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Power Plant failures push VIC energy grid close to the edge


Source: The AGE

Victoria's strained energy network is about to face its first real test of the summer – several days before summer has even started.

This week's mild November heatwave and the recent failure of two coal-fired power units in the Latrobe Valley have drained the state's energy grid of reserve supply and pushed it towards the danger zone for blackouts.

The Australian Energy Market Operator issued two notices Wednesday afternoon forecasting a lack of reserve in the energy grid as the temperature soars towards the mid-30s on Thursday and Friday afternoons.

The level one alerts are a signal that there is a shortage of back-up energy, meaning any further unanticipated loss of capacity or spike in demand has the potential to cause blackouts in parts of the state.

They are not a signal that blackouts are expected, but merely a warning for the energy market to take steps to provide extra reserves.

The alerts have been triggered by a huge drop in capacity at Victoria's Latrobe Valley plants in the past month, due to two sudden system failures. 


On Saturday one of Yallourn's four generation units was switched off after a boiler failed. It is still under repair.

A second unit was switched off months ago for maintenance.

Last month one of four units at the Loy Yang power station failed. It remains under repair.

The two temporary malfunctions at the Loy Yang and Yallourn have reduced Victoria's energy capacity by about 1300 megawatts and  drained the state of more than 10 per cent of its peak period energy supply.

The failures follow the permanent closure of the 1600-megawatt Hazelwood power plant in March.

The dramatic drop in available coal-fired power has forced Victoria to import large amounts of energy from South Australia, Tasmania and NSW this week and to burn more gas, contributing to spikes in the wholesale energy price in the past week.

The price in Victoria has soared from an average of about $80-$90 per megawatt hour this month to well over $200 in this week's heatwave.

Read More: HERE

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A better energy future for Australia


Sourced: Department of the Environment and Energy 

The Australian Government is powering forward with a plan that will deliver an affordable and reliable energy system that will also help meet our international commitments.

As our energy system transitions, we must ensure there is enough electricity generation to supply households and businesses reliably while delivering affordable power.

Our plan to address Australia’s urgent needs and prepare for the long term is based on engineering and economics.

The Government has already taken steps over the past 12 months to address generation, network and retail costs, while pursuing reforms that place an emphasis on well-regulated markets and technology.

Building on this comprehensive package, the Government is acting on the Chief Scientist’s recommendation that new measures are needed to improve reliability and investment certainty in the electricity sector. To do this, we will take the advice of the independent Energy Security Board and implement a new National Energy Guarantee.

“… we need reliable, affordable and secure baseload. For the first time in 10 years we are finally addressing all three.”

Paul O’Malley, CEO, BlueScope Steel

Tackling the energy ‘trilemma’

A decade-long failure to effectively integrate energy and climate policy has created uncertainty in the market, affecting investment decisions and therefore prices and reliability.


Household electricity prices as at June 2017 have more than doubled over the past decade. Since 2007, this has been driven by network costs and, most recently, generation costs due to high gas prices.


South Australia’s statewide blackout in 2016 and the February 2017 load-shedding events in New South Wales and South Australia were wake-up calls. They threw the spotlight on the energy challenges facing Australia with a greater reliance on intermittent sources of generation and a more decentralised grid. They indicated that the National Electricity Market (NEM), designed in 1998, was no longer fit for purpose.


Australia’s emissions per capita and per GDP are at their lowest levels in 27 years, and emissions in the electricity sector have fallen over the past two quarters as coal-fired power stations have closed and demand has flat-lined. But this cannot come at the expense of the reliability and affordability of our electricity system.

It is in these challenging times that the Government is powering forward with our energy plan.

A National Energy Guarantee

To respond to these challenges, the Government will implement a National Energy Guarantee, as recommended by the independent Energy Security Board.

Formed out of the Independent Review into the Future Security of the National Electricity Market (the Finkel Review), the Energy Security Board comprises an independent chair and deputy chair along with the expert heads of the Australian Energy Market Commission (AEMC), the Australian Energy Regulator (AER) and the Australian Energy Market Operator (AEMO).

The Guarantee is made up of two parts that together will require energy retailers and some large users across the NEM to deliver reliable and lower emissions energy generation each year.

reliability guarantee will be set to deliver the right level of dispatchable energy—from ready-to-use sources such as coal, gas, pumped hydro and batteries—needed in each state. It will be set by the AEMC and AEMO.

An emissions guarantee will be set to contribute to Australia’s international commitments. The level of the guarantee will be determined by the Commonwealth and enforced by the AER.

