So, what to make of the much-hyped CoAG Energy Council meeting in Canberra on Friday?
Tom Koutsantonis, the South Australian Treasurer and Energy Minister, is in no doubt. He tweeted: “Most decisive Energy CoAG in years. Climate policy integration with energy policy under way. New gas reforms top of the agenda! Very constructive.”
He went home and told Adelaide media that South Australia has “secured a comprehensive victory” in the Energy Council discussions with respect to gas policy reform and a decision to have power interconnection development regulation reviewed.
To which he added another tweet: “Energy CoAG unanimously agrees to expedite regulatory test for SA/NSW interconnection. CoAG has instructed AER and AEMO to act by December!”
What the Energy Council has actually agreed on power grid interconnection is “to review the regulatory test for investment on new assets to ensure it is effective in the current market environment,” having officials consulting stakeholders and reporting back “before the end of the year” – which is not exactly the same as “expediting the test” for a new SA/NSW link, but pollies will be pollies.
The meeting communiqué in full can be found here: http://www.scer.gov.au/publications/5th-coag-energy-council-meeting-communique-19-august-2016.
Chairman Josh Frydenberg, the federal Environment & Energy Minister, also came away upbeat. On his constituency blog, he has declared the gathering “agreed to significant reforms and a major new program of work to ensure the energy system remains affordable and reliable as we transition to a lower emissions future.”
For Frydenberg, the key take-home message is that the Energy Council has focused on increasing liquidity and transparency in gas markets, on empowering consumer choice and on “ensuring stability and connectivity” of the east coast electricity market.
The Energy Council, he claims, has “proved its ability to respond to current issues.”
The ACT Energy Minister, Simon Corbell, “greeted like a rock star” by a rent-a-crowd barracking for renewables outside the meeting place, tweeted afterwards: “Today’s meeting has committed to three things – affordable, reliable and sustainable energy” but the Climate Institute was unimpressed, tweeting: “Energy Council a missed opportunity; Oz Govt will need to step up on energy & climate reform.”
Victorian Energy Minister Lily D’Ambrosio also contributed a tweet applauding “encouraging signs for a unified path towards a sustainable and reliable market” and promptly got a green activist riposte demanding “Was climate added to the electricity and gas law objectives?” – to which she responded “Was discussed among ministers but no agreement.”
What D’Ambrosio most wants to convey to her Victorian audience (via a media statement she pushed out on Friday afternoon) is that the Energy Council has agreed to evaluate the system under which distribution networks can seek legal redress of Australian Energy Regulator decisions on their revenue-raising. She claims that $3.3 billion was added to network revenue between 2008 and 2012 via appeals against AER decisions.
Her government hasn’t won any plaudits from the upstream petroleum industry after she declined to join the rest of the Council members in agreeing to “adopt an implementation plan” for collaboration on the scientific and regulatory issues relating to gas development.
The essential ingredient for a gas market is gas, was the tart comment from Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association, demanding “firm action” on new development from all States.
What the ministers have decided to do is appoint Michael Vertigan to chair a gas market reform group that will oversee implementation of a package including creating more trading hubs, pursuing better access to pipelines, delivering better information on gas prices and encouraging more supply.
Pipeliners are decidedly not happy. The Australian Pipelines & Gas Association says ministers are “either unwilling or unable with grapple with real gas market issues.” APGA declares that “setting regulation reform above all other aspects of the gas market” is “very disappointing,” pointing out that transport costs today are $1 per unit now – what they were six years ago – while the wholesale price has doubled to $6.
Koutsantonis also argues that the meeting has acknowledged gas prices – “rather than my State’s world-leading embrace of renewable energy” – were the key cause of the “SA energy crisis” last month and he sees his government’s exploration and development approach putting South Australia in “a prime position” to capitalize on the reform plan. “We want to be gas central,” he says.
The hype about the suite of issues, of course, almost has a life of its own, not least in the media.
