Continuity of electricity supply is no trivial matter. Back in April-May 1996 at our place we had rain on 14 consecutive days. Over the period we had 833 mm or over 33 inches in the old language. A renewable energy electricity supply system needs to survive such a challenge, as do home off-gridders. Imagine not just the lights out, but rotting food in the refrigerator, no pumping of petrol at the bowser, the refrigerators and lights failing at the supermarket, no water coming out the tap. For the whole Brisbane area.

Now with interconnected grids through the National Electricity Market (NEM) established in 1998 South Australia withstood a lesser challenge recently albeit with a huge spike in electricity spot prices, arguably prompting a showdown on where we are going with renewable energy and fossil fuels in this country.

The man in the centre, Minister for the Environment and Energy, Josh Frydenberg, wants more gas, to meet peak demand and to supply baseload power, and wants an end to bans on coal seam gas development in NSW and Victoria.

If Frydenberg thinks we need gas baseload in general to replace coal, he’s wrong. The vanishing planet’s emissions budget means we have to go directly from coal to renewables.

The fossil fuel proponents, by definition climate deniers, really need SA’s experiment with wind and solar to fail. Objectively, as Giles Parkinson points out, it hasn’t. This graph shows how spikes (per quarter, spikes above $5,000/MWh) in prices have faded away in recent years:

Take out a couple of recent spikes in Queensland and they’ve faded right away. Inconveniently for fossil fuel proponents, this coincides with the advent of renewables. Parkinson says there is now about 5 GW of solar on rooftops, which has smoothed daytime peaks and pushed them later in the day.

In SA he says 7% of their electricity comes from solar and a whopping 37.7% from wind. Here is the growth in wind:

Queensland which now has the largest spikes has the lowest penetration of large-scale renewables.

Richard Dennis in an opinion piece published in the AFR said the anti-renewable complainers about the SA price hike were either hypocritical or ill-informed. That included quite a few LNP politicians.

Frydenberg seems to have the SA story roughly right, compared with what really happened, telling the Clean Energy Summit dinner that while short-term prices had jumped three times above the $5000 per megawatt-hour mark this year they did so more than 50 times in the first quarter of 2008.

That article also notes that there is mutual respect and communication between Frydenberg and Mark Butler, Labor’s climate change and energy spokesman, so we hope for better days.

It’s time to think of a way forward.

Frydenberg has called a meeting of the relevant state ministers for August 19.

One of the problems is that the focus in setting up the National Electricity Market in 1998, was on privatisation, competition, fragmentation and profit in an area which was perhaps a natural monopoly, benefitting by integration and co-ordination. One of the rules is that the system operator Australian Energy Market Operator (AEMO) has to maintain a reserve of 850 megawatts of reserve across the entire NEM. No account is taken of the carbon intensity of output, all that matters is price.

The SA event was seen as a challenge to system reliability, so the Australian Energy Market Commission, which sets the rules, announced on 12 July a review

on whether wholesale energy market frameworks are suitable to complement increasing volumes of renewable energy and to maintain power system security as the industry transforms.

Should have been done years ago.

Some folks are fond of telling us that the energy suppliers who relied on price peaks for a quarter of their revenue will now have to change their business models. Such folks also tend to be enthusiastic about the possibility of going off-grid. However, there is not a lot of consideration of what the end shape of the system would look like.

To tackle the off-grid issue, I think standards should be set which people have to meet before disconnecting. In the end there will be a grid serving vital community facilities and households lacking the capital to go solo. Everyone has an interest. There will also be equity issues.

For starters, I think that anyone contemplating going off-grid should be able to outlast a 1 in 100 weather event that effects supply, which is possibly what the Brisbane 1996 experience was. If a back-up generator is part of the plan it should be carbon-free.

What is needed amounts to a home electricity generation plan.

Ergon Energy has developed a 10-point checklist of things to consider before going off-grid. It’s quite demanding, and for example asks what you are going to do when the system breaks down and you are waiting for parts from overseas.

The grid itself needs to be smarter and more robust. Ours is the world’s longest interconnected power system, more than 5000 kilometres from Port Douglas in Queensland to Port Lincoln in SA. It needs the main centres better connected.

A possible model is Spain, where Red Eléctrica de España, a single part publicly-owned company, operates the national electricity grid. Mark Mulligan reports. In Spain:

sun and wind together account for about 25 per cent of generation capacity, ahead of natural gas at 17 per cent, coal at 16 per cent and hydro-electric production at 14 per cent.

Along the way they’ve developed a cluster of renewable energy companies with world-wide clout.

The country’s grid management, too, is considered among the most sophisticated in the world, featuring state-of-the-art control centres loaded with software that can accurately predict and manage the variability of renewable energy.

As part of this precision management, all electricity companies are required to inform Red Electrica, the national grid company, of their anticipated power output for the following day.

This is broken down into five-minute segments, and must be accurate to within 5 per cent of forecast output, with fines when companies undershoot.

In addition, Red Electrica might require power producers to ramp up production during a surge in demand during the day, or to switch off wind turbines if demand drops.

Producers get paid a premium for being able to adjust output at short notice.

In the same issue of the AFR, Ben Potter and Mark Ludlow put together a piece Energy: Get NEM design right first.

The National Electricity Market of the future will be vastly different to the one that serves the eastern states today.

It will include more high-voltage interstate “interconnectors”, and more wind, solar and gas power. It will have more technology to manage the flow and wind and solar, less coal power, and it will have utility-scale batteries to better match supply and demand.

It will also depart from the “energy only” market model to include a “capacity market” – payments to fossil fuel generators to stand by to fill gaps in supply when wind and solar energy can’t meet demand.

Reducing carbon emissions needs to be a top-line objective alongside reliability, efficiency and affordability. The Government needs to set renewable energy targets further ahead than 2020, plus accept the need for an eventual zero carbon energy supply.

Read the article for the detail.

One of problems we have is the multiplicity of players, each trying to maximize financial gain, including state players. The 2016 SA problem arguably has its origin in 1998 when the Liberal government cancelled a plan for a connector to NSW in order to enhance the value of state power plants, scheduled for privatisation. It took the ACCC chief 30 years to work out that privatisation on natural monopoly public infrastructure damages the economy.

Achieving a modern integrated clean energy market won’t be cheap, but they say the smart money is heading in that direction. For example:

This week the Liberman family-backed Impact Investment Group launched a $100 million fund to anchor $1 billion of solar investments, Queensland Investment Corp tipped $800 million into AGL Energy’s $2 billion-plus renewables fund, and NSW transmission giant Transgrid backed a plan for a $500 million South Australia-NSW interconnector to avert power crises in SA.

The plunging cost of big solar, and of battery storage, will help.

There is argument about the “capacity market” concept. Britain is heading in that direction. Ontario and Western Australia are already there, and it costs. John Pierce, the Australian Energy Market Commission chairman, doesn’t like the idea. He says it will need a Fat Controller who will be too conservative and want too much in reserve.

No doubt he knows, because this is what the Fat Controller forecast in the past, against what happened:

I wonder what the existing “850 megawatts of reserve” actually means in practice.

Either reserve capacity is necessary or it is not. I came to the conclusion in my recent post that it was.

Bruce Mountain, director of energy consultancy CME, consulted by Potter and Ludlow, says it may be unavoidable.