This two-part Guarantee, proposed by the Energy Security Board, will deliver affordable and reliable energy for households and businesses without subsidies, taxes, emissions trading schemes or carbon prices. It is a market-based solution that will integrate energy and climate policy to deliver a more affordable, more reliable and lower emissions energy system.

Past approaches have ignored reliability and affordability, rewarding some industries, punishing others and slugging consumers. We are taking a very different course. The National Energy Guarantee does not pick winners—it levels the playing field and is technology-neutral.

The Energy Security Board says these obligations will encourage much-needed investment in the electricity sector.

Based on Energy Security Board advice, it is expected that the Guarantee could lead to a reduction in residential bills in the order of $100–115 per year over the 2020–2030 period.


Read more : HERE



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13 terms you need to know in Australia's energy debate


Source: Business Insider  

Australia’s energy market is a prominent fixture in our daily news cycle. Amid the endless ideology and politics swirling around the sector, technical terms such as “baseload power” and “dispatchable generation” are thrown around so often that there is a danger the meaning of these terms can get lost in the public debate.

The term “energy crisis” is bandied around quite loosely with some confusion around whether the crisis is about prices or security of supply. The politics of this are infernal and largely avoidable if all sides of politics had paid consistent and principled attention to energy policy over the 20 years since the formation of the National Energy Market.

It’s worth setting the record straight on the meaning of some of these terms and how they relate to climate policies, new technologies and the progression of market reform and regulation in Australia.

This glossary, which is by no means exhaustive, is a first step.

Baseload power

Baseload power refers to generation resources that generally run continuously throughout the year and operate at stable output levels. The continuous operation of baseload resources makes economic sense because they have low running costs relative to other sources of power. The value of baseload plants is mostly economic, and not related to their ability to follow the constantly varying system demand.

Baseload plants include coal-fired and gas-fired combined-cycle power plants. However, Australia’s international commitment to reduce carbon emissions is curtailing the economic viability of traditional baseload sources.

Wholesale market (the “National Energy Market”)

The term National Energy Market is confusing because it refers to a competitive market for wholesale energy mostly on the east cost of Australia. It doesn’t include Western Australia or the Northern Territory and also includes the gas system. The National Energy Market allows all kinds of utility-scale power resources to connect to transmission system to meet large-scale power requirements.

However, industry talk about the “energy market” or even the “NEM” can also refer to the entire supply chain that includes the networks for voltage transmission, and medium- and low-voltage distribution as well as the retailing to the end consumer. The prices consumers see include all these aspects of the supply chain. This can add significantly to confusion.

 The wholesale market is referred to as a “market” because there is competition between generators. Each generator places daily price “bids” to sell power and adjusts quantities in up to 10 price bands every five minutes. In this way, the sale of power is matched to the available energy and performance of the generating unit.

The market works to efficiently dispatch all variable and “dispatchable” resources to minimise the cost of electricity. The Australian Energy Market Operator (AEMO) co-ordinates the National Energy Market.

Wholesale price

The wholesale “spot” price at which power is traded in the NEM is based on the highest accepted generator offers to balance supply and demand in each region. This is intended to encourage efficient behaviour by generators, as well as to co-ordinate efficient directing of resources.


Storage refers to energy captured for later use, typically in a battery. Electricity has been expensive to store in the past, but the cost of storage is expected to continue to fall with the improvement of battery technologies. For example, lithium-ion batteries were developed for mobile communications and laptops but now are being upscaled for electric vehicles and utility-scale energy storage.

Read More: HERE

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Australia's east coast LNG producers avert export curbs


Source: Reuters

*LNG exporters vow to meet projected 2018 gas supply gap

* No guarantee given on price

* Competition watchdog to keep close eye on gas bids, offers (Adds Shell, APLNG, ACCC comments)

By Tom Westbrook and Sonali Paul

SYDNEY/MELBOURNE, Sept 27 (Reuters) - Australia’s three east coast LNG plants have staved off threatened export curbs after promising to plug a projected domestic gas supply shortfall in 2018, Australian Prime Minister Malcolm Turnbull said on Wednesday.

The agreement follows six months of government pressure on the producers of liquefied natural gas (LNG), led by Royal Dutch Shell, ConocoPhillips, Origin Energy and Santos Ltd, who have been blamed for sapping the local market of gas and driving up prices.

The Australian Energy Market Operator (AEMO) this week projected there would be a gas shortfall of between 54 and 107 petajoules in 2018, or up to 17 percent of demand, which the companies have now vowed to supply.

