Australia’s new Labor Prime Minister Anthony Albanese has promised to ramp up green energy, but a national electricity crisis is showing that fossil fuels are hard to drop. Oz’s lack of power presents a warning to America’s political class, if it is willing to listen.
Australia’s grid operator suspended the national spot market for electricity in June to prevent a blackout. Regulators ordered power generators that use fossil fuels when they could run, setting prices. The grid operator lifted market controls last week, but warned they could be reimposed if prices rise.
Australia’s left-wing climate blames the mess on fossil-fuel companies manipulating the market. Known? Some accused coal producers of deliberately withholding electricity to raise electricity prices to boost profits before being forced to shut down by climate regulation. As always, the real culprit is poor energy policy. Australia has abundant gas reserves, but lacks pipeline capacity to transport the fuel to metropolitan areas in the south of the country. Coal still generates about 60% of Australia’s electricity, and renewable energy accounts for a third. The latter is almost the same as in California, which is facing similar power shortages.
The renewables mandate in Australia has made it difficult for coal plants to turn a profit. Many have closed. Others skimp on maintenance, though they have been stressed by powering up and down to back up renewable energy. Meanwhile, coal and natural gas prices are rising globally amid the war in Ukraine and economic recovery from the pandemic. Weak solar and wind production at the start of Australia’s winter has also affected electricity supplies.
This confluence of events led to a rise in Australia’s spot electricity prices, which prompted its grid operators to limit wholesale prices. Coal and gas generators could not cover the cost of their fuel. Primarily, they halted production, which recently set the stage for the suspension of the market.
Australia’s grid problems could escalate as several coal plants announced plans to retire. While renewable energy is set to increase, they do not provide reliable round-the-clock power. It is worth noting that Australia has invested heavily in utility-scale lithium-ion batteries to store renewable energy. They are not helping much.
Grid operators say the solution to the energy crisis is to build more transmission lines to add more green energy. This is also President Biden’s plan. But building the transmission involves the same permitting headache as pipeline construction.
Jigar Shah, director of the US Department of Energy’s Debt Program Office, recently questioned whether transmission could be built to meet President Biden’s climate goals. “The only thing harder to manufacture than nuclear in this country is transmission,” he said. “The lines we’re building right now started 12 years ago.”
The lesson for America is that a forceful green transition always creates energy shortages, which then lead to urgent calls for government intervention that often creates more market dysfunction. This has happened in Europe and is now happening in Australia. Let’s hope America isn’t next.
Political cuts: The gas tax holiday is another way to divert attention from one of the contributors to inflation: a quick transition to green energy. Images: AFP/Getty Images Composite: Mark Kelly
opinion | A warning from Australia’s electricity crisis
A power station north of Sydney.
photo:
Tim Wimborne/Reuters
Australia’s new Labor Prime Minister Anthony Albanese has promised to ramp up green energy, but a national electricity crisis is showing that fossil fuels are hard to drop. Oz’s lack of power presents a warning to America’s political class, if it is willing to listen.
Australia’s grid operator suspended the national spot market for electricity in June to prevent a blackout. Regulators ordered power generators that use fossil fuels when they could run, setting prices. The grid operator lifted market controls last week, but warned they could be reimposed if prices rise.
Australia’s left-wing climate blames the mess on fossil-fuel companies manipulating the market. Known? Some accused coal producers of deliberately withholding electricity to raise electricity prices to boost profits before being forced to shut down by climate regulation. As always, the real culprit is poor energy policy. Australia has abundant gas reserves, but lacks pipeline capacity to transport the fuel to metropolitan areas in the south of the country. Coal still generates about 60% of Australia’s electricity, and renewable energy accounts for a third. The latter is almost the same as in California, which is facing similar power shortages.
The renewables mandate in Australia has made it difficult for coal plants to turn a profit. Many have closed. Others skimp on maintenance, though they have been stressed by powering up and down to back up renewable energy. Meanwhile, coal and natural gas prices are rising globally amid the war in Ukraine and economic recovery from the pandemic. Weak solar and wind production at the start of Australia’s winter has also affected electricity supplies.
This confluence of events led to a rise in Australia’s spot electricity prices, which prompted its grid operators to limit wholesale prices. Coal and gas generators could not cover the cost of their fuel. Primarily, they halted production, which recently set the stage for the suspension of the market.
Australia’s grid problems could escalate as several coal plants announced plans to retire. While renewable energy is set to increase, they do not provide reliable round-the-clock power. It is worth noting that Australia has invested heavily in utility-scale lithium-ion batteries to store renewable energy. They are not helping much.
Grid operators say the solution to the energy crisis is to build more transmission lines to add more green energy. This is also President Biden’s plan. But building the transmission involves the same permitting headache as pipeline construction.
Jigar Shah, director of the US Department of Energy’s Debt Program Office, recently questioned whether transmission could be built to meet President Biden’s climate goals. “The only thing harder to manufacture than nuclear in this country is transmission,” he said. “The lines we’re building right now started 12 years ago.”
The lesson for America is that a forceful green transition always creates energy shortages, which then lead to urgent calls for government intervention that often creates more market dysfunction. This has happened in Europe and is now happening in Australia. Let’s hope America isn’t next.
Political cuts: The gas tax holiday is another way to divert attention from one of the contributors to inflation: a quick transition to green energy. Images: AFP/Getty Images Composite: Mark Kelly
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