by Chanticleer

Some will think it strange to link this week's collapse of Australia's most aggressive builder of large-scale solar projects, RCR Tomlinson, to Alan Finkel's independent review of the national electricity market published 18 months ago.

But there is a direct link between Australia's energy policy vacuum and the demise of an engineering company working on about $1.1 billion in solar farms in Queensland, Victoria and Western Australia.

When Finkel, the chief scientist, released his report in June last year he made 50 recommendations, and 49 of these were accepted by the federal government. Actually, to be pedantic, 49 and one-third were accepted because his 50th recommendation had three prongs.

The three prongs were: a clean energy target (CET), an emissions reduction trajectory, and the creation of an energy security board to drive change in the system. The only one of these accepted by the federal government was the energy security board recommendation.

By rejecting Finkel's call for a CET and an emissions reduction trajectory the country was left with one policy driver – the renewable energy target – which had bipartisan support.

Finkel did not think much of the RET because he believed it would potentially lock into the system high levels of emissions, despite meeting emission reduction targets agreed under the Paris Agreement.

Finkel explained this to Chanticleer last year during a question and answer session at an event organised by the General Sir John Monash Foundation.

He said nobody cares about what proportion of renewables are in the system if it is not actually doing anything to influence the most important outcome, which is atmospheric emissions of carbon dioxide that have an impact on global warming.

That is why Finkel made the focus of his report on emissions rather than the generation mix. To back that up he recommended a continuous reduction rather than a fixed target.

He did this because he feared that a fixed target would potentially lock in high emissions through the replacement of the country's old coal-fired plants with high efficiency, low emission (HELE) coal-fired plants.

Finkel believed this sort of outcome would be troublesome for the Australian economy and prevent it from transitioning to zero carbon emissions at some time between 2050 and 2100.

He said under a scenario whereby Australia replaced its coal-fired fleet with HELE coal-fired plants the country would easily meet its Paris agreement of a 28 per cent reduction in emissions by 2030 but that would lock in the coal-fired emissions for 50 years.

Whereas a trajectory to zero emissions would encourage different behaviour by those investing in new generation.

No alternative policy

The CET was a mechanism that would have enabled the electricity market operator to guarantee that Australia either meet or better the trajectory for reducing emissions to zero.

In the absence of the CET and the reduction trajectory and no other alternative policy from the federal government, the RET has been the primary driver of investment in new generation.

The latest figures from the Australian Energy Market Operator show the RET has been enormously successful in encouraging investment in solar and wind generation in return for renewable energy certificates.

The accompanying graphic shows that proposed solar projects would deliver 21.4GW of solar generation and 16.5GW of wind generation capacity. There is no doubt that Australia will easily meet its RET target of 33,000GW by 2020. Labor has said it will double the RET target to be achieved by 2030.

There are consequences from this almighty rush of renewable generation. The electricity system is like one complicated machine. It was not designed for renewable energy. It can be reliable and secure with increased renewable energy power coming into the system, but this needs to be planned in an orderly way.

Finkel's recommendation for a network-wide integrated plan was accepted by the government and AEMO is working on that. But the implementation of the plan requires significant investment in upgrading the network.

The increased renewables coming into the network have caused congestion in some places and led to a rise in marginal loss factors, which are a measure of the amount of power lost when power is flowing from the source through the system.

The stability in the system depends on where the new power sources are in the network.

The RCR collapse was partly caused by the increased time taken by AEMO and transmission network operators to integrate renewables into the system. They are being forced to conduct lengthy testing to ensure network stability.

In some cases, completed solar farms have been asked to install expensive synchronous condensers or batteries to ensure that the power coming into the system is stable.

AEMO and the transmission operators are under pressure because of the rush of projects that have already been commissioned. 

At the time of its collapse, RCR was working on 13 projects and at least nine still had work to do.

There is at least $$8.7 billion in projects for solar and wind planned for the next two years.

The exact reasons why RCR Tomlinson went into administration two months after raising $100 million in a rights issue will not be known until Jason Preston from McGrathNicol makes his first report to creditors in two week's time.

Tony Boyd