“They have given us a guarantee that they will offer to the domestic market the gas that was identified as the expected demand shortfall, by AEMO, in 2018,” Turnbull told reporters in Sydney after meeting with the three LNG operators.

The threat of export controls on the three LNG plants had raised alarm about sovereign risk, especially for the investors in those plants and their Chinese, Japanese, Korean and Malaysian customers.

Gas has become a hot political issue as soaring prices are hurting households and threatening jobs at manufacturers like food, building materials and chemical producers, as well as driving up electricity prices, as gas-fired power is needed to back up wind and solar energy.

To deal with the crisis the government passed a law earlier this year that would allow it to limit exports from any of the three LNG plants on the east coast to beef up local supply in any year that it deems there will be a shortfall.

For 2018, the export controls will now not be invoked.

“We are very pleased to contribute to a solution which will provide certainty for Australian customers to have access to available gas,” Australia Pacific LNG chief executive Warwick King said in emailed comments. Australia Pacific LNG is run by ConocoPhillips and Origin.

Shell said it had set up an Australian trading business because it saw an opportunity to sell gas from Queensland to customers in the country’s southeast, where there is little competition among suppliers.

The Australian Competition and Consumer Commission this week flagged that producers were offering gas at A$10-$16 a gigajoule to industrial users, well above the forecast Asian LNG price LNG-AS for 2018 netted back to Australia plus local pipeline costs, which worked out to A$7.77.

“The new announcement should open up the market for contracting again and flush out the real demand, as the 107 PJ supply shortfall announced by AEMO remains highly questionable,” said Wood Mackenzie analyst Saul Kavonic. (Reporting by Tom Westbrook. Editing by Jane Wardell and Richard Pullin)

Read More: HERE

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World's second biggest gas exporter prepares to run short


 Source: The AGE 

Surely the world's second biggest exporter isn't about to run short of gas?

We are, according to the Australian Competition and Consumer Commission, although not for the reasons that are widely believed.

The conventional wisdom has been that when three big exporters opened six big liquefaction plants at Gladstone in Queensland and locked themselves into long-term supply contracts with Japan that they couldn't fulfil they had to commandeer gas that the rest of us would have used.

That did happen, but it's not the main reason we're about to run short of gas. It's that the exporters also shipped a lot of extra gas overseas, in addition to the gas they were contractually obliged to export.

It's easy to understand why. They spent billions building the liquefaction plants and they are trying to get a return. The ACCC has a particularly good insight into their thinking. It's used compulsory information-gathering powers to amass a trove of 20,000 industry board papers and reports.

The commission says next year the big three are planning to export 64.3 petajoules of gas that they are not contractually required to export. One petajoule is enough to supply the residential needs of a city like Warrnambool, Wollongong or Penrith for a year; or enough to supply one very big industrial user.

It says coincidentally 64.3 petajoules "accounts for the entire expected gas supply shortfall".

Next year's expected gas supply is 1901 petajoules. Domestic users – industry, business and households – will need only 642 petajoules. But the exporters are planning to ship out more than all of the rest: 1314 petajoules, resulting in a shortfall of 55 petajoules. (A worse-case scenario, also modelled by the commission, is a shortfall of 110 petajoules).

The ACCC says it would be possible for the exporters to ship out less than they are planning to without breaking contracts, and although they've made some moves in that direction, it is "unclear" why they haven't done more.

In the meantime, in a disturbing development for the businesses that rely on gas, many are being offered blind auctions. Rather than being given a price, they are being asked how much they would be prepared to pay to keep the gas on. It's a one-shot game. If they don't offer enough they miss out.

One offered 20 per cent more than it had been paying and missed out. Those that get offers are being given very short deadlines to accept, often just two to five days, a "significant constraint for many large users who are required to obtain approval from company boards and executive management". Even when they accept offers, some have them withdrawn.

 Read More: HERE


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Gas export curbs loom as East AUS faces gas shortfall


Source: Reuters

MELBOURNE (Reuters) - Royal Dutch Shell, ConocoPhillips and Santos face curbs on exporting gas from Australia’s east coast in 2018 if they fail to plug a projected local supply shortfall, Prime Minister Malcolm Turnbull warned on Monday.

Eastern Australia faces a gas shortfall of up to 17 percent of market demand in 2018, the nation’s energy market operator and competition watchdog projected in reports submitted to the government on Monday that will be the basis for a decision by Nov. 1 on whether to limit exports.

