Chris Stoltz: South Australia’s power crisis highlights need for urgent action to fix national electricity system

Chris Stoltz

THE present state of South Australia’s electricity market should be a source of national shame.

Overnight — more than 90,000 homes and businesses were without power in soaring heat while residents face possible further blackouts today as the temperatures remain high.

While the political discussion around who and what’s to blame continues to play out, this latest ‘blackout’ demands urgent action.

Under the predominately market-driven reform of the last two decades, overlaid with more recent regulations, electricity has become increasingly expensive, unreliable and inflexible.

We also have an emissions reduction trajectory that is one of the worst in the world.

But first we must face facts.

Australia has one of the oldest and least efficient power generation fleets in the OECD. Seventy per cent of our thermal generation should be replaced in the next decade.

We need a properly engineered system which will enable businesses and families a guaranteed electricity supply that is affordable and reliable.

As with any infrastructure project, we must account for all costs and benefits: financial, technical, social and environmental.

To do this will not be cheap. To not act — a disaster. The last 24 hours in South Australia is testament again to this.

Even if we replace like-with-like, new ultra-supercritical coal plants — such as suggested by Prime Minister Turnbull, will be a huge investment totalling many billions of dollars.

Until a few years ago, the cheapest way to achieve energy security would have been a mix of new gas and coal plants.

However, since then, gas prices have almost tripled, making it even more challenging to develop a cost-effective transition plan that accounts for job losses and new employment opportunities.

But we need a detailed plan to get there and we need it quickly.

Coal is expensive, but renewables are intermittent. It’s not sufficient that the power supply is inexpensive if it is unreliable.

So how do we square the circle between cheap renewables and predictable coal?

Engineers Australia understands there is no easy answer. If there were a perfect answer today, it would almost certainly be wrong tomorrow.

For example, if a gas export contract was cancelled, local gas prices might fall and gas generation could expand.

If battery prices halve again, as they have over the past two years, then solar and batteries will be far cheaper than even written-off gas plants.

Also, there are many new demand-management and storage technologies available or in development.

Regardless, we can only proceed and progress by accepting our current reality.

The first step is to recognise that modernising the grid will take 15 to 20 years and the technology mix will vary over time.

Any plan needs to incorporate the latest technology as it evolves, as well as management methods, technical standards and trading rules.

It is critical that a regular review structure is in place so that people who make investments under one scenario aren’t stranded when policies fail or rules change.

It is also vital that the planning body include input from consumers and engineers, as well as the environmental, legal and financial sectors.

We cannot afford to continue on the present uncharted path.

If we don’t change course rapidly, it really is lights out, as South Australians understand only too well.

This article first appeared in the Adelaide Advertiser