been going for about 50 years.

      Batteries have the advantage of being able to supply power immediately so there will inevitably be a role for both technologies.

        Pumped hydro is pretty quick too, the Dinorwig dam in North Wales has a response time of 12 seconds with 1320 MegaWatts.

      Member that time when there was a huge drought and you couldn't even use it for power.

        Pumped hydro is not the same as renewable hydro. Pumped hydro recycles a small amount of water and is an energy storage technology. It's not significantly afffected by drought. Renewable hydro uses rain and snow falls to generate electricity. The Snowy does both but predominantly renewable. I'm not clear what Turnbulls plan for the Snowy is. Possible because he hasn't shown anyone the envelope yet.

    This must be the only resource nation on earth where the government doesn't mandate some sort of reserve for the domestic market. No, instead let the free market do as it will. Embarassing. Pathetic. Sad.

      Soon Australia will be the biggest exporter of gas in the world yet Australia will not be making much money from it (the companies involved use a variety of legal/immoral techniques to offshore profits) nor will the LNP demand that they provide gas to Australians at some "low" rate (it's an idealogical stance about free trade).

      AGL recently tried to purchase Australian gas from Japan because the price is cheaper there than it here. Yes, the producers are selling at a loss to overseas buyers but not to us!

      All I can do is to wait until solar battery systems get cheap enough for me to get one and then dump my gas stove and heater.

        For real efficiency go the whole hog. DC fridge and stove. Some tv's though smaller ones have DC supplied version meant for use in caravans. Save pesky inverter losses.

        Also investigate Nickel Iron (NiFe) batteries or the Redflow Zinc Bromide battery. Whilst neither are cheap options, they have much longer service lives than the 7 odd years for lion

    Let's not forget how privatisation plays a key role in all this. How it changes focus from providing energy to making profits.

    No, privatisation is magic and produces the best of all possible economies. Consumers just need to understand that they need to make some sacrifices to support our economy.

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