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PM opens up energy battlefront with SA Liberals

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The Prime Minister’s prescription to drive down power prices has put the Coalition Government in direct conflict with the South Australian Liberals over a key element of the state’s energy future.

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Malcolm Turnbull told the National Press Club yesterday that energy prices would be one of the year’s defining political issues.

He pushed “clean coal” generation and large-scale storage as ways to prevent South Australia’s cost and reliability issues spreading to the rest of the market.

But he also slammed the states for banning unconventional gas extraction, or fracking, saying more onshore extraction was “desperately needed” to provide cheaper and more reliable energy.

The argument puts him at direct odds with South Australian Liberal Leader Steven Marshall, who has promised a 10-year moratorium on fracking – or unconventional gas extraction – in the South-East of the state.

Turnbull said “state bans on onshore gas development will result in more expensive and less reliable energy and, without gas or substantial new forms of energy storage, where will the firming power come from, to support intermittent renewables like wind and solar?”

He said the Federal Government would offer incentives to the states to re-start onshore gas extraction.

In South Australia, the Labor Government strongly supports unconventional gas exploration, in contrast to governments interstate, including Victoria and Northern Territory, who have moved to ban the practice.

Federal Energy Minister Josh Frydenberg, visiting Adelaide today, repeated the Prime Minister’s message, saying states needed to support onshore gas extraction because “more gas means more jobs means lower electricity prices and means a more stable system”.

While he slammed the State Government for increasing renewable energy in the state without proper consideration of its impact on prices and reliability, he made it clear he believed gas generation was a key component of fixing the local network, along with increased storage capacity.

“What the Prime Minister referred to yesterday in addition to his discussion of coal and gas was also talking about storage,” Frydenberg told ABC Adelaide’s breakfast program. “Now, that would have a real impact here in South Australia.

“If you can create more storage capacity for the wind and the solar power that you’re generating today that could help stabilise your system and that could be very important. So what the Prime Minister has done is he’s written to the Clean Energy Finance Corporation and ARENA, asked them to start a new round of funding for large scale storage and they’ve announced that they will do so immediately.”

Frydenberg met with Marshall this morning and fracking was included in a “broad-ranging discussion about how we can deliver the cheapest and most reliable electricity possible”, according to a spokesman for the Liberal leader.

State energy minister Tom Koutsantonis described Turnbull’s clean coal push as a “fairytale”, saying market analysts predicted clean coal would produce very expensive power.

“Companies are not going to make a 50-year investment decision to build new coal-fired power stations when gas and renewable energy is cheaper and cleaner,” he said.

“Coal is also being phased out of the market because of the subsidies offered by the Federal Government to cleaner forms of energy. The Prime Minister is basing his support of new coal-fired power stations on misplaced ideology rather than science.”

He also slammed Marshall over his proposed fracking moratorium, saying he wanted to ban “the very commodity electricity generators need more of if we are going to see power prices come down”.

Marshall told InDaily that “practical outcomes not ideology will drive energy policy under a Government I lead”.

He said the State Government should be working through “all potential solutions to South Australia’s energy crisis”.

“This assessment process must be undertaken urgently, methodically and free of political interference,” he said. “A suite of coordinated energy policies will be needed to restore cheap, reliable power to South Australia.”

However, he confirmed that fracking in the South-East would remain off the table.

“The State Liberals do not support fracking in the South-East,” he said. “We support the continuation of this activity in the Cooper Basin, where it has occurred successfully and safely for decades.”

Energy analysts have also questioned Turnbull’s clean coal push, suggesting the so-called “ultra supercritical” power stations weren’t the most cost-effective option for building a more reliable grid and reduce pressure on costs.

Dylan McConnell, from the Melbourne Energy Institute, has analysed the potential contribution of clean coal technology to meeting carbon reduction targets and found it stacked up poorly next to renewable energy.

He told InDaily that emissions from the electricity sector could be reduced by 27 per cent if coal powered stations were replaced with “ultra supercritical”coal plants supplying about 20GW of power.

However, the cost of that power would be about $62 billion, compared to $24-34 billion to achieve the same emissions reductions using renewable energy sources.

McConnell also said a coal plant wouldn’t be particularly useful to South Australia in reducing costs because it would likely have a very low utilistation rate, “which means the cost per unit output would need to be very high, and you would have quite volatile pricing”.

While he said a coal plant could improve the reliability of the system, it would be a very expensive way to do that.

He favoured other options, such as increased storage (an option flagged by Turnbull yesterday). Storage options included batteries or pumped hydro, which uses excess energy to pump water from a low point to a high point, where it is held in a dam until required. The water is released and used to turn turbines.

Tony Wood, head of energy at think tank the Grattan Institute, has also raised questions about clean coal as a feasible option for reducing emissions and costs.

“The current cost of these technologies is considerably higher than that of existing plants,” Wood wrote on The Conversation website. “And the scale of the required investment, combined with climate change policy uncertainty, makes it highly unlikely that such plants could be financed without government backing. There were no hints from Turnbull as to how this might be provided.”

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