For example,The Advertiser in Adelaide kicked off its report like this: “Cheaper electricity and more reliable supply is being predicted because of sweeping reforms thrashed out at a Canberra summit,” called, it added, “in the wake of SA’s power crisis.” And ministers had agreed to “slash red tape” for approving new grid interconnection.
What can actually be delivered and when as a result of Friday’s deliberations very much remains to be seen.
Politicians may (and do) complain that implementation of the recent upgrade for the SA/Victoria high voltage link has taken too long but the project approvals process and the time required to actually construct complex infrastructure is inherently not fast – one wonders why some reporter doesn’t ask Koutsantonis when, if absolutely everything about the project runs on rails (so to speak), a new link between his State and New South Wales might be operational?
Those interested in the interconnection issue should read the PricewaterhouseCoopers’ review of the proposed new link between SA and NSW for Transgrid. It can be found here: https://www.transgrid.com.au/news-views/news/2016/Documents/TransGrid%20SA-NSW%20Interconnector%20Report%20(Final).pdf
Apart from anything else, the PwC 30-page paper provides a useful helicopter view of the east coast electricity transition situation.
This opening paragraph gives some of the flavor: “One of the challenges of markets in transition is that outcomes can be less predictable. We are seeing this in electricity markets across the globe. There are multiple drivers for this including the introduction of renewable generation (eg wind and solar), the closure of fossil fuel generators (eg coal-fired) and movements in commodity prices (eg oil, gas and coal) which are increasingly volatile. In a number of markets we are seeing dramatic and sudden impacts as a result of these drivers. The Australian electricity market is starting to see these impacts and it appears that South Australia is perhaps seeing this most acutely at this point in time. We hypothesize that South Australia is ‘the canary in the coalmine’ as there are early indications of other stresses across other Australian States and Territories.”
The next Energy Council meeting is scheduled for December and it is going to be more than a little interesting to see what has developed in five months’ time.
As the Energy Networks Association CEO, John Bradley, observes in a media statement on Friday’s meeting results: “ (It) is a step in the right direction, but the test will be on-ground outcomes. We have seen agreements before to integrate carbon policy, unlock gas supply and reform tariffs. Australia is running out of time to deliver for customers in a rapidly changing market.”
Many years ago – about 34 in fact – I used to think the incumbent Secretary of the Treasury in Canberra an awful cynic because of his frequent, scathing references in meetings to the “meretricious players” among the resources and energy companies lobbying the federal government. (He caused quite a stir late in his public service career when he publicly threw the same stone at some of his government’s hired advisers for sustaining ministers’ political prejudices.)
I was reminded of the “meretricious players” jibe by this week’s sudden flurry of media stories claiming to out the major energy retailers for allegedly using their market power to take a too-high proportion of end-users’ bills. (“Shocking charges of big power players revealed,” said one TV news report.)
The new fuss is based on a consultant’s report claiming that “in those parts of the NEM where retail markets have been fully opened to competition charges for retailing electricity to households have grown to be a far bigger portion of the bill than the cost of producing (what they) consume.” This is part of the ongoing argument that “Australia has the world’s most over-priced electricity” when tax is not taken in to account, an assertion that has been challenged when purchasing power is the yardstick.
The fact that the political lobbying organization commissioning the consultant’s report is running a campaign to get consumers to switch away from the “Big Three” suppliers to one that it and other environmental activists support as “the greenest retailer” and the coincidence of causing waves in the media just days before the CoAG Energy Council meeting are fuel for my cynicism, I’m afraid.
The Australian Energy Council, lobbyist for the gentailers, has riposted that electricity markets are complex and critics can cherrypick data and draw conclusions that suit them but the carry-home message from the media coverage, especially on TV, for consumers is that, yet again, they are being “ripped off.”
Hearing and reading this stuff sent me back to the Australian Energy Market Commission review of power bills for the CoAG Energy Council last December.
The AEMC told ministers then that there is significant difficulty in quantifying the retail cost segment of end-user bills and the task is “highly sensitive to assumptions.”
