Guest Post: Dr. Faustus – Abide with Me

The Energy Security Board (ESB) is a member of the alphabet constellation of Australian electricity regulators and managers with their hands on the National Electricity Market (NEM).

The ESB is tasked to report annually to government on the health of the NEM and ‘progress’ against the objectives of the Strategic Energy Plan.  The Strategic Energy Plan grew out of the Finkel Review and was adopted in January 2020 by the COAG council of energy ministers. It sets out a vision for the future of the NEM, “framed through six desired outcomes”:

  • affordable energy and satisfied customers
  • secure gas and electricity system
  • reliable and low emissions energy
  • effective development of open and competitive markets
  • efficient and timely investment in networks
  • strong but agile governance

Serious energy wonks can (and should) read the details of the Outcomes and Objectives laid out in Table 1, that supposedly drive the Commonwealth, State, and Territory energy policies and actions.

The ESB released its Health of the National Electricity Market 2022 Report last Thursday, which provides a score card of how the NEM is tracking against the Strategic Energy Plan.

It’s grim reading.

Summary – Health of the NEM

“The health of the NEM is currently facing significant risks arising from the rapid technological and economic transition in the NEM, which have been highlighted by the recent crisis events. Addressing these risks requires massive physical investment and wide-ranging policy reforms. These investments and reforms must be pursued purposefully, urgently, and with an unrelenting focus on cost discipline to meet the affordability, reliability and emissions reduction challenges that are facing the sector.”

The ESB’s “three overarching themes for the most pressing risks”:

Energy affordability is a major concern for consumers

“There are currently more upward than downward pressures on energy prices in an environment where consumers already face higher costs of living.  

An orderly energy transition remains the best way to improve energy affordability in the long-term.  However, this will take time and the required investments will add to cost-pressures, although they will be lower than the costs of a disorderly transition.”

Energy markets are tightly interconnected

The use of gas-fired generation to support unreliable renewables has jammed the always expensive, now ruinous, domestic gas market firmly into the back end of Australia’s energy economy.

We need urgent and cost-effective investments in transmission, renewable energy and flexible capacity

“Our best strategy to manage the risk of the transition is to build replacement assets quickly, while still maintaining discipline over costs, in advance of thermal generation retirements.”

None of this will come as a surprise to Cats who follow the sinking of Australia’s social economy.

The report then provides a more detailed analysis of the risks attached to the “six desired outcomes”, and a glimpse of the future.  There’s a lot; it’s all pretty horrid, but the key points are:

  • Electricity prices are out of control – average wholesale prices are currently being set by the most expensive fuel, gas, and the regulated environment has no control over the outcomes;
  • The ‘market’ is too complicated for customers to manage their cost exposures;
  • Rooftop solar is now a huge technical problem for providing reliable supply. The government is coming to take control of your home batteries.
  • System integrity has been seriously compromised by the phase-out of synchronous generation – unleashing an expensive and unreliable new market for FCAS (frequency control and support), which will significantly impact consumer prices and supply security;
  • System reliability hits the fan in 2024/25 (closure of Liddell) and accelerates through to 2029/30 as further large coal units are ‘retired’. (FWIW I suspect this is optimistic.  Liddell closes in 2022 – and will impact immediately.)
  • Gas shortfalls and exciting gas prices loom;
  • The broader energy market has failed – domestic gas and coal suppliers with no connection to international markets are (apparently) charging international prices for their products. Alternatively coal and gas generators (mainly Queensland Government-owned) are making huge windfall profits.
  • Flexible capacity renewable suppliers are concentrated and gaming the market. Chief amongst them is Snowy Hydro (prop. A Albanese);
  • Network investment has fallen in a hole and needs to be urgently kickstarted (despite the complete lack of State-level planning, supply chain risks, in the face of inflation, while being efficient, well-priced, and with an unrelenting focus on cost discipline).

So, the Nation’s energy bureaucrats give a surprisingly clear message to the Commonwealth and State governments (or at least, their Energy Ministers), paraphrased as:  ‘We are in dreadful trouble, pressing dreadful trouble; the solution is technological and financial and unimaginably complicated by unrealistic, contradictory, and uncoordinated government policies’.