The shortfall of around 110 petajoules (PJ) seen in 2018 is far worse than the market operator flagged in March.

“We are determined to ensure and we will ensure that that shortfall, which we’ve been advised of today - three times bigger than we thought it would be six months ago - is not going to occur,” Turnbull told reporters.

Turnbull said he would press the east coast LNG exporters - Shell at Queensland Curtis LNG, ConocoPhillips and Origin Energy at Australia Pacific LNG, and Santos at Gladstone LNG - for plans to plug the 110 PJ supply gap.

Gas has become a hot political issue as soaring prices are hurting households and threatening jobs at manufacturers like food, building materials and chemical producers, and at the same time driving up electricity prices, as gas-fired power is needed to back up wind and solar energy.

To deal with the crisis the government passed a law earlier this year that would allow it to limit exports from any of the three LNG plants on the east coast to beef up local supply.

“Gas supply remains tight in eastern and south-eastern Australia in 2018 and 2019, and there remains a risk of a supply shortfall,” Australian Energy Market Operator Chief Executive Audrey Zibelman said in a statement.

For 2018 the shortfall risk is between 54 petajoules and 107 PJs, the market operator said, in line with the gap that the competition commission found.

The three LNG exports plants, which were completed between 2014 and 2016, have long-term contracts to sell gas to customers in Asia, but have also been selling spot cargoes overseas instead of locally due to high costs and access issues on pipelines in Australia.

“The expected shortfall could be reduced to a significant extent if the expected sales on international LNG spot markets were instead redirected to the domestic market,” competition chairman, Rod Sims, said in a statement.

Under the terms of the Australia Domestic Gas Security Mechanism, the LNG plant that has been seen most at risk of being forced to divert gas from exports to the domestic market is the Gladstone LNG plant, operated by Santos Ltd.

Shell, Origin and Santos have already announced plans to step up local supply, but the commission said that was insufficient.

Read More: HERE

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Next Generation: the long-term future of the NEM


Source: Grattan Institue 

Australia should start work immediately on an electricity ‘capacity mechanism’ in case it is needed to ensure reliable supplies, encourage investment in new generation, and reduce the threat of shortages and blackouts.

But the cost of such peace of mind would ultimately fall on consumers in the form of higher electricity prices, so a capacity mechanism should be introduced only if all other market reforms have been exhausted and supply is still under threat.

Through a capacity mechanism, generators would be paid not only for the electricity they produce to meet current demand, but for committing to provide power for years into the future. The market operator or retailers could contract for sufficient electricity to meet future demand, to ensure new generation and storage is built in time.

Australia has endured a decade of toxic political debates about climate change policy, South Australia suffered a state-wide blackout last year, electricity bills are skyrocketing, and coal-fired power stations are closing.

In these circumstances, it is understandable that governments feel the need to ‘do something’. But the danger is they will rush in and make things worse. What Australia needs now is perspective, not panic.

The Australian Energy Market Operator (AEMO) last week called for a ‘longer-term approach’ to ensure electricity supplies. This Grattan report identifies a capacity obligation on retailers as the most effective and lowest-cost approach.

The report calls for a three-step policy. First, the Federal Government should implement all recommendations of the June 2017 Finkel Review, including a Clean Energy Target or a similar mechanism to price greenhouse gas emissions.

Second, alongside the Australian Energy Market Commission’s work on the market’s reliability framework, AEMO’s annual assessment of future supply and demand should be extended to include a more comprehensive assessment of the future adequacy of generation supply.

And third, if the newly created Energy Security Board concludes that projected shortfalls are unlikely to be met under the current market design, AEMO should introduce a capacity mechanism.

This pragmatic, planned approach offers the best prospect of affordable, reliable, secure and sustainable power for Australia.

Read More: HERE

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Santos redirects export-bound gas to Aus East Coast Market


Source: ABC

Energy company Santos has agreed to supply gas to 330,000 Australian east coast homes over the next two years rather than export it.

Santos and its GLNG partners announced they would sell 30 petajoules (PJ) of gas to east coast customers including electricity companies next year and in 2019.

Santos managing director Kevin Gallagher said that the gas would otherwise have been exported as LNG.

"Over the last few months Santos has been working constructively with the Federal Government and our GLNG partners to supply additional gas to the east coast domestic market," he said.

The announcement follows a Federal Government decision earlier in the year to restrict gas exports, in a bid to counter domestic shortages which have been pushing prices higher in Australia, and in turn affecting power generation.

Prime Minister Malcolm Turnbull did not specify how much impact export controls were likely to have on prices, but said wholesale prices fell after the federal decision was taken.

