Energy Transition, lessons from South Australia’s energy crisis

Over a year ago, I compiled a list of lessons from South Australia’s renewable energy leadership. At the time, I cast my mind back over the past decade and highlighted the ways that rapid change had caught out the policy makers – suggesting that other jurisdictions could be smarter than we were.

So much has happened in the past year that we are due for an update. The lessons we should learn, depend on the warnings one thinks we should have heeded. So I need firstly to summarise where South Australia finds itself:

We’ve gone from an energy transition to an energy crisis. The goals for an energy system – secure supply, affordability and climate change commitments are not being met adequately. No one agrees on causes or solutions. Governments have commissioned the Finkel Review which could be the most important piece of work this year but a centrepiece to the review, a clean energy target has not met with bi-partisan support.

At the heart of the problem has been governments’ trust in market solutions without a sharp eye on the shortfalls in market performance and without adequate leadership on the long term outcome the market should be tasked to achieve. ‘Lack of planning’ has been cited by numerous commentators as a failing but the fact is, markets don’t plan. My suggestions a year ago include a number where the real failing is seeing renewable energy as an add-on to the market rather than significant changes to be integrated as part of becoming the market itself.

Lesson 1: Supporting an energy transition needs to be a full time, iterative process.
With so much uncontrollable and rapid change, the outcomes of a good process – better technical design (cheaper, cleaner and more robust) and strong support from customers, governments and energy companies – should be enough to justify that the energy transition is funded by the energy system itself. But Government, the market operator or the utilities cannot own the process and rather need to be co-opted into something bigger than themselves. (I’ve written about such a process here and here.)

South Australia, with almost 50% renewable energy, has become the whipping boy for the energy crisis and the most vulnerable state in terms of price shocks, blackouts and pressure to slow or stop the energy transition.

david pope.pngLesson 2: Politicians won’t waste a good crisis and you need to be prepared to make the most of it too…
…while also countering the rubbish. The climate lobby in Australia was sent into overdrive to counter the anti-renewable energy and clean coal push from the Federal politicians. This fantastic David Pope cartoon captures the benefit of having something, ready to be dusted off in your bottom drawer.

As a result, politicians have created energy policy on the run – in the space of a few short months and with social media abuzz. As an example, Elon Musk offered 100MWh of battery storage, “in 100 days or its free” to South Australia via tweet on a Friday. He spoke to the Premier on Saturday and the Prime Minister on Sunday while Adelaide enjoyed a long weekend. By Tuesday, less than a month after promising to intervene in the market, a $550m Energy Plan was launched by the State Government. The Federal Government upped the ante on Wednesday with a $2bn pumped hydro announcement and on the same day the State Premier and the Federal Minister for Energy openly criticised each other in front of the cameras at a battery project launch. By this stage, after most of the state has been subjected to the 4 month debate about what is wrong with our energy system and a few oversimplified solutions, there is little criticism about the expense and the decision making process. Voters are relieved that something substantial is being done.

Lesson 3: Unprecendented resourcing and quick fixes follow crisis.
It may not be your bottom drawer they’ve turned to (see Lesson 2). Keeping longer term outcomes in the public mind is challenging. The public consent our state government has achieved is only short term and crisis driven. Our energy transition demands that we build a stronger consensus on long term action. Time will tell in South Australia – will our politicians keep energy in mind and grapple effectively with longer term issues such as growing inequality in energy outcomes? And what does it take for the solutions to be suitable for a new paradigm, such as significant decentralised generation with localised optimisation and control?

It’s worth noting that two announcements from the state energy plan might not see the light of day in their original form. An energy security target has been deemed simply a subsidy for gas (and there is an ongoing debate about inertia). A new state owned peaking generator has been delivered as a series of engines that might be swapped for a gas turbine later on.

Each event we’ve experienced in the past 6 months has highlighted opportunities to improve the way we operate from the statewide blackout to the involuntary load shedding event.

