(The opinions expressed here are those of the author, a
columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, March 14 Australia is
becoming an interesting microcosm on how to, or how not to,
transition an economy from being predominantly powered by coal
to more climate-friendly alternatives.
The dramatic intervention by Tesla Inc Chief
Executive Elon Musk last week is just the latest twist in an
ongoing saga that pits business, government, farmers, government
and environmentalists against each other.
Musk, in an exchange of tweets with software billionaire
Mike Cannon-Brookes, chief executive of Atlassian Corp, offered
to fix the electricity supply problems of South Australia state
within 100 days of signing a contract.
Musk's plan is to install 100 megawatts (MW) of
grid-connected battery storage, which would be available to meet
peak demand and would be charged with surplus electricity from
other generating sources in periods of low demand.
It's a bold offer and would most likely provide a quick fix
to Australia's fourth-largest state, which suffered a blackout
last November and has been dealing with power shortages over the
peak summer period.
Businesses like BHP Billiton, which operates the
giant Olympic Dam copper mine in the state, have been pushing
for the government and other stakeholders to ensure stable
electricity supply, saying the cost of blackouts runs into
millions of dollars in lost output.
Musk, whose Tesla Corp is ramping up output of its battery
storage packs at its Gigafactory in Nevada, held talks with
Australian Prime Minister Malcolm Turnbull at the weekend, as
well as with South Australian Premier Jay Weatherill.
The politicians will no doubt be tempted to Musk's offer to
install batteries, especially since the electric car pioneer
said if he didn't meet his 100 day deadline, he wouldn't charge
But while Musk's offer, if taken up, would provide a quick
fix, it would not do enough to mend the underlying problems at
the heart of Australia's electricity woes.
It's worth looking at how Australia got itself to the point
where virtually all players can agree that the nation is facing
something approaching an energy crisis.
After all, the country is not short of fossil fuels such as
coal and natural gas, and its climate and low population density
outside the major cities are ideal for renewables such as solar
and wind power.
The country is heavily reliant on an ageing fleet of
coal-fired power stations, which makes Australia one of the
highest polluters per capita.
These coal power stations are starting to close down, with
one shutting in South Australia last year and another planned to
close in Victoria state at the end of this month.
The problem is that the coal-fired power stations' role as
providers of base load electricity cannot be taken over by wind
and solar, and the role is falling to natural gas.
But natural gas is also the most expensive method of
generating electricity in Australia, so utilities are reluctant
to run their gas-fired plants until prices are high enough to
justify the cost.
South Australia has a gas-fired plant that was mothballed
until last year's power supply crisis, but even with the higher
prices for electricity, the operator is struggling to make the
The state moved on Tuesday to try and address its energy
security issues, announcing it would build a 250 MW gas-fired
plant and help the private sector build a 100 MW battery, at a
total cost of A$510 million ($385 million).
GAS SUPPLY CONSTRAINTS
Natural gas supply is becoming a problem in Australia, which
may seem ironic given the country is on the verge of becoming
the world's largest exporter of liquefied natural gas (LNG) as
the last of eight new plants come closer to completion.
In fact, the new LNG plants are copping some of the blame
for the tightening natural gas market, especially the three in
eastern Queensland state based on using coal-seam gas as the
These are being blamed for sucking domestic natural gas out
of the market and into the export LNG industry.
What hasn't helped is that some of Australia's state and
territory governments are also pursuing policies that will
restrict future natural gas supplies.
Victoria state has banned hydraulic fracturing, or fracking,
as well as shale and coal-seam gas exploration, while the
Northern Territory, New South Wales and Tasmania have various
moratoriums on fracking.
This leaves Western Australia, Queensland and South
Australia as the remaining states where onshore natural gas
supplies can be developed, and they are now in the cross-hairs
of the environmental lobby, which is opposed to any and all new
natural gas wells.
Politicians across the traditional Labor-Liberal divide are
increasingly giving in to demands to restrict natural gas
exploration, while pretending that this won't have a negative
impact on energy security and electricity prices.
But the costs are starting to become apparent, with spot
electricity prices surging over the Australian summer and
natural gas suppliers warning that they will be unable to meet
the needs of industrial customers without action being taken.
It's often the case politicians only take action when the
point of crisis is reached, and this appears to be the case in
What's needed is a holistic approach to energy supply as
Australia transitions away from coal-fired power.
This means ensuring enough natural gas is available to
provide base load generation, while scaling up renewables such
as solar, wind, pumped hydro and battery storage.
Forging enough common ground with the various stakeholders
will be the main obstacle, but more than anything else,
Australia is showing how difficult it is to end the age of coal.
(Editing by Richard Pullin)