Mr Turnbull argued it would be unacceptable for Australia to become the largest global exporter of LNG but have a shortage of east coast domestic market gas.

Mr Gallagher said the decision taken by Santos was further proof of its readiness to respond to market dynamics and meet local gas demand.

"We are committed to improving energy reliability and affordability for all Australians, both householders and industry," he said.

Santos earlier decided to deliver up to 72 PJ of gas over four years into the south-east market through a swap agreement and sale of 15 PJ to the Pelican Point power station in Adelaide.

Read More: HERE

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Renewable energy boost to power Victoria's regional cities


Source: The Age

In a huge boost to Victoria's electricity supply, renewable energy companies will compete to supply Victoria with 650 megawatts of power – enough for the energy needs of every household in Geelong, Ballarat, Bendigo and the Latrobe Valley.

The competitive "reverse auction" will be the biggest of its kind in Australia, as corporations tender for the contracts to power 389,000 households. This is expected to trigger investment of about $1.3 billion in renewable projects such as construction of wind and solar farms. Expressions of interest will open in October.

The projects are critical to the government's target to increase Victoria's renewable energy level to 40 per cent by 2025. The government will seek to lock in its renewable energy target – 25 per cent by 2020 and 40 per cent by 2025 – by tabling legislation today. Currently about 10 per cent of the state's power needs are met with renewable sources.

Read more HERE.

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Port Augusta home to new $650 million solar thermal plant


Source: The Advertiser

PORT Augusta will be home to a new $650 million solar thermal power plant that supplies all of the State Government’s power needs.

SolarReserve will build the 150MW plant, which will be operational in about three years. Its standard output under normal conditions will be 135MW, with the capability of exceeding that during the evening peak demand in favourable conditions.

Construction is set to begin in 2018 and be complete by 2020, creating an expected 650 construction jobs and 50 ongoing positions.

SolarReserve will pay to construct the plant and the State Government will buy the power it generates over a 20-year contract.

The project will rely on a $110 million concessional equity loan from the Federal Government, which was promised as part of negotiations with South Australian Senator Nick Xenophon on the Commonwealth’s company tax cuts legislation.

The plant, to be built about 30km north of the town on state-owned land, will be able to store between eight and 10 hours of energy so it can operate when the sun is not shining.

Read more HERE

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Turnbull “eyeballs” energy bosses, kids himself on solution


Source: Renew Economy 

Prime minister Malcolm Turnbull “eyeballed” the heads of Australia’s biggest retailers over the scale of consumer bills on Wednesday and would like you to believe that they blinked.

Truth be told it was more of a knowing wink than a blink, and it is likely that all Turnbull achieved is to kill the size of discounts available to smart consumers. There is not a snowflake’s chance in hell (or a coal boiler) that the big utilities are taking a haircut on this.

The fundamental problem – the high price of electricity – remains unaddressed because the Coalition will not deal with issues such as long term energy policy, or the legal rorting of wholesale markets by an oligopoly of generators, some of them the same mob that turned up to look concerned and contrite in Canberra.

The heads of AGL Energy, Origin Energy and EnergyAustralia, and five other leading retailers along with their lobby group, met with Turnbull, federal Treasurer Scott Morrison and energy minister Josh Frydenberg, to discuss retail market practices that have padded company profits at the expense of consumers.

Top of the agenda were concerns that millions of Australian households were on electricity plans that were costing them “hundreds of dollars” – and potentially thousands – a year more than they needed to pay, due to a combination of customer confusion and inertia.

What was agreed fell a long way short of the sort of regulation vaguely mooted by the government, flagged by the head of the Australian Energy Market Operator, and promoted by the Greens.

Confusion is profit, as we reminded readers last week, and it appears to have finally sunk in with the government, once they had paused their relentless attack on renewables and battery storage.

“Complexity and inertia are the big energy company’s friend,” Morrison told reporters after the meeting. “We’re ensuring that there is less complexity, and working on this inertia issue,” he said.

“What we want to put in place is the ability of consumers to have an informed choice,” Turnbull said. “Many households and consumers are paying hundreds of dollars more, right now, than they need to.

“The biggest (bill) discount doesn’t necessarily mean the best deal… It’s that level of complexity that customers are not aware of, and they are effectively getting short-changed.”


Read more HERE

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What if Big Oil's Bet on Gas is Wrong?


Source: Bloomberg 

Talk to a Big Oil executive these days, and the chances are they’ll steer the conversation toward gas.

