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Why invest in the national grid?

By Mike Pope - posted Monday, 8 July 2013

In most Australian States the cost of electricity has been rising dramatically and continuously, not because of the carbon tax but, ostensibly, to fund maintenance and upgrade of the national grid. The condition of the grid has apparently been allowed to deteriorate over recent decades and is now in desperate need of renovation, allegedly costing billions of dollars over the next 5 years.

Is it necessary to maintain a national grid in Australia? Or are we investing huge sums in an asset that is likely to and should be replaced by a series of super-efficient regional and micro grids? These will become necessary as technologies evolve to generate renewable energy supported by improved and cheaper electricity storage.

Ongoing global warming is causing an increase in severe weather events. In some cases this will affect the ability of coal fired power stations to operate by reducing availability of water for cooling. It also poses a direct threat to grid security. That threat comes in the form of high temperatures, increased risk of bush fires and high wind events. Any of these can damage grid towers and wires, necessitating repeated costly repairs.


This duel threat is stimulating consideration of the alternatives to coal fired power stations and the need for extensive interconnected smaller transmission networks. Government recognises the need to reduce use of fossil fuels by 80% by the year 2050, a target likely to be adopted by most industrialised countries by 2020, in order to avoid dangerous global warming and climate change.

The world is now at the start of a transition from fossil fuel to use of renewable sources to cope with ever expanding energy needs. Those needs will be increasingly met from solar, geothermal, wind and tidal sources. All lend themselves to distribution of electricity via regional or local grids. The big difference is that, with the possible exception of geothermal, all can generate electricity cost-effectively in close proximity to consumers and be scaled to meet changing demand.

Two arguments are made in favor of retaining a national grid: If local generating capacity fails due to break-down, lack of wind, or sudden demand for increased supply, how will energy be provided? At present this is achieved via the national grid, drawing on limited storage of electricity in the grid itself and surplus capacity being generated elsewhere. Second, a national grid facilitates competition between generators supposedly ensuring that the cheapest generating capacity is used. Without a national grid competition is limited or made impossible.

These arguments have some validity where, at present, relatively large fossil fuelled power stations are, out of necessity, located near their fuel source (coal mines) and supply a number of distant regions with electricity. Greater demand in one of those regions can be met by surplus capacity of a more distant power station feeding energy into a national grid connected to areas where demand is highest.

Australia, among many other countries, is moving towards electricity generation from renewable sources. This is a growing trend essential to meeting the national target of producing 20% of national energy demand from renewable sources by 2020. This development will increasingly rely on the use of wind and solar power stations that do not have to be built near a coal mine or a reliable water supply for cooling. Renewable power stations required to meet regional demand can be built in or near major population centres. They can feed directly into an efficient regional or local grid, avoiding the present need for inefficient long distance transmission.

Solar power stations are of two kinds: Small generators providing the power needs of a single household or building – eg. roof mounted photovoltaic cell (PVC) displays, whether located in a rural or urban area, making those premises increasingly energy self-sufficient. In Australia, over 1 million households now have PVC roof-mounted displays and the number is expected to rapidly increase as the cost of storing electricity for use after sunset drops, storage capacity increases and reliance on back-up from the national grid diminishes.


Large wind and solar-thermal or PVC generators feeding into a local grid can already supply the energy required by a full range of urban users, other than major industries with high energy needs. The latter could own and operate their own power stations fuelled by renewable sources or rely on supply from the local grid powered 24/7 by geothermal or solar-thermal.

The generating capacity, technology used and location of larger power stations will be determined by the market rather than fuel sources. Power stations and local grids able to generate and distribute electricity at the cheapest price will compete and the most efficient will prosper and supply market demand. Regional and local grids will have the capacity to detect and extract electricity from consumers with a surplus and deliver it to those with unmet demand.

The advent of power stations fuelled from renewable sources makes it possible for their location to be in close proximity to the consumer, obviating the need for a national grid and reducing the size of regional grids. Capital investment required for building power stations fuelled from renewable sources will be (in many cases already is) lower than for coal fired generation, making power station ownership and operation possible by individuals, (households) and communities (local government) as well as public or privately owned companies investing in the latest large-scale technology.

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About the Author

Mike Pope trained as an economist (Cambridge and UPNG) worked as a business planner (1966-2006), prepared and maintained business plan for the Olympic Coordinating Authority 1997-2000. He is now semi-retired with an interest in ways of ameliorating and dealing with climate change.

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