Address to the Australian Energy and Battery Storage Conference
The Honourable Malcolm Turnbull AC
23 March 2022
The topic of this conference is, in my view, the single most important in the energy transition. Storage, and in particular the need for Long Duration Energy Storage (LDES), is the ignored crisis within the energy crisis. Well, at least here, it cannot be said to be ignored.
There is a lot of lazy, glib talk about how the transition to net zero requires new technologies, innovations yet to spring from the imagination of a new generation of inventors.
Don’t believe a word of it. We have the tools to do this job, right now. Variable renewable energy - wind and solar - supported by storage - batteries, pumped storage and green hydrogen - can take us to a zero emission energy world.
Of course new technologies, and refinements to existing ones, will emerge - whether it is bigger and better batteries and electrolysers, smarter turbines, or the creation of virtual power plants to name just a few.
That’s great. Hooray.
But it is no excuse for not moving fast today. We have no time to waste.
Five years ago, as Prime Minister, I visited Lismore, devastated by floods. If you had a dollar for every time someone said “once in a hundred years” you could have paid for a new town. Just a few weeks ago, Lismore was flooded again - except the water was more than two metres higher. And I heard one of our leaders talking about “once in a thousand years”. So is this the new euphemism. “One in a hundred year floods” mean every five years, “one in a thousand year floods” mean what - every ten, or seven?
Surely the arguments about global warming are over, how many more fires and floods do we need, how much more extreme weather. We have had the worst fires and the worst floods in living memory in just the last few years.
And we know that as the climate warms these extremes will only become more frequent and more damaging.
We are running out of time.
And we have to stop burning coal and gas.
Denying this is as irresponsible as it is surreal.
Of course the fires of the summer of 2019/20 were very real, as were the recent floods. But what was surreal was the Australian pavilion at the Glasgow Climate Change of Conference. It was bad enough that our federal government would not increase its 2030 emissions reduction target from the commitment made in Paris in 2015. The only developed nation not to do so. But what really tipped the scales of surreal, absurd, out of touch, craziness was the most prominent exhibit at our pavilion.
It wasn’t the world’s largest deployment of rooftop solar. It wasn’t the massive green hydrogen ambitions of Andrew Forrest’s FFI (Fortescue Future Industries). And it certainly wasn't the southern hemisphere’s largest pumped storage project in Snowy Hydro 2.0.
No, it was a message from Santos.
A gas company, promoting its plans to produce more gas but in doing so capture the CO2 and stick it under the ground.
At one level, it did have a sort of sentimental, nostalgic touch to it. It reminded me of the days when I was John Howard’s Environment Minister and we all still believed, and were advised, that CCS (carbon capture storage) would work, and be cost effective!
Well the intervening 15 years have demonstrated that it is not. But the team that brought you the gas fired recovery, would have none of that.
Honestly, it could have been worse. Angus Taylor could have arranged for someone to spray paint “Climate Change is crap” on the side of the pavilion…..in Tony Abbott’s handwriting, or perhaps presented a video loop of Scott Morrison’s unforgettable appearance in the House of Representatives with a lump of coal.
Remember “It’s coal” he said “Don’t be afraid..”
Well you know what. We are afraid. Afraid of wrecking the only planet we have got.
And to add even more urgency to this existential challenge, the world, and especially Europe, has to wean itself off Russian hydrocarbons.
And, moreover, the transition will require not simply green power to replace coal, but vastly more supplies of electricity to cater for the electrification of sectors, like transportation, household heating which rely on fossil fuels as well as the production of green hydrogen.
What a pity, we weren’t represented in Glasgow by the Government of New South Wales, instead of the Government of Australia.
Because while the Australian Government is continuing to build Snowy 2.0, but prefers to talk about gas, the New South Wales Government has acted.
Water NSW led the way in 2018 with the Pumped Hydro Road Map, with Minister Don Harwin seeking proposals for pumped hydro proposals on Water NSW’s large dams. Then in 2020, Energy Minister, now also Treasurer, Matt Kean brought the Government’s energy transition plans together in the Energy Roadmap which included a thorough and innovative programme to deliver at least an additional 2GW of pumped hydro storage in NSW by 2030.
The importance of pumped storage was brought home to me in 2016 when South Australia experienced a massive blackout. There were several factors, notably a storm that knocked out transmission lines, but one really registered with me.
We were, especially in SA, building out industrial scale wind and solar as well as enormous residential rooftop solar. This was destroying the business model of continuous coal burning thermal generation which was beginning to close. There had always been, as far as I could tell at the time, a breezy assumption that gas peakers would provide the firming capacity required but that had presupposed $4 a GJ gas which, by that time, was but a happy memory.
With much help from another speaker today, Andrew Blakers, as well as Oliver Yates, then chair of the CEFC (Clean Energy Finance Corporation), I dug into the history and operation of pumped storage. It was obvious to me we needed a lot of it. But time was pressing.
During my time with the NBN I had learned that Moore’s law does not apply to digging holes, whether they are trenches in the street or 30 hectare turkeys' nest dams. The short point wás that we could roll out solar and wind in months, but to build pumped storage required years. Batteries were coming onto the scene but were nowhere near being credible as long duration storage technologies.
So I gave a speech in early 2017 which highlighted the importance of pumped storage, followed it up with a call to Snowy Hydro and Hydro Tasmania and from that speech and those calls grew Snowy 2.0 under construction and the Battery of the Nation - inexplicably yet to be commenced.
