“We are getting this so, so wrong because we are pricing emissions without permitting a major technological player help us optimise the result. The losers will be Australian households and businesses.”
Here are a couple of bullet points from modelling done for the Australian Government by SKM in relation to the impact of a carbon price on electricity for Australia, with my emphasis added:
The medium action case contains a number of features that are likely to impact on price trends:
- Changes to gas prices put upward pressure on pool prices, and this is particularly evident in the DKIS (Darwin-Katherine Interconnected System) price, where CCGT (combined-cycle gas turbine) plant sets the price and is the marginal new entrant
- The assumed emissions intensity limit for new plant of 0.86 t CO2
- Inclusion of the New South Wales GGAS (Greenhouse Gas Abatement Scheme) and the Queensland GEC (gas electricity certificate) Scheme, both of which subsidise low emission generation and put downward pressure on prices e/MWh precludes the entry of new brown coal plant in Victoria, and as a result CCGT plant is the marginal plant there because there is no other viable thermal power alternative. However, the escalating cost of gas means that eventually it becomes cheaper to import energy into Victoria from conventional coal-fired base load plant in New South Wales by upgrading the transmission system. This explains the price separation between New South Wales and Victoria post 2030, which is when new base load capacity is required in Victoria
What on earth are we doing?
No other viable thermal power alternative? They mean besides nuclear power the one providing 5.7% of total global energy demand right now.
Just imagine how much simpler and more optimised Australia would be, with plunging greenhouse gas emissions and better protection for all of us from escalating power prices if:
- Nuclear power was considered a “viable thermal power alternative” in Government modelling
- The assumed emissions intensity limit for new plant was 0t CO2-e because climate change is actually urgent, it demands an urgent response, nuclear can deliver exactly that service and any new plant other than zero-carbon plant, with all we know in 2012 and beyond, is virtual insanity
Suddenly, changes to gas prices would have less impact on Australian pool prices. Suddenly, Victoria would have a new zero-carbon baseload replacement option for 2030 and beyond. Rising gas prices over the longer term would not drive the perverse result of black coal importation to one state from another in a country that is supposed to be pricing pollution. Power prices for Australian homes and businesses would sit steady from plants that are sensitive to neither fuel prices nor carbon prices.
We are getting this so, so wrong because we are pricing emissions without permitting a major technological player help us optimise the result. The losers will be Australian households and businesses.
Oh, and our climate upon which we depend for everything. Lest we forget.
PS: There is a punchline, not as if this needed one.
Section 3.1 General Assumptions of the modelling states: “The market is assumed to operate to maximise efficiency and is made up of informed, rational participants”.