Profits from Adversity !

There is no doubt that Mother Nature delivered a scorcher to Australia this past weekend and it is not without warning. The pundits have been talking about global warming for years and our coal fired electricity generators have given way to solar and wind because of public pressure.

We came perilously close to widespread blackouts.  In particular, demand for air conditioning in the eastern states threatened to exceed generating capacity and the government stepped in and demanded big industrial users reduce their usage to supplement power to homes and retail businesses. Of course, this came at a cost to the bottom line of those same industrial users.

This states biggest industrial user is Tomago which consumes between ten and twelve percent of all the power generated and has a price contract that goes back to 1991 with AGL which shields them from the imposition of spot pricing during power shortages.  The terms allow AEMO to demand they lower usage in emergency situations.

It seems that just such a requirement saw Tomago shut each of its three potlines in sequence for seventy-five minutes and that may have been the reason we avoided rolling blackouts at the height of this heat wave.  Tomago warns that its profitability rests on continuous production and that restarting potlines in times of high heat is a dangerous task for the workers involved.  World aluminium production has problems and many plants have closed.  We need to be careful not to undermine the viability of this Australian manufacturer.

Electricity generation in Australia used to be a state matter.  It is now part of a national grid and is a mix of coal fired power stations, natural gas power stations, hydro electric generators,  wind farms, solar arrays - and the solar input from the roof assemblies on many Australian homes.  This mix of power is transferred from state to state when demand in highest - and when supply is lowest the spot price charged spikes.  At the height of this emergency it reached $ 14,000 for each Megawatt hour.

Some pundits claim that there was a gap between public use and availability caused by this Tomago load lowering and that AGL had the opportunity to invoke the spot price market and make a quick million dollars profit.  This is in keeping with what happens in all other forms of commerce in which a spot price is compounded by shortages, but making a profit from an emergency will rankle with many people.

Mother Nature just delivered a warning we would be wise to heed.   We need to get our act together and decide how we generate enough electricity to cover our base load, and that will never be possible with renewables.  This country is not big enough to provide areas where the sun is always shining and having a favourable wind to turn windmills is unreliable.  It is perfectly clear that the options are either coal, natural gas - or nuclear.   Nothing else can provide the reliability to deliver a base load in all conditions, day or night on a 24/7 basis.

There is now every expectation that the conditions we have just experienced will return again each summer.  We are courting the disaster of retreating to third world conditions of unreliable power supply unless we make decisions and put in place the generating capacity to meet our needs under heat wave conditions.

We no longer have the choice of fudging the hard decisions between coal and nuclear with endless discussions.  The future prosperity of this nation is now at stake !