The commission pointed out that this component of the bill is made up, in particular, of retailer operating costs (which include billing and customer service expenses, management of bad debts and financial contracts and the costs of meeting obligations imposed by governments) plus customer acquisition and retention costs (including marketing) as well as provision for a return on investment. Some of these, it said, can be estimated but the RoI assessment requires a detailed knowledge of a company’s capital, risks, revenue and costs by jurisdiction, not information readily in the public domain.
This assessment would be “extremely difficult and costly to undertake,” the AEMC declared, “and highly sensitive to assumptions,” limiting its value.
It also pointed to a litany of reasons why RoI for retailers can vary “significantly” over time, including spending on innovation or developing and marketing higher value products.
Network and environmental costs in the final bill can be directly observed, the AEMC added, as they are passed straight on to customers but wholesale energy costs will vary considerably and factors affecting them will include whether or not a retail activity is vertically integrated with generation and how it then operates its plants to meet its load – as well as how it hedges its exposure to the spot market.
Unfortunately, caveats like these induce MEGO (“my eyes glaze over”) among journalists and politicians — if any of it is reported as background, which it has not been this time, the same would apply to the relatively few consumers who get past “gouged again” headlines and opening “shock” paragraphs of media stories.
One of the arguments being tossed around in this latest electrical storm is that it was “never intended” in the 1990s push towards deregulation for generators and retailers to be integrated. Having been on the ground during the reform process, managing AEC’s predecessor, the Electricity Supply Association, when it represented the full extent of the supply chain, I can tell you that it was quite widely recognized in the industry at the time that an inevitable consequence of the transition (that word again) would be businesses making power as well as selling it to end-users.
I think it is fair to say it was less well appreciated that at least some of these companies would also be in the gas business – the “gas versus electricity” rivalry was a strong feature of the 1980s and 1990s – but, looking back, I’m not sure why this development wasn’t more obvious.
Today, of course, kicking big business players in energy, banking, insurance, telecommunications, groceries, petrol services and so on is a factor of life because markets have evolved to feature a few of them and a larger number of smaller ones hungry to snatch even a relative few of their customers (and only too willing to play to the political and media galleries in the “rip-off” games).
There is an old joke, you know, about how pygmies eat elephants – the punchline is one bite at a time.
This is the raison d’etre of media and political fusses of the sort confected this week about electricity retailing (there are actually 22 retailers in the market on the east coast, not that anyone in media I saw thought to mention this).
Whatever rhetoric the CoAG Energy Council cobbles together to get it through this fuss, I’ll have a little wager that the next effort by the aforesaid MPs (the players, not the pollies) will be to agitate for yet another Senate inquiry and that they’ll find very willing takers in Labor and cross-bench senators.
The consultant’s report, by the way, observes “A rush to intervene may make matters worse. But this cannot be an excuse to do nothing.”
It goes on to say: “Deeper economic analysis of the retail market is needed to understand the distribution of costs and profits between engaged and disengaged customers and between incumbent and new entrant retailers. With insights gained from this, the question of whether intervention of some form might improve outcomes should be considered.”
But this didn’t make the “gouging” media reports.
This is a week when we can expect to hear a lot more about our desired transition to a lower-carbon economy as it features the CoAG Energy Council meeting to be held in Canberra on Friday (a routine forum, shifted from last month because of the intrusion of the federal election, not a “crisis meeting,” as it has been hyped).
Many engaged in this debate across Australia have their own peculiar views of the transition – the most radical being the perspective that we have to be rid of fossil fuels by 2030.
Here-in lies the core issue: free markets are always in some form of transition but the lower-carbon shift, the activists argue, must be forced.
One of the latest media reports refers to this Friday’s Council meeting considering “rebooting” the east coast power market to accommodate more wind and solar power without “extreme prices.”
Set against this, one must applaud Josh Frydenberg, in a media interview, making the rational point: “You can’t talk about transition to a low emissions future without taking into account the considerations related to a reliable, affordable and accessible energy supply.” The federal Environment & Energy Minister perhaps should have said “you shouldn’t” rather than “you can’t” because more than a few can and do.