“In 20 years, we will not be known as oil and gas companies, but as gas and oil companies,” Patrick Pouyanne, chief executive officer of French giant Total SA, told a conference in St. Petersburg last month.

But with the cost of renewable technologies falling sharply, some are warning that the outlook may not be so rosy. Forecasters are beginning to talk about peak gas demand, spurred by the growth of alternative power supplies, in the same breath as peak oil consumption, caused by the gradual demise of the internal combustion engine.

In a long-term outlook published last month, Bloomberg New Energy Finance predicted that gas’s market share in global power generation will drop from 23 percent last year to 16 percent by 2040, and that gas-fired power generation capacity will start to decline after 2031. BP Plc has highlighted “risks to gas demand” as a key uncertainty, including the possibility that consumption plateaus by 2035, “squeezed out by non-fossil fuels.”

Read more HERE

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COAG splits over clean energy target


Source: Renew Economy

Four Labor states and governments have formalised their push to purse their own clean energy target mechanism, officially breaking away from the federal government after the Coalition refused to endorse the Finkel Review’s recommendation on the issue.

The COAG energy council meeting in Brisbane endorsed 49 of the 50 recommendations from the Finkel Review, and endorsed the decision to get rid of the “limited merits review” that affects network spending. However, the federal government said it could not commit to a clean energy target.

South Australia, Victoria and Queensland, along with the ACT, said they would ask the Australian Energy market Commission to study how a CET might be implemented by the states saying “they can’t wait any longer”.

It is not clear how long this will take, and how quickly legislation can be introduced, or if it can survive state-based partisan politics given that both the South Australia and Queensland Labor governments are facing elections in the next 12 months.

The role of the ACT is also unclear, given that it will reach its target of 100 per cent renewable energy by 2020.

These same states this week all committed to zero net emissions by 2050, in a ceremony marking the visit of former vice-president and climate campaigner Al Gore.

“It is incredibly frustrating that despite the overwhelming community support for a market mechanism, the Federal Government is still resisting committing to all 50 Finkel recommendations,” South Australia energy minister Tom Koutsantonis said in a statement.

“Opposition from the coal lobby and the right wing of his party is preventing the Prime Minister from acting in the interests of all Australians.” The federal Coalition has been riven by divisions over the proposed CET, with conservative commentators unanimously condemning the idea, and the rump of Far Right Coalition MPs also voicing their opposition.

Federal energy minister Josh Frydenberg said COAG had agreed a “significant set of reforms to ensure a more affordable and reliable energy system.” The recommendations include the creation of an Energy Security Board. Each jurisdiction will send through a name; and the next few weeks the states will agree on a chair and deputy chair. 

The other members will be the heads of the three main energy industry regulators, rule-makers and operators.

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Gas exports the culprit for electricity price hikes


Source: The Australia Institute

The Australia Institute has released the Electricity Update of the National Energy Emissions Audit (The Audit*) for July 2017.

The report, by renowned energy analyst Dr Hugh Saddler, reveals a stunning correlation between domestic electricity prices and gas prices, despite gas making up only 10 percent of electricity generation.

Australian gas prices have risen significantly, as predicted, upon the development of export terminals and the linking of domestic gas to the Asian market.

“The correlation between the two data series is striking, confirming that higher wholesale electricity prices, and hence higher retail prices in SA are almost entirely caused by higher gas prices,” Dr Saddler said.

“The launch of the NEM in 1998 was followed by a rush of construction of gas turbine power stations in Queensland, NSW and Victoria, and even in Tasmania, accelerated in Queensland by a gas generation mandate policy introduced by the state Labor government. 

“So this is not a malfunction of the National Electricity Market, but precisely how it was expected to operate, when set up. What has changed is the price of gas, driven up by export contracts.”

The alternate narrative, that the electricity price rises is to do with increased renewable production, does not stand up to the data, where we see no correlation, even in the usual example given, South Australia. 

“It seems that the decision to allow so much of the gas resources of eastern Australia to be exported was made without considering the likely effects on the electricity market.

“Household and business consumers of electricity are now paying the price for this policy failure,” Dr. Saddler said.

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$380m solar farm proposed for southern NSW


Source: ABC News

An energy company is proposing what would be the biggest solar power plant in New South Wales, in an effort to help Australia meet its renewable energy target.

Photon Energy wants to build a 316-megawatt project at Gunning, near Goulburn on the state's southern tablelands.

It has lodged its initial plans with the NSW Department of Planning, which would involve building hundreds of thousands of solar panels on 590 hectares of land.