Now Snowy 2.0 is the ultimate long duration storage asset - it will be able to generate 2000 MW for seven and a half days without repumping. Which is enormously valuable. However impressive though Snowy 2.0 is, it is very sui generis. The scheme connects two existing big dams - Tantangra and Talbingo which are 700 metres difference in elevation and about 27 kms apart. Making the connection, through a large mountain, is the challenge and so the TBMs (tunnel boring machines) are hard at work.
Now I have every reason to expect that if someone eventually builds the transmission (you would think forgetting to do this on time would be a lively issue, but I digress), there will be a Snowy 3.0, 4.0 and even 5.0. But you cannot run all of the storage for the NEM (National Electricity Market) from one location.
We need much more storage - AEMO (Australian Energy Market Operator) suggests at least another 45 GW and for all the obvious reasons of security and grid stability it should be distributed and ideally located close to existing transmission.
Even more importantly it should be, wherever possible, in a format that is repeatable. Obviously pumped storage is not replicable in the way a battery is. But the standard technique which has been used around the world in years past is worth reviving - build a turkeys nest dam high on a ridge next to an existing reservoir and establish a closed loop system.
Which brings me back to the vision shown by the New South Wales Government. Water NSW owns and operates many dams across the State and it has been calling for expressions of interest to establish pumped hydro schemes on them. There are, literally, hundreds of potential locations but it is important to get cracking and build them.
For my own part, while I love Snowy 2.0, its scale, the history, the romance of old plans lying neglected for decades in dusty filing cabinets only to be revived in 2017….we need more storage and above all we need projects which provide at least eight hours storage and more, and are in a form that can be widely emulated. The temporal asymmetry between variable renewable generation and pumped hydro can only be addressed by getting started as soon as possible.
This is particularly important in regions like the Upper Hunter, which I know well, and the New England where coal jobs, generation first then mining, are going to go. They have to. The world has to stop burning coal which means we have to stop mining it. So we need clean generation - renewables plus storage to take its place, and ideally in the same regions not only to provide new jobs to replace ones lost, but also to take advantage of the existing transmission and other related infrastructure.
But why pumped hydro? I do have a fascination with water, that is true and include several texts, ancient and modern, on roman aqueducts in my library. But the raw truth is that about 95% of the world’s stored electricity is in pumped hydro systems. They were, most of them, built to support continuous generators, especially nuclear ones - they absorbed surplus power at night and servedpeaking demand during the day. Very sensible. But in today’s world where we will have little or no continuous generation, they are more important than ever.
What about batteries? Simply put, they cannot currently provide the scale or duration of storage that we need at a remotely affordable price. That may change in time, but we don’t have time.
Why long duration? Isn’t the evening peak only a few hours most days? True, much of the time, and now.
But we have to plan for a world where we have stopped burning coal and gas and when the wind isn't blowing and the sun isn't shining we won't have any electricity unless we have stored it in some way - pumped hydro, batteries and green hydrogen being the leading options.
This presents a problem. It is easy to see a business case for a battery that can discharge for an hour or two or three or four. FCAS revenues, basic arbitrage all stack up. But storage for eight and more hours is harder to justify, at least in today’s market.
But if we want to keep the lights on, all the time, we will need it. Dunkelflaute is a delightfully German word to describe periods in the northern winter with diminished sunshine and little wind, but it is not confined to Germany. If we don’t want to build nuclear power stations and if we think there are many higher value use cases for green hydrogen than generating electricity we will need a lot more long duration storage.
So how do we pay for it? The obvious answer is by capacity payments. Work out how many gigawatt hours you need to have on standby in different circumstances and pay somebody to provide them. Plainly the NEM’s energy only market cannot do that.
One approach of course is for Government to build the storage. I guess that’s what I did with Snowy 2.0. But that methodology is no more replicable than the topology, we need signals for the market.
And once again New South Wales has provided real leadership, which is attracting global attention from other jurisdictions grappling with the same problem. While still under consultation, Minister Matt Kean’s LTESA (long term energy service agreements) policy would see the State grant an option to the developer of a pumped storage project to require the State to guarantee a level of income to the project. Revenues actually received would be offset against the guaranteed amount and revenues which exceeded it would be shared. Projects which were net recipients of state support when the option was exercised would have to share future revenues which exceeded the guaranteed revenue level. These options will be granted in a competitive process - those seeking the least support for the most long duration capacity will be preferred.
This scheme, still in development, is not like a contract for difference or a floor price for energy. And that makes sense when we talk about storage, because the policy objective is not to secure the generation and despatch of renewable electricity, but rather to make sure there is a quantity of stored electricity able to be despatched as and when required.
So if you are feeling filled with despair about the state of energy policy at the federal level, you can cheer yourself up by knowing that in this critical area of solving the crisis of LDES, New South Wales is taking a creative, proactive approach - its Energy Roadmap - which I believe will be emulated in many other jurisdictions including the United Kingdom where the plans to dramatically expand wind necessitate a similar expansion in pumped storage - for which I might add Scotland’s lochs are ideally suited, long lakes with steep sides and several good, long operating examples, like Cruachan at Loch Aw.
These old pumped storage schemes now have more revenue opportunities than their founders had ever contemplated.
But we have to get on and build - I have correctly acknowledged the leadership of New South Wales, but the other States are making great progress to fill the policy vacuum left by Canberra as well, so I am delighted to be followed by Victoria’s Lily D’Ambrosio.
As a former Prime Minister, I never thought I would say this, but “Three cheers for Federation.”