As an example, the Victorian Greens State spokesperson on energy sees the key to avoiding incidents such as the South Australian “crisis” in this light: (We need) a national renewable distribution scheme. If you distribute renewables across Australia then you won’t have the SA problem. The wind, she reminds us, “is always blowing somewhere and the sun is always shining somewhere.”
All this is bolstered by the view of the Greens and others that “renewable storage is just around the corner, subject to government investment.”
How far perspectives like this are also held by the representatives of Victoria and Queensland who will be at the CoAG meeting table this week is a thought-provoking point, given their governments are pursuing policies driving renewables investment way beyond the RET arrangement agreed by the federal Coalition and Labor less than two years ago.
(Amid the hype there are warning voices too: the University of Queensland’s professor Paul Meredith, for example, saying that adding grid-scale battery storage to the NEM will be “highly complex” and there are risks in rushing the process that could “embed new inefficiencies in to the grid.”)
The here-and-now too often gets lost in this debate.
For example, playing with the data presented by Hugh Saddler and his team in the always-interesting monthly Cedex review of the NEM for Pitt & Sherry, I work out that the east coast market in the 12 months ending July saw black coal generation contributed 94 terawatt hours, brown coal 39 TWh and gas 24 TWh versus all renewable generation of 26 TWh, of which wind farms contributed some 11 TWh and most of the rest came from long-standing hydro-electric systems.
The coal share of the NEM supply in those 12 months, says the Cedex report, was 75.6 per cent (versus 6.1 per cent for wind and 14.7 per cent for all renewables). This indicates that Frydenberg needs to review his oft-repeated comment that coal’s share of power supply is down to 60 per cent and still falling. That number is a national profile, including non-grid supply to mining areas and remote communities – but the major market is on the eastern coast where the bulk of demand and consumers reside, with coal remaining the dominant fuel source for electricity.
The mooted transition is unarguably one of the most important issues for Australia in the first half of this century – but, as Matthew Warren, CEO of the Australian Energy Council, points out: “It’s all fun and games until someone gets hurt.”
Warren argues that South Australia has become “an accidental experiment” in how far technologies like wind and solar can be pushed in to a market (and, by extension, coal and gas plants pushed out) “before something breaks.” He urges recognition of a “simple reality”: increasing variable renewable energy at scale reduces carbon emissions but eventually leads to higher prices and greater reliability risk.
However, this is clearly not something that is obvious to the Greens, a swag of self-interested investors, many politicians and quite a lot of our media.
Warren and the Australian Energy Council do concede that the electricity system, as currently configured, is “demonstrably not delivering against its three basic objectives: keep the lights on, remain affordable, reduce greenhouse emissions.” But, the AEC argues, this is not the failure of the design of the NEM in the 1990s. “It is the result of a decade of State and federal government meddling with an extremely complex system. Good policy has succumbed to bad politics on energy.”
In a newspaper op-ed this week, Warren asserts: “A decade of political tinkering has left us with an electricity system that doesn’t work. It doesn’t deliver the right investment in the right place, it doesn’t signal a reliable and efficient transformation from high to low emissions generation, it does nothing to enable greater demand flexibility by empowering consumers to consume energy when it is abundant and conserve when it is more scarce.”
What the CoAG Energy Council agreed when it last met is that the transformation of Australia’s energy system to a lower-carbon future must be managed as an integrated, national policy process. As I have repeatedly asked, did the ministers who made this commitment actually understand what they were saying? Is there buy-in for this goal at the highest levels of their governments? And perhaps what is the impact of the dog’s breakfast of a federal election for the approach to this?
One big problem is that some of the Energy Council members are still pursuing arbitrary targets and intrusive regulation at their jurisdictional levels – and another is the ever-present political urge to pursue the quick fix.
Come Friday, will we get more rhetoric while the steamroller of populism-fuelled intervention meanders on?
Will we get more pushing on further high voltage interconnection for the east coast market without deep analysis of the impacts and the costs?
And then there is the ongoing activism for rewriting of the National Electricity Law to give greater force to attaining the green dream.
