In the chaos and complexity of energy in Australia, one topic has always cut through the noise: blackouts.
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topic → cut → noise
Or, more precisely, the need to avoid blackouts at seemingly any cost, so untenable are the political consequences.
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consequences → avoid → cost
It is for this reason that so much of Australia's energy planning goes towards making sure there is always enough capacity to keep the lights on.
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much → go → lights
"When people say, 'Oh, we've breached the reliability standard, therefore blackouts', the reliability standard that we have is incredibly, incredibly tight," Tristan Edis of Green Energy Markets says.
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Edis → say → Markets
To be exact, Australia's "reliability standard" prescribes that consumers should expect their electricity needs to be met 99.998 per cent of the time.
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needs → prescribe → time
In other, albeit simplified, words, no more than 0.002 per cent — or 10 minutes — of their demand should go unserved across an entire year.
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cent → go → year
This does not include power lost because of outages on the poles-and-wires network, a much more common occurrence.
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This → include → network
For more than two decades now, one document has been central to ensuring Australia's onerous reliability standards are maintained.
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standards → ensure → decades
It's called the "electricity statement of opportunities" and it's handled by the body that runs the country's biggest electricity system — the Australian Energy Market Operator.
When guidance goes wrong
Dylan McConnell from the University of New South Wales says it's called a statement of opportunities for a reason.
He says it shows where there are likely to be supply gaps in the decade ahead, thereby signalling where new energy projects would be most needed.
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projects → call → decade
"It says everything will be fine if we do these things," McConnell says.
"
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McConnell → say → things
It's essentially supposed to provide guidance to the market on where reliability issues may emerge in the future.
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issues → suppose → future
I guess it's to suggest where new projects would be valuable to ensure that system reliability is maintained."
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reliability → guess → ?
The statement of opportunities is now counting on projects that may not be built on time.
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that → count → time
Many, they say, may never be built at all.
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they → say → ?
And they warn that fundamental changes to the way the reliability assessment is carried out are hiding major problems with Australia's energy transition.
"At the moment, it's probably the case that we're downplaying some pretty significant risks and challenges ahead of us, and that has consequences," McConnell says.
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McConnell → warn → consequences
Among those consequences, he says, are higher wholesale energy costs in the event forecast generation and storage does not arrive in time or is simply not built.
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generation → say → time
Partly, he says this is a function of supply and demand.
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this → say → supply
If there's less supply than was forecast by the end of the decade, McConnell says prices will inevitably increase to reflect that scarcity.
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prices → be → scarcity
Equally, he says the market operator will turn to emergency measures to ensure supply is sufficient.
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supply → say → measures
These measures could include paying big energy users a premium to turn down or turn off their use at times of stress on the system.
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measures → include → system
Or it could be shelling out small fortunes to the operators of diesel-fired generators to provide critical back-up power.
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it → shell → power
Either way, McConnell says, the measures are not cheap.
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measures → say → ?
On top of this, he says governments themselves would step into the breach to stave off any shortfalls in supply.
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governments → say → supply
The lever most likely to be pulled would be the extension of ageing coal-fired power plants such as Yallourn in Victoria and Eraring in New South Wales.
"At the end of the day, blackouts and unreliable electricity is politically untenable," he says.
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he → pull → day
AEMO did not always publish such a rose-tinted view of reliability.
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AEMO → publish → reliability
If anything, Edis of Green Energy Markets says the agency used to take a much harder line that was arguably too conservative in its assumptions.
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that → say → assumptions
He says it effectively underestimated forecast supply because of "silly rules".
"And now it's probably gone too far the other way," Edis says.
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Edis → say → rules
Key to the change is the way AEMO includes projects in the reliability outlook.
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AEMO → include → outlook
Historically, he says it was only those projects which were either existing or committed that got a guernsey.
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that → say → guernsey
Put another way, the plants had to be in the ground already or under construction to be used in the forecast.
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plants → Put → forecast
Since 2023, however, he notes AEMO has been including "anticipated" projects in its central assessments.
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AEMO → note → assessments
To qualify as anticipated, he says projects need to satisfy at least three of five criteria: land, contracts, planning, finance and construction.
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projects → qualify → criteria
But he says meeting that requirement is too low a hurdle and does not guarantee that a development will go ahead.
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development → say → requirement
"If people are assuming that those anticipated projects will materialise … they're going end up with a rude shock," he says.
"
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he → assume → shock
And so we do have a problem on our hands.
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we → have → hands
It's a viewed echoed by Paul McArdle, a respected electricity market analyst at Global Roam.
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It → view → Roam
In a series of reports, McArdle wrote the changes to the reliability forecasting process were tantamount to "a sleight of hand trick".
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changes → write → trick
He said the shift away from sober planning to a "rose coloured glasses" alternative had gone largely unnoticed.
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shift → say → alternative
A prime example concerned financing, which almost always involved borrowing money to ensure a project can be built.
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project → concern → money
Typically, he said projects needed to have a long-term sales deal with an electricity user to secure funding from banks and other lenders.
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projects → say → banks
…and 23 more, not listed.
The Aporia