Senate debates

Wednesday, 31 August 2016

Statements by Senators

South Australia: Renewable Energy

1:45 pm

Photo of Alex GallacherAlex Gallacher (SA, Australian Labor Party) Share this | Hansard source

I rise to make a statement on a very pertinent issue relating to the state of South Australia. In recent times, South Australia has had an inordinate amount of discussion about renewable energy and the cost of electricity—the cost to business and to consumers. To sum up my position: I am in favour of all renewable energy and all energy supply that makes it cheaper for a pensioner; I am not in favour of an impost on a low income earner or of a pensioner's bill going up.

We have come through a situation in South Australia, over many years, where we had brownouts and blackouts, and periods in hot summers with no electricity. This was very, very distressing for the community, for business and the like. We seem to have moved away from that. Now we have a situation where we do not have brownouts or blackouts; we have an inordinate spike in the cost of our electricity. It is so bad that, on the cost of generation, large companies approached the South Australian energy minister and Treasurer and said: 'We need to do something about this or we are going to have to close down our operation. We just can't afford the cost of electricity through the National Electricity Market.'

Over the last couple of parliaments I have had the opportunity to travel to look at energy in Japan, Korea and a number of other places. Basically, their baseload power generation is nuclear, which is probably not going to happen in Australia in the short term, hydro-electric and coal.

What has happened in South Australia is that we have lost our baseload power. The Leigh Creek mine has shut down; the Port Augusta generation facility has shut down. We are totally reliant on renewable energy and gas.

A constituent said to me, 'We have a hydro-electric scheme in Australia.' I said, 'Certainly we do.' The Snowy Hydro is well known and well loved. It has the status of an icon. It is deep in Australia's psyche. Hundreds of thousands of migrants built the place. So we had a bit of a look at that and just did a cursory examination of the Snowy Hydro scheme. And you would think: 'It's clean; it's renewable; there are no emissions; it's cheap; it's paid for.' Thirteen per cent is owned by the Commonwealth government, 58 per cent by the New South Wales government and the balance by Victoria. So you have a bit of dig in, and you say, 'Okay, we've got this community asset, paid for by taxpayers' dollars; it's clean, green and cheap to run. Let's have a look and see what it actually does.'

Normally we know the scheme consists of power generation of 3,950 megawatts. If this was running at full capacity year round then the power produced would be 34,602,000 megawatt hours or 34,602 gigawatt hours. According to Snowy Hydro, they produce, on average, 4,000 gigawatts of electricity per year, which means they are running at a capacity factor of 13 per cent—13 per cent! Normally, you would expect a clean, green, renewable asset, capable of producing enormous amounts of electricity, to actually be contributing at full bore. It does not make sense—it is counterintuitive—that a totally renewable source of energy, constrained only by the water in the dams, under this current system, in the National Electricity Market, only operates at 13 per cent capacity a year.

I read that in Canberra they want to be 100 per cent renewable and they are building wind farms. Well, I would have thought they would have just needed to look up the road and have one of those nine turbines power the half a million people or thereabouts who are seeking to use electricity in Canberra.

So it seems to me that there is something not quite right in this. We have a fully-paid-for asset operating at 13 per cent of capacity. And we know, through examination of the accounts of the corporation, that it pays a respectable dividend—it makes money. But, once again, if we are in favour of cleaner, greener, renewable energy, how is it possible that one of these nationally owned assets can be just ticking along at 13 per cent of capacity? Why are we building wind farms or other renewable energy sources when we have a fully-paid-for, remarkable asset, which, its own publicity will say, can turn a power station on in 90 seconds and connect to the national grid—which excludes the Northern Territory and Western Australia; that is my information—and can push power out to all of the connected parts of the national grid? How is this possible?

When you go and dig a bit deeper, you find they have other power stations. They own gas plants. They own energy retailing companies. They have about 650 employees, a proper professional board and all of the things that go with that. But what you find, if you dig into this subject matter, which I find absolutely intriguing, is this. There is a baseload power supply capacity—clean, green hydro; renewable; paid for; cheap to run—only operating at 13 per cent of capacity.

Then, to add insult to injury, you find this: Failure to comply with generator dispatch instructions: the case of Australian Energy Regulator v Snowy Hydro. The Australian Energy Regulator took a Commonwealth, New South Wales and Victoria owned entity to court and prosecuted them for what appears to be an attempt to profit out of the national electricity market. We know that Snowy Hydro would pay penalties of $400,000, that it would appoint an independent compliance expert to review the accuracy of Snowy Hydro's internal documents relating to complex dispatch instructions and that Snowy Hydro would make a $100,000 contribution to the Australian Energy Regulator's legal costs.

Now, to the person who in South Australia gets an electricity bill that they cannot pay—that they in fact might have to ask for time to pay, while most of us in this place are pretty fortunate in that a bill comes in and the bill goes out—or people in the Riverland struggling with a high cost of electricity for their production facilities, where there are genuine businesses struggling to pay people on the job and their energy costs, and they have a thing like the Snowy Hydro, clean, green and renewable, operating at 13 per cent of capacity, and then are being fined by the Energy Regulator for playing the game of profiteering, that is quite extraordinary. It is extraordinary, and worthy of much more scrutiny in this place than perhaps it has had in the past, because most of this information was an absolute revelation to me. When a constituent said to me that the Snowy Hydro does no work and probably operates for only 30 or 40 days a year, I thought they did not know what they were talking about. But when the annual report of the Snowy Hydro says that they operate at 13 per cent of capacity and that they have made a provision to pay a fine imposed by the Energy Regulator, things are not right.

We all seek cheap, green, renewable energy. We have it in spades in the Snowy Hydro, and somehow or other it has gone completely awry. That national asset is working at 13 per cent of its capacity. People are suffering in South Australia and other parts of Australia from extraordinarily high generating costs. The spikes go up to $10,000, from $20 to $40 a megawatt—and I am not totally familiar with these terms. From $20 to $40, the spike can be as high as $10,000. Why isn't this asset brought in to mitigate those things? Why isn't this asset—a government owned asset, an asset owned by the Australian people—mitigating the effects of these energy price spikes? The reverse seems to be true: it is alleged that they are actually taking advantage of those price spikes to maximise their profits. It is quite a conundrum, and I will have further to say on it.


Mark Duffett
Posted on 1 Sep 2016 11:24 am (Report this comment)

"constrained ONLY by the water in the dams"? I would have thought that (i.e. the amount of rainfall the scheme gets) a fairly hard constraint, and the primary reason why the apparent capacity factor has been as little as 13%.

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