Higher power bills here to stay, says Paul Broad

Mr Broad has also come out against the NSW government moratorium on fracking for coal seam gas, saying it was a cheaper and cleaner source of the thermal energy that the Australian grid would still need, even with the rise of renewables and the building of Snowy 2.0 as a power grid “balancer”.

In a broad-ranging interview,  Mr Broad said the outcome of Australia’s power debate had huge implications for heavy industrial users of electricity, such as Tomago Aluminium.

“In my view, Australia’s time of having a cheap energy source as a comparative advantage will be no more,” he said. “Aluminium exists where there is cheap energy. The smelters move around the world, and we will no longer have the source of cheap energy we once did.”

Asked why other countries were not in the same boat, Mr Broad said that Canada – a current favourite of the global aluminium industry – had “massive” amounts of hydro-electric power. Canada has about 79 gigawatts of hydro-electric capacity, or 10 times the Australian capacity of 7.8 gigawatts.

While Snowy Hydro 2.0 would add another two gigawatts of capacity to the system, Mr Broad said one of its major uses was to help “balance” the grid by providing electricity regardless of whether the sun was shining or the wind blowing. It was also an important source of “synchronous” power, meaning it would have a major role to play in keeping the “frequency” of the alternating current or AC power grid at the required 50 cycles per second, or 50 Hertz.

Although there are widely divergent opinions among electricity experts as how to best reconfigure the power grid to make best use of renewables, it may require the building of a new direct current or DC transmission system to minimise losses from a system that would use hundreds of electricity sources, rather than a handful of coal-fired power stations.

A study led by engineering professor Andrew Blakers at the Australian National University last year created headlines for its finding that Australia had 22,000 potential pumped hydro sites. But as Professor Blakers acknowledged to the Herald, his study put the cost of creating a power grid based on wind, solar and pumped hydro at more than $150 billion, with 40 per cent of those costs coming from the construction of a new DC transmission line running from Victoria to Queensland. While Snowy Hydro was not associated with the ANU study, Mr Broad said the power grid would need considerable investment to help Australia meet international obligations.

“It’s no longer about cheap electricity with no other considerations,” Mr Broad said.

“The market has moved, the facts have changed. The Australian government has signed up to the Paris Agreement, whether you like it or not, and that means we have to dramatically reduce our carbon dioxide emissions and in the power industry that means renewables and if you want a stable grid you can’t have that percentage of renewables without having a massive storage capacity and that means hydro.”

While batteries would have their place, Mr Broad referred to comments by Tomago Aluminium chief Matt Howell, who in trying to give people an idea of the amount of energy involved, points out that the world’s largest storage battery – the Tesla set-up in South Australia – could only supply the smelter’s 970 megawatt demand for eight minutes.

As Mr Howell told the ABC’s PM program last year: “For large baseload consumers, such as aluminium smelters, they need base load supply. And practically, that means thermal. It can either be coal or it can be gas.

“And whilst we’re not ideologically opposed to renewables, wind and solar – they certainly have their place in many applications – but there is no aluminium smelter anywhere in the world that is powered by wind and solar. We need continuity of supply and that means thermal.”

Mr Broad, who ran Hunter Water and Sydney Water before Snowy Hydro, said the National Energy Guarantee was likely to lead to a change in power pricing, whereby wind and solar generators would have to put a “firming product” into their prices.

As an example, he said wind could be profitably generated at $40 a megawatt hour, but another $40 for a firming product – to ensure reliability under the NEG – would take the price to $80.

“Which ever way you look at it, power bills are not going to come down again for the foreseeable future,” Broad said. “I’ve always been a very vocal supporter of the Hunter and its industries, and Australia as a whole has a decision to make here. If we can’t maintain an efficient and robust power grid, then the inevitable result will be a de-industrialised society to whatever degree that takes us.”

Under the Paris agreement, Australia has to reduce its carbon dioxide emissions by 26 per cent from 2005 levels. The electricity market accounts for about 35 per cent of our greenhouse emissions.

The federal government’s greenhouse gas accounts show a slight fall in seasonally adjusted emissions from 2007 to 2013, with a trending increase since then.

The most recent figures, for September 2017, show overall emissions rising by 0.8 per cent in the year to September, with emissions from the National Electricity Market or NEM falling by 3.1 per cent over the same time.

On fracking, Mr Broad said there was clear evidence to show the risks could be managed to provide a cleaner source of energy than coal.

“When I ran Sydney Water we had methane coming up naturally out of the basin,” Mr Broad said. “The moratorium is killing us as far as an energy source is concerned.”