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Energy Myths

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The blackouts in South Australia and the announcement that Australia is likely to have gas shortages have spawned a range of myths that are posed as solutions to the problems:

Elon Musk and the battery storage miracle

Elon Musk has announced that he could build a battery farm that would provide South Australia with back up base load power within 100 days otherwise he will give it to someone for free.

This scheme falls under the old maxim that if an offer sounds too good to be true, then it probably is.

The problem is that such a deal is not commercially viable without a massive subsidy, or government ownership or a take or pay agreement with an energy retailer at an exorbitant price per unit of power used.

Senator Sarah Hanson-Young, who chairs the current Senate enquiry into the grid failures, says there is no problem with Musk proposal; for the concept to be commercially viable it just needs a bit of a tweak to comply with the current National Electricity Market rules.

This presumably means that the owners of the storage will get precedence to sell into the spot market when the price exceeds a benchmark.

This would eliminate the idea of a competitive market.

Elon Musk will make more money to build a spaceship to go to Mars and electricity prices will go through the stratosphere with it.

An emission intensity scheme will solve the energy crisis

In a piece for the Fairfax Media over the weekend Phil Coorey wrote that the Coalition was frightened to stick its neck out on energy policy and implied that it was behind the eight ball compared to Labor when it came to dealing with the energy crisis because it wasn’t prepared to adopt an emission intensity scheme (EIS).

An EIS is a good policy for reducing carbon emissions and it may help to encourage energy investment over the long term but it will not help the current crisis which has two aspects: misplaced government intervention to encourage over-supply of renewables and equally misplaced government intervention to limit the supply of gas for the domestic market.

In the current circumstances an EIS to reduce carbon emissions is redundant.

Electricity prices have doubled since the abolition of the carbon price due to the two misplaced government interventions which have led to the decommissioning of coal fired generators and the fact that massive gas resources have been left in the ground.

Since the electricity price rise is far greater than that contemplated under any proposed carbon price it can be presumed that it has led to a reduction in consumption of electricity and consequently of emissions.

Moreover the reference to calls for an emission intensity scheme by industry leaders is not a call for it to be imposed in present circumstances: it presumes ends to the moratorium on gas exploration and the renewable energy target.

The obvious solution to the gas crisis is to allow more exploration for gas.

The clear solution to the electricity problem is to get rid of the renewable energy target. Then an emission intensity scheme or, better, a carbon tax should be introduced to encourage investment in base load low carbon emission technology.

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Image Source – Phil Coorey: The Coalition is frightened to stick its neck out on energy policy (Photo by Rob Keating)