Luckily government is ahead of the game.  On 12 August 2022, Commonwealth, State and Territory Energy Ministers agreed to establish a new National Energy Transformation Partnership.

The Partnership builds on a commitment by Energy Ministers on 8 June 2022 that:

“…in a new era of cooperation and collaboration, the time is right to work together on a new agreement to set the vision for Australia’s energy sector transformation to net zero.

And, in the finest Sir Humphry tradition, the ESB gives government a gentle stroke:

We are also encouraged that Energy Ministers have agreed to tackle head-on the nexus between energy and climate change policies. The agreement to include an emissions objective in the National Electricity Law (NEL), the National Gas Law (NGL) and the National Energy Retail Law (NERL) is a key enabler of this change. The Partnership will be Australia’s first fully integrated national energy and emissions agreement.

And the Partnership is straight out of the blocks:

As a first action under the Partnership, governments will work together on

reforms to national energy governance, including…

Integrate emissions in the National Energy Objectives

Fast-track amendments to the three objectives set out in the national energy laws – the National Electricity Objective (NEO), the National Energy Retail Objective (NERO) and the National Gas Objective (NGO).

Progress a co-designed First Nations Clean Energy Strategy

Co-design a new First Nations Clean Energy Strategy, to ensure First Nations people in Australia shape and drive the clean energy transformation

In safe hands.

35 thoughts on “Guest Post: Dr. Faustus – Abide with Me”

  1. Guns gold and generators…

    they are, of course, going to ban home ‘carbon powered’ generators – we are all in this (the blackouts) together you know….


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  2. In order for their to be any accountability for the inexcusable idiocy that now has the electrickery grid on the verge of collapse, all interconnectors need to be cut. That way South Australia and Taxmania feel the most immediate effects (as they’ve implemented the most destructive policies), with Victoria and NSW not far behind.

    The NEM should never have been established in the first place and power generating capacity and supply should have remained the responsibility of the states.

    We are “governed” by the most pig headed treasonous staggeringly ignorant hypocritical collectivist imbeciles to have existed in human history. This country, in particular, should simply not be in such a disastrous position in regard to domestic power generation and supply. There are no excuses, none.

    What this insanity does demonstrate beyond any doubt is that politicians, the braindead meeja, academia and the bureaucracy are committed to utterly destroying peoples’ standard of living. They must be held accountable and suitably punished.


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    46
  3. Co-design a new First Nations Clean Energy Strategy, to ensure First Nations people in Australia shape and drive the clean energy transformation

    A culture that hadn’t learned how to boil water is going to drive the energy transformation?

    I’d suggest this is the apogee of tokenism, but there are no doubt some grifters who are going to do very well out of it, which is its real point, I suppose.


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  4. Translation…”we’re from the government and if you think things aren’t f@*d up enough already…
    hold the popcorn!”
    Things aren’t going to get any better either.
    10% of the population vote for the greens.
    80% vote for Liebor or Liebor lite.
    All 3 of those parties have swallowed the unreliables bulldust.
    When the inevitable blackouts and price rises occur none of those voters will look in the mirror and admit that that is what they voted for.


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  5. Progress a co-designed First Nations Clean Energy Strategy

    Co-design a new First Nations Clean Energy Strategy, to ensure First Nations people in Australia shape and drive the clean energy transformation

    No doubt drawing on their centuries of tradition in electricity generation.
    This nation has already benefited immeasurably from First Nations agricultural systems, it would be a crime to not tap into traditional power generation methods.
    For Australia to thrive it only makes sense.


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  6. we will get around to addressing the “six desired outcomes” but the very first thing we should do is print up a range of T-shirts with catchy slogans.

    first nations say watt?


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  7. Everything the left touches turns to shit.

    The only solution is to make politicians criminally liable for damage they cause to the electorate. Treasonous acts should be punished by livestream electrocutions.


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  8. Rabz says:
    October 5, 2022 at 9:15 am

    The NEM should never have been established in the first place and power generating capacity and supply should have remained the responsibility of the states.