Frydenderg has told a newspaper over the weekend: “I’m hopeful of some significant reforms coming out of the meeting. The NEM has to reflect realities.”
Back in the early 1990s, Keating, Goss and Greiner, realizing the risks, came to the conclusion that creating the NEM should not be left to politicians like themselves, so they pushed in to being the National Grid Management Council to make the east coast market. One is tempted to ask do we need another NGMC to frame a comprehensive national energy strategy?
What we manifestly don’t need is more of the same populism, knee-jerking and groping-in-the-dark intervention of the past several years – but how hopeful can we be that the Energy Council on Friday will deliver understanding of this, let alone effective communication of it to the public at large?
One of the strange things about the past week is that the mainstream media chose to wholly ignore an announcement about Australia’s largest electricity region attempting to develop a new energy strategy.
New South Wales is not small beer on the national power scene: with some three million residential customers, another 300,000 business accountholders, more than 66,000 gigawatt hours of consumption and more than 10,000 megawatts of operating black coal generation, it stands above all the rest in the east coast market – and, taken with Queensland, “black coal country” accounts for some 64 per cent of NEM supply and demand.
One would assume, then, that a decision to “develop a roadmap for NSW to transition to a clean, affordable and reliable energy future,” to quote from the statement on 3 August by Industry, Resources & Energy Minister Anthony Roberts (http://www.resourcesandenergy.nsw.gov.au/__data/assets/pdf_file/0011/667496/NSW-to-develop-advanced-energy-strategy.pdf) would be a non-trivial issue for newspapers, TV and radio. One would be wrong.
The other thing I find curious is that Roberts managed to make this statement without even mentioning the role of coal or fossil fuels.
A glance at some snapshots of the State power load on Sunday illustrates how odd this is. Through the course of the first day of this week, at 8.45 am coal generation met 7,097 MW of load, at 1.10pm it was 5,745 MW and at 10.05 pm 7,078 MW. This meant that coal plants accounted for 95.5 per cent, 96.2 per cent and again 96.2 per cent respectively of State load at these three points, picked at random.
Of course, the relative contributions of coal, gas, hydro, wind and solar power fluctuate all the time, changing over the year according to the hour, the day, the weather and the levels of demand – but the coal share, even on the sunniest and windiest days, is still by a long way the “big beast” of NSW generation.
How this situation can be changed, with what generation and network resources, at what total system cost to maintain security and reliability of supply and at what cost to end-users is one of the half dozen biggest issues in NSW’s future out to 2030 (and, of course, beyond).
Now the government get-out-of-jail card for the way it framed this statement is presumably that the exercise is about “advanced energy strategy” and about a “smooth transition” to a “clean, affordable and reliable” energy future, but any view that this can be achieved without fossil fuels at all, and without coal in the next 10-15 years, is fanciful.
The risks involved in racing without due care down the power transition path surely can now be seen to be well-represented by the experience in South Australia. As Australian Energy Council CEO Matthew Warren has emphasized, the SA situation is not a renewables problem, it’s a policy and planning problem.
Anthony Roberts’ media statement seems to me yet another exercise in energy policy sophistry that is now only too common across much of Australian politics – designed to paint governments or parties a greener shade while talking up concern for consumers and assuring them they are being “empowered.” How many in South Australia, and especially among the State’s 100,000 business customers, feel “empowered” right now, I wonder?
While speaking up for his own industry, Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association, put his finger on the core point in reacting to his namesake’s statement: “Experience around Australia has shown that proper planning is essential to a smooth transition to a cleaner energy future,” he said. “NSW, like other states, needs a diverse, responsive generation sector that can maximize the use of renewables without jeopardizing energy supply.”
I’d amend this only slightly – to read “optimize the use of cleaner energy sources without jeopardizing supply.”
Malcolm Roberts, of course, is focused on the need for politicians to accept that the State should have access to sufficient gas-fired generation capacity to underpin electricity security. The NSW strategy, he said, “should step on the gas.”
He looks to next week’s CoAG Energy Council meeting to initiate action to actually start increasing eastern Australia’s gas supply.