Some improvements are being made quietly, behind the scenes and away from the blame game. To some extent the hostility of the debate hampers the ability of agencies to get on and make changes, preferring to defend the modus operandi because making changes could be seen as accepting the blame. Some improvements are only ideas at this stage, needing still to run the gamut of consultation, debate and knee-jerk policy making. The process for these latter ideas is fraught (and would benefit from a commitment to the process suggested in Lesson 1).

Lesson 1.b: Getting the right folk to work together is hard, there is plenty of culture change involved too.
My thoughts on this go back to a book I devoured while on my Churchill travels, where Vineet Nayar characterises 10% of an organisation as transformers – these are the people sprinkled throughout the energy regime that need to be empowered to understand and lead our energy transition.

It’s hard to know how much of what has been experienced can be generalised as lessons – but I’ve had a go.

We have seen much of the energy policy debate occur on the East coast where utilities and energy institutions have their head offices.

Lesson 4: National electricity market means the conversations happen at a national scale. It won’t happen in your jurisdiction unless you build a local conversation that can’t be ignored.
Danny Price, the architect of the State Energy Plan has even suggested the system needs to go back to state based control. I would argue that we will ultimately need to consider much more local control and optimisation.

We have seen volatile electricity market prices, potential gaming by incumbents on the market and a business sector openly weeping about the difficulty contracting on the market at a reasonable price. Mark Wakeham wrote an excellent piece after the Hazelwood coal fired power station closed in Victoria. One of his lessons, ‘owners lie about their closure dates’.

Lesson 5: Utilities will work hard to maximise their positioning in the market.

We have seen storage investments everywhere. Every utility scale investment is now required to include storage. Elon Musk will deliver his battery and you can bet that the regulators are scrambling to work out how to control it and reward its energy security value – because if he can put it on the line in 100 days, they need to respond equally quickly by summertime.

Lesson 6: The gap between planning and market driven decisions is messy.
Let’s not forget that the electricity market is creation of Governments and changing it to accommodate batteries highlights that policy makers need to understand the limitations of the old paradigm and the possibilities of the new.

We have seen many proposed investments, large and small. AEMO keep track of the large projects which are larger than our actual consumption by a factor of 2 or more. At the customer end, energy startups like LO3 and Tempus Energy have come to South Australia to participate in projects. Homegrown startups are emerging everywhere (the list is long enough that it needs to be the subject of another blog)

Lesson 7: The energy sector, new and old, will come to investigate the opportunities in your jurisdiction, when your ‘crisis’ is advertising itself loudly enough.
I think there is an opportunity here to stimulate the classic clustering model. Businesses compete, collaborate and innovate and over a decade or so, SA has a world class energy technology sector.

And finally, we have seen the announcement of a solar thermal power station at Port Augusta. This has been a community driven ask for at least 5 years. The numbers didn’t look like they would stack up, but the numbers couldn’t put a value on the jobs that could flow from becoming involved in solar thermal technology. The State Government and final project developer appear to have worked hard to strike a deal that will be commercially acceptable.

Lesson 8: Community advocacy is long hard work but it gets there in the end.

At this point I need to conclude that there is probably another lessons blog needed in about 12 months time.

There is no doubt a rocky road of continuing uncertainty for everyone who buys electricity and invests in assets, including small scale solar panels and batteries.

We still live with the tension between the old system and the new. The end game of 100% renewable energy isn’t integrated into decision maker’s thinking yet. Transport and heat energy is barely on their radar.

Changes are happening faster than anyone is prepared to predict. Finkel and the Electricity Networks Association happily discuss changes taking until 2050 to occur.

Despite my efforts, we have very little discussion of community energy in South Australia. I think we are too complacent because our transition to renewables is well underway and we are not angry enough.

I think we’re missing the broader narrative too. Sooner than we think, we will have an abundance of cheap renewable energy and we need to think about future economic decisions to make the most of our relative abundance.

How is the energy transition progressing in your home state?

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About Heather

I am an energy and climate change specialist with a background in industrial energy efficiency and climate change policy.
This entry was posted in churchill, energy transition, Solar Energy and tagged , , . Bookmark the permalink.

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