RenewEconomy - Giles Parkinson
Well, hallelujah. It turns out Australian households are going to get
free electricity – at least on the generation side – if you believe the
modelling that has been shoved at us from the Energy Security Board and
now the Australian Competition and Consumer Commission.
According to ACCC data released in its voluminous and damning report
on the electricity market on Wednesday, the average household bill in
Australia is $1,636 a year, of which $560 is made up from wholesale
electricity.
According to the ESB modelling, they are going to be able to reduce
household bills by $400 a year thanks to the reduction in prices of the
wholesale market, initially due to the impact of more wind and solar via
the renewable energy target, and then by the National Energy Guarantee.
The ACCC reckons that its suite of measures – quite separate to the
NEG – will reduce the price of wholesale electricity by $155 a year.
Bingo! If you believe these numbers, then the cost of wholesale power will be reduced to just $5 in the average household bill.
It’s a nonsense, of course – just part of the merry-go-round of
hand-wringing, economic theory, useless promises and “concern for
consumers” that has been used as cover for the outrageous surge in
electricity prices over the past decade.
ACCC chair Rod Sims is right. Customers are getting screwed at every
turn – by inflated network prices, in the wholesale market because of
lack of competition (although, he says extraordinarily, apparently not
because of abuse of market power), and in retail bills.
This has been going on in full sight of the ACCC, state pricing
regulators, federal regulators and state and federal governments for
nearly a decade now.
We, and others, have been writing about it for years. So have the
regulators themselves, in equally voluminous reports, and any number of
analysts. But precisely nothing of consequence has ever been done about
it by the authorities.
Instead, they have actually made it worse, rejecting and delaying
rule changes and policies that could encourage efficiency, demand
management, and battery storage – all of which could have moderated
prices.
About the only protection the consumer has had is to install rooftop
solar, and lately battery storage. Unsurprisingly, rooftop solar is the
main target whenever the authorities are galvanised into action.
Sims made a big deal out of network prices way back in 2011, when he
was head of IPART, the pricing regulator in NSW. He didn’t do much about
it then, although he did try to push through retrospective changes to
the premium feed-in tariffs for rooftop solar in the state.
That feed-in tariff – 60c/kWh gross – was overly generous, no doubt
about it – and the government and the regulators had been told as much
by the industry itself, who warned them that it would need to be scaled
back, and early.
But politics is politics and they ploughed on, resulting in a cost
blowout, drastic action, sudden closure, the threat of retrospective
changes and a major conflict with the industry. The retrospective
changes didn’t go ahead, but the boom in the solar market came to a
crunching end.
Now Sims is targeting rooftop solar again. Of all the 50-something
measures canvassed by Sims on Wednesday, none was so drastic as the call
for the federal government’s small scale renewable energy scheme (SRES)
to be abolished by 2021. One option canvassed was to kill it
immediately.
This is a problem. A big problem, and a frightening one for consumers.
Not only has rooftop solar delivered protection from the outrageous
pricing of the electricity market as a whole, they have also brought
wider benefits – from reducing peaks and pushing hem into the evening,
and moderating wholesale prices.
It is also the future the energy.
The Australian Energy Market Operator, network owners, the CSIRO, and
analysts such as Bloomberg New Energy Finance say that distributed
generation – which includes rooftop solar and battery storage and demand
management – will account for nearly half of capacity and generation by
2050, if not earlier.
BloombergNEF
this week said this transition was inevitable and would likey bring an
early closure of coal generation, all things being equal.
But all things are not equal, barriers remain, chief among them the
need to think differently about the grid, rather than seeing wind and
solar and other technologies as a barely tolerated add-ons to a market
for fossil fuels.
You can see that thinking has not caught on with conservatives, and
particularly not the Coalition government. For the life of them, they
can’t see beyond the need for baseload or how dispatchable capacity
could come from anything other than coal, gas or nuclear.
And it’s not caught on with regulators either.
As I reported way back in 2011,
at the height of the debate over the solar tariffs, Sims and AEMC
chairman John Pierce let it be known what they thought of solar – that
it was, and always would be, an expensive option to produce electricity
and reduce emissions.
Worse, they seem to resent the fact that people who have invested in
rooftop solar benefit from lower bills than those that don’t. How dare
they cut their bills!
Rooftop solar has fallen in price by some 70 per cent since those
days, and by most forecasts outside of vested interests and ideologues
will be the dominant form of generation across the globe. Even the IEA
sees solar as the biggest contributor to electricity by 2050.
And this is what is frustrating about the ACCC report.
It ignores the need for emissions reductions.
As ITK analyst David Leitch points out here,
and as The Greens point out, you can’t claim “technology neutrality”
and be serious about decarbonising the grid at the same time.
Not only that, the ACCC pretends the gaming in the markets is not
happening, and it does not address the inflated pass-through cost of
green schemes that make them look more expensive than they are.
It’s interesting to note that they do recognise that the cost of the
LRET (large scale renewable scheme) will disappear to zero or negligible
levels from about 2020/21, but their call to blow up the small scale
solar scheme does not make sense.
For one, it’s a scheme that is being gradually wound back anyway. The
benefits of added solar to the grid far outweigh the 40c-a-day average
cost of the scheme.
If the regulators really wanted to be clever, then maybe find a smart
way to ensure that low-income households and renters and others get to
have solar, and storage.
Instead, they apply the hand-brake, to slow down the transition. This
has been the story of Australia’s energy market for more than a decade.
Almost every report done by a statutory authority has refused to
contemplate what a decarbonised grid might look like. Sims falls into
the same trap.
And because technologies like rooftop solar and battery storage will
start in the home, or the business, the only hope for consumers, it
would seem, is that AEMO comes up with something sensible in its
Integrated System Plan.
The ACCC’s proposal for some sort of auction scheme for new projects
to bid for a government-funded tariff for years 6-15 of the asset life –
so to help lock in debt – looks interesting, although is largely
dismissed by Leitch in his analysis.
But it seems to be an assessment and an admission that the NEG will
not attract new investment in of itself – as so many different analyses
have concluded.
It’s just a little depressing that prime minister Malcolm Turnbull
still thinks this might be taken up by new coal plants, that the
Nationals and others are convinced that it would be, and that Sims
solution to back-up power is to “drill, baby drill.”
“We’re not advocating one technology or another,” Turnbull said in a
radio interview on Thursday. “We don’t need to subsidise one technology
or another. We’ve got to get lower prices. That’s what I’m on about,
lower electricity prices.” Clearly, he’s not about leading a party
taking climate change seriously.
“It is throughly disheartening that this nonsense is being bandied
around by the highest authorities in the land in complete disregard of
the native impacts on climate, health and the economy,” one energy
industry veteran emailed me today.
“It makes me want to give up and stick my head in the sand along with
the rest of the population.” Exactly what the fossil fuel industry and
their spokespeople in the government are hoping.
How the state governments can possibly reach a conclusion about the
NEG on August 10, given the implications of what Sims is proposing, and
with the finer detail of the NEG delivered just a week earlier, is
beyond comprehension.
“Trust us about the details,” say the big business lobby groups who
have championed the NEG, at the same time as saying that adding any more
renewables to the system would cripple the economy. It seems the energy
wars are only just beginning.
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