Shortly before Anthony Roberts’ statement appeared, the Minerals Council put out a statement urging federal, State and Territory governments to take a technology-neutral approach to future generation, pointing to coal-fired plant still providing three-quarters of the NEM’s power and arguing that future strategy shouldn’t rule out a role for low-emission, high-efficiency coal technology.
For my part, I think governments in NSW and elsewhere need now to be fully focused on avoiding the trap of ricocheting from reliable and cheap power to patchy and expensive (to quote the Grattan Institute).
The institute accuses governments collectively of “a systemic failure to understand and address the consequences of poorly-considered policy.”
And the SA Treasurer is on the record as warning that South Australia’s woes today, may (he said “will”) affect other States tomorrow.
There are a heap of us on the sidelines harping on the fact that the cornerstone of good strategy has to be durable, effective, national carbon policy integrated with energy plans – but, as the States (SA, Victoria and Queensland in the current van) keep demonstrating, jurisdictions are hell-bent on going their own way on supply strategy for political reasons.
This new statement from the NSW Energy Minister does not come close to signalling that his government wants to repower the State in a pragmatic, pain-free way rather than pursue populist paths.
But how a government can be held to account in the public debate when a potentially important policy move is not even reported, let alone analyzed, in the mainstream media is not just a good question, but a critical one.
At least, in this case, I can point to the NSW re-powering issue getting a big airing in late October when a Quest Events conference in Sydney focuses on exactly this issue over two days (http://www.questevents.com.au/re-powering-nsw-2016).
I thought this conference, which I am co-chairing, to have the potential to be a valuable contribution to the wide-ranging discussion of the east coast’s power rollercoaster ride before the NSW government’s statement appeared; given the tone of this release, I feel the event has taken on even more importance.
Whatever else the nation’s energy ministers discuss when they gather in Canberra on 19 August under the CoAG Energy Council umbrella, it’s pretty certain they will focus on greater interconnection for the east coast electricity market.
Two problems – the six-month failure of Basslink with ensuing strife for Tasmania and the high profile “South Australian energy crisis” – have raised the profile of the NEM grid this year, not only for two shaken State governments but also for the federal Coalition, which sought to boost the chances of its three Tasmanian MHRs (who all lost, depriving Malcolm Turnbull of a majority as they fell) by running hard locally on support for Basslink 2.
Enhanced links between SA and both Victoria and New South Wales are now live discussion points in the media and elsewhere.
The Tasmanian and federal governments are armed with a preliminary report on the feasibility of Basslink 2, commissioned jointly by Hobart and Canberra and written in quick time by Warwick Smith. (Smith’s initial effort can be found on the federal Department of Industry website and more quickly by putting his name, Basslink 2 and “report” in to Google Search. He is now working with the two governments, the Australian Energy Market Operator and the CEFC on “credible scenarios” of how Basslink 2 could be developed.)
As SA Treasurer Tom Koutsantonis, who is also State Energy Minister, no doubt will make clear to the CoAG meeting, an interconnection discussion needs to range wider than Tasmania’s needs and desires – and one imagines that the Andrews government in Victoria, seeking to emulate SA’s rush in to the renewables woods, is more than a little interested in this supply security insurance aspect, too.
However ministers should bear in mind a warning from the Australian Energy Council: “Greater imports via new interconnectors may in turn impact the economics of existing dispatchable generators based in South Australia. This would leave SA particularly vulnerable to the implications of Victoria and NSW moving towards a similar plant mix (wind, solar, gas back up) as those regions decarbonize under State or national policy drivers.”
Not for the first time in the history of NEM development, a tangle exacerbated by the “toxic” rows over decarbonization policy, CoAG ministers would do well to pause and ask themselves what exactly they are trying to achieve? In this vein, I recall someone asking in the recent past “If the RET is the answer, what is the question?”
The risk today is that, confronted by the latest iteration of energy supply complexity, pursued by the hounds of populism and under media pressure to “do something,” our ratty crew of governments will rush in directions that seem a good idea to them at the time only to find us all enmeshed in new hassles because of “unintended consequences.” (The current fuss over the end of some OTT rooftop solar subsidies is a case in point. There are any number of others.)
