Today’s Blog – Friday 10th February 2017

Editorial

As noted yesterday, the South Australian electricity system experienced a controlled load shedding incident on Wednesday, during a period of extreme heat and record demands for electricity.  Result – slanging matches all round, almost entirely fuelled by prejudices rather than facts.

The simple version:

  • A large amount of wind generation has been built in South Australia – driven by the John Howard introduced renewable energy credit (REC) Federal law.  Its windy here normally – hence the investment – but was not windy on Wednesday evening.
  • Gas fired generators struggle to make money when the price of gas has more than doubled in recent years.  This has been driven by poor policy decisions – but also driven by highly irrational behaviours by big E&P companies who grossly over-invested in liquefaction capacity in Queensland in what in hindsight can only be seen as testosterone not brains driving investment decisions.
  • Fossil fuels deplete – and incremental gas supplies in the State now cost more to develop. The State’s only coal-mine was mined out.
  • The National Electricity Market was effectively designed by bankers in London to assist in the UK’s electricity privatisations in the early 1990s.  This was then copied in Australia.  It needs to be updated after nearly 30 years.

We have a very simple and zero cost solution for the SA Government – it should reverse its chickening out of changing South Australian time to Eastern Standard Time.  On Wednesday that would have given an extra half hour of rooftop solar (> 500 MW in the State) to meet the big call on starting up domestic air-conditioning as people come home.

Commodity prices

Oil prices rose overnight, with Brent closing up ~1% to US$55.67 and WTI up ~1.2% to US$53.08.  Strong gasoline futures price increases dragged crude along in their wake.

Henry Hub fell ~0.6% to close at US$3.11.

LNG and international gas

Further to yesterday’s stories on the potential for countries such as Indonesia and Australia to import LNG, the world’s largest floating storage and regasification unit (FSRU) lessor, Excelerate Energy, has just signed a letter of intent with South Korean shipyard Daweoo to supply it with up to seven new FSRU vessels.

These vessels will be capable of delivering 1 Bcf of gas per day.  In energy terms that is 293,000 Mwh.  As noted earlier in the week, the new Tesla battery powered energy storage in California can deliver 280 Mwh.  Converting to electricity equivalent, a FSRU can deliver ~500 times more electricity into an energy system than can the largest battery array currently in place.

Quote of the day

Possibly heard in recent discussions about knee-jerk changes to energy policies:

“Am I jumping the gun, Baldrick, or are the words ‘I have a cunning plan’ marching with ill-deserved confidence in the direction of this conversation?”

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