The largest operating project in the Southern Hemisphere, the Nyngan Solar Plant in the state's west, is 104 megawatts and the Sunraysia Solar Farm, which was approved near Balranald last month, will be 200 megawatts.

Photon Energy managing director Michael Gartner said the $380 million Gunning project would be significantly bigger than any other project in NSW.

"The reason we've gone to that scale is because we see the need to build very large-scale solar generation systems to supplement the energy requirements of the power grid, as we've moved forward to the energy transformation away from coal to renewable energy," he said.

Mr Gartner said the Gunning district's location between Canberra and Sydney made it ideal for connecting to the electricity grid.

Read more HERE

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Worried manufacturers bid for gas in east coast market


Source: Financial Review

The Esso-BHP Billiton joint venture is understood to have received keen interest in natural gas they have put up for sale from the Bass Strait amid uncertainty among buyers over how soon – if at all –the new Domestic Gas Security Mechanism will be triggered.

Several gas buyers in the stretched east coast market are thought to have bid for gas in a tender by the Bass Strait venture operator Esso offering supplies over 2018 and 2019.

NSW-based Weston Aluminium, which uses gas as well as sourcing the fuel for other manufacturers, bid despite finding the terms "not very customer friendly", said managing director Garbis Simonian.

"I know quite a few people who bid," Mr Simonian said.

"We're really concerned because we're not sure how serious these guys are about triggering the [domestic gas security] mechanism. Why do we have to wait six months?"

The decision on whether to trigger the ADGSM, which was put in place on July 1, lies with federal Resources Minister Matt Canavan, who is due to decide in the next several weeks whether to classify 2018 as a "shortfall year" under the legislation. That would start in motion a process that could lead to restrictions being placed on exports from Santos' GLNG venture in Queensland from January 1.

Australian Industry Group chief executive Innes Willox said this week the group "strongly expects" the mechanism to be invoked for 2018 unless there is a material change in the gas market, given prices offered to industrial buyers that are three times higher than expiring contracts.

But gas exporters including Santos are arguing that the latest assessment from the energy market operator shows it now expects no shortfall in supplies over the next two years, in contrast to a forecast in March. Santos chief executive Kevin Gallagher said the issue in the east coast market was "a pricing problem, not a gas shortage problem".

Even so, competition tsar Rod Sims, who is among those who will advise Senator Canavan on whether the mechanism needs to be triggered, has made clear that price is fundamental to assessing whether a shortfall exists, as is whether buyers have a choice of supply.

Senator Canavan has described the market as "finely balanced" and has pledged to intervene if necessary.

But Mr Simonian argues that the high prices being paid by local manufacturers compared with LNG "netback" prices means there should be no dispute. Still, a lack of confidence in the government's commitment to exercise its new LNG control powers is spurring interest in whatever gas is available.

"There is quite a bit of activity going on with small parcels of gas," he said.

"But long term we need some large projects to come on stream, and that's really up to the state governments that need to lift these restrictions."

An Esso spokesman wouldn't comment directly on the tender, which is understood to have closed last week, with the results expected in late July.

"The Esso/BHP Billiton joint venture has made significant investments to enhance gas supply, including the more than $5.5 billion investment in the Kipper Tuna Turrum project, which will access 1.6 trillion cubic feet of gas and help offset declines in our mature fields," he said.

He said further development opportunities in the Gippsland Basin continued to be assessed.

Meanwhile, Queensland power generator Stanwell Corporation has "well advanced" talks on gas supply it needs to restart its Swanbank E power plant by next summer, as ordered by Queensland Premier Annastacia Palaszczuk.

Stanwell shuttered the plant in early 2014 when soaring gas prices and lower electricity tariffs made it more profitable to sell the gas. But the closure of generators such as Hazelwood in March has tightened the market and driven wholesale tariffs higher, with business and households now being hit by huge hikes in bills.

Stanwell chief executive Richard Van Breda said the restart process was still in its early stages but that "discussions are well advanced with a number of potential counterparties" for gas.

"We are confident we can source the gas required to return Swanbank E Power Station to service," Mr Van Breda said.

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Increased Energy Costs Put Pressure on Aus Food Industry


Source: The Age

Australia's $126 billion food and grocery sector, under pressure from rising energy costs and keen to reduce its reliance on supermarket giants Woolworths and Coles, is exporting more to the US and China.