One of the themes of my This is Power and other commentaries is the strong tendency (and not only in this country) of politics to run ahead of good design – far from exclusively an energy issue.
However, let’s not get too high and mighty about politics: the South Australians, for example, have had two “crises” in less than a year – the much-publicized recent one (which posed the prospect of large manufacturers temporarily shutting operations) and last November’s State blackout (also caused by an interconnector failure) that saw 20 per cent of the population without electricity. Imagine a problem that cuts power to a million people in Sydney or Melbourne and the resulting furore (not least in the media) and you can perhaps appreciate why SA’s Weatherill, Koutsantonis & Co are a touch fevered just now in their approach to their issue. “Politics” and “policy” are joined at the hip, whether we like it or not.
And let’s also not forget that a decade ago it was a panicking Queensland Premier – trying to dodge a growing political storm over recurring power cuts in the State’s south-east corner (where most of the voters live) – who spooked the Energy Council as a whole in to approving new network regulation, which eventually delivered $35 billion in NEM capital outlays in five years, causing a near-doubling of grid charges for consumers. Of course, understanding why the politicians behave like fleas on the energy griddle is one thing, condoning their behavior is another.
In our particular east coast energy circumstances today, there are not only electricity challenges but also gas supply policy problems and they run together.
In both Tasmania and South Australia, gas has been a significant issue this year – the islanders would have had far less of a hassle if they had managed their gas set-up better in order to support power supply and the SA situation, as aggrieved renewables boosters keep hollering, was hardly helped by the east coast gas development imbroglio that is now in to year five.
The challenge for the Energy Council on 19 August is not to provide a sop to the multi-headed hound of 24/7 politics or a Bandaid for current hurt but to set in train a process that will articulate the over-arching market challenge and identify key steps to address it as soon as possible. A different sort of interconnection.
A popular refrain running through public power debate at present is that the framework of the NEM must be reworked – Koutsantonis is declaiming, for example, that he wants to “smash the NEM in to a thousand pieces” – and there can be no doubt, I think, that 18 years after the market’s debut, carbon policy and fast-changing technology circumstances are eating at its foundations. But this is not a task for amateurs, however well-intentioned, and still less for ideologues; it is not, I suggest, even a task initially for energy ministers. A genuinely effective NEM resolution requires buy-in by government leaders and a change mechanism that can deliver durable, efficient market reform – which can only work if there is also a durable, national carbon abatement policy. More interconnection.
Make our energy plan national is a very substantial hurdle. To quote one recent commentator, the South Australian power system has been “flying on a wing and prayer” for a number of years. We have the Victorian government appearing to want to adopt the same approach and questions have to be asked about just where Queensland will go (with the Palaszczuk government sitting on two important Productivity Commission reports).
Of course, the situation is not helped by the final outcome of the House of Representatives election. How a hamstrung central government is supposed to exert authority in a federal system is a good question.
Whether the 19 August meeting is “crucial,” as some are suggesting, also remains to be seen but it is certainly important as a vane for the current energy policy weather on the east coast. What’s most important is that ministers shouldn’t end up spinning round and round, but produce an outcome that at least points in a viable transition direction, building on their “integration” pledge at their previous meeting in December, and makes some progress in joining the dots.
A critical question flowing from the “South Australian energy crisis” is whether the entity charged with co-ordinating our federal system of government, the Council of Australian Governments, is up to the job of co-ordinating any kind of major policy reform?
This is about more than the agenda, governance and calibre of the CoAG Energy Council; it is also about the capability of the nine governments overall to achieve anything meaningful in an important area, in this case the orderly, long-term decarbonization of our electricity system.
In thinking about this over the past week, I delved back in to my files and pulled out an interview Tom Parry gave “The Australian” late last year that is germane to the problems so much in the spotlight at the moment.
