$550m battery, gas plant and more renewables in the pipeline

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  • State government to get decision making powers on production and distribution
  • Prices across Australia not set to budge in the next two years
  • Questions still linger about gas supply
  • SA Premier beats Musk at his own game

Fed up with being at the mercy of an ill-planned push for renewable energy generation, the South Australian government has bitten the bullet and is set to push through a massive investment to avoid a repeat of this summer’s statewide blackout.

The news that the investment will not be funded by the taxpayer, but through budget surpluses, should be music to the ears of SA residents and it should also help the Eastern coast as well. The announced plan will take time to come to fruition, and no doubt there will be cost overruns and delays, but at least it will help settle the markets in terms of the future security of supply… at least on the surface.

SA’s investment could be a pressure valve

If SA can pioneer battery technology and have a gas-fired plant as a backup in the event of power demand spikes, it will ease the pressure on Victoria’s interconnector, and in turn, New South Wales.

Prices are always influenced by demand and supply. If the supply is there, or at least forecast for the future, market forces should do their thing and prices should stabilise across the board.

Energy prices are high because retailers are buying into contracts in advance, which are being pushed to record levels due to supply not meeting projected demand. Those costs are then passed on to the end customer.

This plan could be a game-changer if implemented properly and the South Australian government does deserve some credit for intervening. Those with a progressive outlook might look at this and wonder if Australia is going back to the days of a state-controlled economy. But the time for the market to right itself has long gone – if the state government did not put its foot down and actually emphasise that it was doing this to specifically put downward pressure on pricing, then SA would have experienced even more outrageous price increases.

Better planning needs to be followed up to ease prices

SA seems to have thought this one through – a second gas-fired power plant will be built by the private sector, but will be bound to sell its wares to the state. However, there is still a big elephant in the room… where is the gas going to come from? Australia is one of the most energy-rich nations in the word, but we are still in a bizarre situation where we are exporting gas to other nations and leaving ourselves with a shortfall. This is due to the preconceived notion that renewables would solve our woes. What the politicians forgot in their rush to be paladins of the renewables movement, was that renewable energy sources are at the mercy of the weather. Put simply, if it’s not windy, or it’s not sunny, then there’s not enough power. No one thought of a redundancy plan. SA is seeking to redress this situation and in turn, it should help destress traditional energy supply units in Victoria and NSW.

Planning for the future

SA has learned its lesson though and it is seeking to bind the private supplier to a state security quota.

It does seem like a decent plan and SA, under the stewardship of Jay Weatherill, has set the bar. But for this to work, it needs a cohesive and holistic approach. Federal Government Prime Minister Malcolm Turnbull is set to meet gas producers this week and is also planning a summit with energy producers in the near future. Given that Western Australia has booted out the Liberals in favour of Labour, it is time to stop the political bickering and pull on the same rope. The PM must muster his troops and rally support across the board and sort out this mess before it gets to a critical mass. On a side note, the silence by politicians in the wake of billionaire Elon Musk’s claims that he could sort this out in a couple of months suddenly makes sense, despite the satirical current affairs programmes’ obsession with him. SA is going to play him at his own game. Who knows, it could have been marketing and Tesla could very well be in the energy mix.

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