Business has given South Australia’s $550 million plan to fix South Australia’s power crisis and blackouts a pass mark.
That’s in contrast to the Federal government which is now furiously seeking legal advice whether about whether South Australia is breaching the rules of the national electricity market.
Significantly, the South Australian initiative coincides with a Grattan Institute report earlier this week which found that competition in electricity retailing has failed to deliver lower prices for consumers. The report found that prices in Sydney, Melbourne, Brisbane and Adelaide have almost doubled over the past decade and warned that governments will need to step in and re-regulate prices if the industry does not lift its game.
South Australia’s $550 million package includes building a $360 million government-owned gas-fired 250-megawatt plant to provide power grid stability and for emergency power needs and create Australia’s largest battery storage facility. Elon Musk’s Tesla, ZEN Energy, Lion Solar and Carnegie Energy are in the running to build the 100Mwh battery storage farm.
The plan unveiled yesterday by Premier Jay Weatherill and Energy Minister Tom Koutsantonis also sources and uses more South Australian gas for its own electricity needs.
It’s a scheme that effectively gives the state priority over the national gas market and the $80 billion of LNG plants in Queensland, which are exporting vast amounts of gas from Australia.
And in a radical plan which will delight the rural sector, South Australian Government will pay landowners and farmers 10 per cent of royalties collected from the underground gas extracted from their properties. The South Australian Government estimates farmers could get hundreds of thousands of dollars each year in payments.
Business gave the scheme some qualified support.
Australian Industry Group Chief Executive, Innes Willox said it was a good first step but more work was needed and the national market had to be preserved.
“The SA Government package is a serious response to the State’s problems. At first blush these initiatives will help stabilize SA’s segment of the electricity market by delivering extra energy supply at critical times, along with inertia and frequency control. Importantly, they will make use of SA’s full range of technological options, from its gas resources to renewables, energy storage and more,” Mr Willox said.
“It is less clear how much these initiatives will help with SA’s other energy crisis, affordability. That will be more heavily shaped by decisions in other States and at the national level. This is particularly true for gas, where the effect of SA’s sensible production incentives may be lost if Victoria and others remain closed to gas development.
“Emergency powers to intervene in market operation decisions are at first glance understandable given recent events, but we do not want a result where market governance is confused and the national character of our market is lost.”
BHP Billiton welcomed the announcement.
“It was pleasing to see the plan address the critical issue of energy security through a number of infrastructure and policy initiatives,” BHP Billiton said in its statement.
“BHP Billiton’s submission to the Finkel Review called for the need to stabilise the market in SA as a first priority and we are encouraged by the announcement to invest in battery storage, incentivise gas production while continuing to focus on meeting emissions reduction targets.”
AGL gave it a tick. “The SA energy plan appears to be a considered and comprehensive approach to meeting current challenges in the market. It outlines the key issues facing SA with regard to being a world leader in the integration of renewables,” the company said.
“Energy security and reliability are likely to be enhanced as a result of this package.”
The South Australian Chamber of Mines and Energy was also positive.
“We welcome today’s initiative — it sends a huge confidence boost to SA businesses, for which we are very grateful. We’re particularly pleased that the Government is tackling the battery storage issue … and also the gas initiative — it’s much more than a transitional fuel,” the Chamber said.
Others were more qualified.
Business SA said it needed to see more detail before it could give the plan full support.
“We do absolutely support some of the State Government’s key points, but we do have concerns with others,” Business SA said. “Can reliability and security still be guaranteed but with a lower-cost solution than spending $360 million (on a gas-fired power station)? We need to see the devil in the detail before we go out and give wholesale support across any of these policy points.”
The scheme however has enraged the Federal government.
Energy minister Josh Frydenberg said creating a “locally-made” electricity market went completely against the spirit of the national electricity market and warned it would see South Australians paying more for electricity, not less.
“SA wants to rip up that national agreement and, in doing so, will only drive up prices for its people as well as those in other states,” Mr Frydenberg told reporters.
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