    Indeed.
    By its nature electricity generation and distribution is a monopolistic activity – wide open to being gamed and manipulated to transfer wealth from consumers to generators/suppliers.

    The NEM and all its artificial complexity fails to create a competitive (far less efficient) market and obscures responsibility for pricing an essential service.

    So, avoided political risk for governments. And an opportunity for the state-owned generators (hello Queensland Government, hello Snowy Hydro) to feast on excess profits from the distorted market.

    Oddly, you never hear of this.


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  9. ….an opportunity for the state-owned generators (hello Queensland Government, hello Snowy Hydro) to feast on excess profits from the distorted market.

    Speaking of Leftists turning everything to shit, yesterday it was revealed that the Queensland Treasury Corporation had to rescue Queensland’s state owned power companies to the tune of $1.8b last financial year. Stanwell dipped into negative equity during the year and can only continue its operations due to its overdraft at the QTC; CS Energy recorded a net loss of c. $95m, while CleanCo., which manages the governments renewables assets, reported a $300m loss.


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  10. Roger

    Speaking of Leftists turning everything to shit, yesterday it was revealed that the Queensland Treasury Corporation had to rescue Queensland’s state owned power companies to the tune of $1.8b last financial year.

    Was that the result of the state government demanding very high dividends from them?


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  11. Rabz says:
    October 5, 2022 at 9:15 am
    In order for their to be any accountability for the inexcusable idiocy that now has the electrickery grid on the verge of collapse, all interconnectors need to be cut. That way South Australia and Taxmania feel the most immediate effects (as they’ve implemented the most destructive policies), with Victoria and NSW not far behind.

    The NEM should never have been established in the first place and power generating capacity and supply should have remained the responsibility of the states.

    We are “governed” by the most pig headed treasonous staggeringly ignorant hypocritical collectivist imbeciles to have existed in human history. This country, in particular, should simply not be in such a disastrous position in regard to domestic power generation and supply. There are no excuses, none.

    What this insanity does demonstrate beyond any doubt is that politicians, the braindead meeja, academia and the bureaucracy are committed to utterly destroying peoples’ standard of living. They must be held accountable and suitably punished.

    Said with great passion Rabz . . . the contempt I have for this lot of scum is infinite.


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  12. Was that the result of the state government demanding very high dividends from them?

    Covering forward contracts to keep the power flowing and the lights on is the claim.

    I suspect it’s rather more complex than that.


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  13. Anchor What says:
    October 5, 2022 at 10:17 am

    Political failure writ large and – sadly – no hope of change until the lights go out, and then all hell breaks loose.

    Sadly, people gonna die. Many more than from Covid, in the worst case.

    Even this may be not enough to reverse the climate delusion.


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  14. Sadly, people gonna die. Many more than from Covid, in the worst case.

    Even this may be not enough to reverse the climate delusion.

    Correct – particularly as they are already positioning failure as a reason to do MORE not LESS – notice how blackouts are met by calls for more renewables, and failure of the COVAXes are met with calls for more vaxxes?

    It feeds on the ‘cognitive dissonance’ phenomenon – I can either admit I got it all wrong, or I can avoid the mental pain that would cause by burying that thought in my subconscious, and doubling down instead.


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  15. Covering forward contracts to keep the power flowing and the lights on is the claim.

    I suspect it’s rather more complex than that.

    That’s what the 2022 Annual Reports for CS Energy and Stanwell show. In total around $2bn cash lost to swaps and forward hedges and wholesale market charges.

    Absent a NEM, these expenses would not have occurred, because no need. The counterparties to the hedging transactions would have been poorer – but, Queensland would have enjoyed $50/MWh electricity.

    (The accounts also show huge increases in revenue while fuel (primarily coal) costs remained at 2021 levels. Tread warily listening to statements that high international commodity prices are at the bottom of the crisis.)


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  16. Geez guys….

    I spend a lot of time hiking in the Snowy Mountains, and therefore know the ins and outs of Snowy 2.0 like the back of my aching arse. I know the whole route of the tunnels to and from the power station in Lobs Hole / Ravine via Gooandra, and all the infrastructure between the high reservoir at Tantangara and the lower ones at Blowering / Talbingo. I knew long ago that they were going through fractured, asbestos-bearing rock which would necessitate lining the tunnels with concrete. Another lazy few billion $, right there. And much much more!