And with Woolies and Coles spending billions of dollars in recent years cutting grocery prices, food producers are keen for foreign retailers to invest heavily in Australia. The world's biggest online marketplace, Amazon, and German discount department store Kaufland are the most likely candidates.

Tanya Barden is the new boss of the Australian Food and Grocery Council, which represents packaged food, drink and grocery manufacturers.

She said the domestic market for food producers was "very competitive", with years of price falls at the checkout and skyrocketing energy costs creating skinny profit margins.

"We've had downward pressure on prices for six or seven years and continued upward pressure on costs," she said.

"The doubling, tripling of energy costs are having a massive impact on the industry. That's really going to make a difference between some businesses staying and going offshore."

Read more HERE

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Energy efficiency scheme spreads to more office buildings


Source: Financial Review

A federal scheme that requires commercial buildings to disclose their energy efficiency has been expanded to include more property, by lowering the space threshold at which the scheme applies.

Known as the Commercial Building Disclosure (CBD) scheme, the program has previously set a 2000 square metre threshold for mandatory disclosure.

From July 1, the threshold has been lowered to 1000 square metres for commercial office space that is sold or leased, after the expansion was flagged last year.

About 5000 buildings, covering 26 million square metres of office space, are already within the scheme. The extension will bring another 1000 buildings within its ambit.

The NABERS Energy star rating must appear on all forms of advertising material for a building within the scheme.

A review of the disclosure program, which began in 2010, found the scheme generated $44 million in benefits in excess of costs.

The mandatory disclosure system encouraged behaviour change by owners, operators and tenants.

Read more HERE

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Destructive wave of energy price hikes about to hit Read mo


Source: Financial Review

A destructive wave of energy bill hikes is poised to sweep across businesses and households from July 1, with some commercial customers to be hit by a tripling in electricity prices after the closure of the Hazelwood coal generator.

The news of the hikes coincides with a sudden escalation of concern over the stretched east coast gas market after the unexpected shutdown of a major offshore platform in the Bass Strait just ahead of a cold snap in the south-east.

The shutdown has cut gas supply from the biggest supply source for the east coast by 15 per cent and triggered a sharp spike in wholesale gas tariffs, underscoring the pressures being felt across the energy sector.

Businesses coming off multi-year electricity contracts signed when the power market was in oversupply will suffer worst in the wave of retail price increases, seeing jumps in their total energy bills that will dwarf the up to 20 per cent hikes that some households are facing.

Victoria-based Wilson Transformer Co is bracing for an 83 per cent surge in its annual power bill from about $800,000 to almost $1.5 million, including a more-than-threefold jump in the electricity component of the charge, said executive chairman Robert Wilson. Its price for peak power is going from just under 4.4¢ a kilowatt-hour to about 15.4¢, while its off-peak tariff will jump from just over 2.5¢/kWh to about 9.65¢.

"It's been a shock," Mr Wilson said. "We can't change our prices because we are an import-export competing business so it's just straight off the bottom line."

Read more HERE

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Final bid date set for Engie's Loy Yang B


Source: Financial Review

With coal power generation causing heated debate in Canberra, the level of interest in one of the country's older coal plants is notable.

A final bid date for Engie's Loy Yang B generator has been set for August 29, with suitors short-listed after last month's indicative offers now immersed in the data room.

Both new Alinta Energy owner Chow Tai Fook Enterprises and privately owned Delta Energy are understood to be through to the next round of the Rothschild-run sale process, with private equity giant Blackstone still in the mix.

Delta - owned by interests held by power industry maverick Trevor St Baker and advised by Goldman Sachs - is thought to have tied up with a strong partner and is keenly pursuing a bid that would see the 953 megawatt brown coal generator drawn into a portfolio that already includes the Vales Point coal generator in NSW. With the big three power players standing firmly on the sidelines for any coal power station these days, the field is relatively clear for Delta & Co and Alinta to battle it out, although China Resources is also said to be there.

Thailand's biggest coal producer Banpu is understood to have been weeded out after the indicative bid stage, while Denham Capital also had a look  but didn't go ahead.

The plant is expected to fetch about $1 billion, although some say up to $1.5 billion could be warranted depending on your view of electricity prices over the medium to longer term. Certainly the wholesale prices in recent months are backing a bullish outlook, with few experts expecting much moderation over the next few months.

Loy Yang B, which generates about 10 per cent of Victoria's power, is 30 per cent owned by Japan's Mitsui & Co. which is working with Paris-listed Engie for a 100 per cent sale. The asset is being pitched as a strong cash flow-generating business with a life still of about 30 years.

Read more HERE