    So, every chance I get, I ask average citizen what they think of the following: Snowy II is based upon water flowing downhill to produce electricity when passing through bladed turbines (mostly at dawn and dusk), then being pumped back uphill to Tantangara when renewable power is cheap by day to power the pumping. Then the water sits waiting to flow downhill through the turbines again. Over and over again. The question: what happens when millions of electric cars are being charged by day while people are at work etc and there is no cheap renewable power by day?

    Thus far everyone I’ve asked has seen immediately that Snowy 2 is a dud! So why do the people enriching themselves via the dud: pollies, engineers and all other manner of spiv, not see that
    Trick question, eh what?


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  17. ….an opportunity for the state-owned generators (hello Queensland Government, hello Snowy Hydro) to feast on excess profits from the distorted market.

    Red Energy is an electricity retailer competing with other retailers. It is wholly owned by Snowy Hydro which is, in turn, wholly owned by the federal government.

    Level playing field???


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  18. For those harking back to the days when States ran power companies, I’d remind you that:

    1. SECV caused massive price hikes for consumers when it invested in Loy Yang.
    2. NSW Pacific Power ditto with its terrible management in the 1980s.
    3. SEQEB, like Texas, smugly managed power for “least cost” – and proceeded, like Texas, to deliver extensive blackouts.
    moderated

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  19. At no stage does the report address the enormous risks to the Australian public and to industry and our economy of closing coal fired input and introducing further renewables. To mention a few of these risks:
    1.The significant number of hours and even consecutive days when there is both a wind drought and overcast skies across several eastern states. No amount of additional RE infrastructure can address this situation ,up to 70% of supply when it arises. Already this year there have been many such occasions. Batteries developed to date could not cover this gap.
    2.The introduction of renewables leads to a correlating increase in the use of gas. So gas production will have to increase significantly in order to firm the grid. SA exemplifies this issue. The price and availability of gas and the availability appropriate gas fired generation facilities will be crucial issues.
    3.The grid and in particular Victoria rely heavily on the input of hydro from Tasmania via underwater cables and SA feeds of this source via the Victorian interconnector. What happens if and when the next drought in Tasmania occurs or has happened previously the cable has been damaged and there are two to three month outages.
    4 The need for additional electricity to support an increased population as well as increased per head consumption to cater for electrical vehicles seems to have floated past the report writer’s radar.
    5.The implications of natural disasters such as bushfires, storms, dust storms and floods that inevitably happen in our country at irregular but frequent intervals. The public deserves to know that disaster planning for back=up and recovery to the system has been planned for such occasions. Have they?
    6. A cyber event affecting the ability of AEMO to manage what is now a complex computer driven interconnection between states. The possibility of such an event must be considered as the opportunity to bring the interstate connectors down through sabotage is very real.

    I leave you with these to consider for starters.


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  20. What would things been like [in Russia] if during periods of mass arrests people had not simply sat there, paling with terror at every bang on the downstairs door and at every step on the staircase, but understood they had nothing to lose and had boldly set up in the downstairs hall an ambush of half a dozen people?

    Aleksandr Solzhenitsyn


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  21. What we are actually missing is a senior mainstream investigative journalist to expose this situation as the horrendous failure of government policy it actually is. Buy a home generator, make sure your house doesn’t have a smart meter.


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  22. For those harking back to the days when States ran power companies, I’d remind you that:

    SECV – privatisation politics and clumsy public sector financing;
    Elcom – a series of generator failures at Liddell;
    SEQEB – straight up Bjelke Petersen v ETU;

    Not great, but transparent – and also not the Chernobyl of unplanned investment and strategic uncertainty we are currently facing.


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  23. “…a series of generator failures at Liddell”

    Well, duh!
    They hammered the hell out of it as much as they could because it was cheaper to run than Vales Point, Munmorah, Eraring etc – when you don’t have to wash the coal first, you saves a lot of cash. They pretty much ran it until it broke into unusable condition, and only then fixed it – as quickly as possible!


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