Parry, chairman of the Australian Energy Market Operator from its creation in 2009 until November 2015, was prescient in telling the paper that “there is a policy debate we’re just not having” about the issue of the impact of intermittent renewable energy on the grid and the market.
Reading this interview also sent me back to the inquiry a panel chaired by Michael Vertigan carried out for the Energy Council last year.
The Vertigan review amounted to a “can do better” report for the nine governments but was so lengthy and so couched in the convoluted language of public service that it whizzed past the attention of even the “serious” media.
Central to this report was the observation that “the council and (its advising) senior officers appear to lack a focus on strategic direction and are therefore not providing effective and active policy leadership to the energy sector.”
Since hearing from Vertigan & Co, the Energy Council has gone through the motions of preparing to do a better job and has specifically committed to integration of energy and low-carbon policy – but, as I keep pointing out, without top-level (first minsters) endorsement of this pledge, it is hard to see what can be delivered. Indeed, Victoria and Queensland seem determined to go their own way on the crucial issue of how much wind and solar power to tip in to their regional systems.
The Grattan Institute energy team, Tony Wood and David Blowers, tackled the “blame game” flowing from the South Australian experience in a commentary in “The Guardian” newspaper last Thursday. They said that, when the “agitated state” of politicians, other commentators and renewables advocates are set aside, the SA “crisis” is what happens when climate change policy and energy policy are not aligned.
With respect to the Energy Council, Wood and Blowers declared that it needs to be made to work properly.
“States can no longer go off in their own direction without considering the consequences of their actions on all States and consumers.”
East coast States, they added, have been “parochial in their approach to energy policy for too long” – they need to make decisions with the NEM in mind.
Anyone who has ever run an organization or a company can tell you that it is not enough to tell an erring sub-entity to get its act together – leadership from the top is required to set the direction and the measures of required improvement and to stand over those responsible until they deliver.
When the issue is policy (or in this case inter-linked policies) with a material impact on the national economy, on jobs, on mass market bills and on the country’s standing in the lower carbon transition effort internationally, expecting relatively junior ministers to go it alone is simply not acceptable.
Until now what we have seen is top-level focus on carbon issues (a political football), intervention from on high in the NEM without proper understanding of impacts (populism rampant) and an on-again/off-again approach to energy issues depending on the political heat being generated by specific problems – eg network pricing and now the SA “crisis”.
A real risk in the current situation is that the highest echelon of policymaking – first ministers – will throw their weight behind something like grid interconnection as a means of encouraging renewables development (a populist cause) without addressing all the other problems that also need resolution to make the “machine” (the NEM) work well again.
Malcolm Roberts, CEO of the Australian Petroleum Production & Exploration Association, someone who has had experience as a federal ministerial adviser and as chair of a State regulatory body, made the point in “The Australian” on Friday that “reducing carbon intensity is more complicated than just force-feeding more renewable capacity in to a flat market.”
He added: “Treating power generation as a zero-sum game between popular and unpopular technology is not sensible policy. Reducing emissions is essential but ensuring reliable supply is equally important.”
As he rightly also said, the problem at hand is not just about electricity. In part, it is about some States compounding the integration challenge by preventing the development of new gas reserves. Here again, a resolution is not just a matter for junior ministers – it falls to government leaders and this needs to include the Prime Minister.
It is not beyond imagination that, having had the SA “energy crisis” because of power generation problems this winter, we could face a NSW crisis next winter or the one after because of a lack of gas at a time of peak demand – if that isn’t of national importance, what would be?
The SA “energy crisis” hasn’t struck without warning. As newspapers have been pointing out, AEMO and economic consultants were identifying this risk at least two years ago.
The big issue arising out of the SA experience is not, as the Clean Energy Council is complaining, that renewable energy is being made a scapegoat but, as the Grattan Institute and others are saying, our national inability to resolve “the dismal debate” we have been having about carbon and energy policies over a decade.
The effectiveness – or should that be the ineffectiveness? – of CoAG is perhaps the still bigger issue because it impacts on much more than energy.
Is this the national issue par excellence that we are unable to comprehend because stakeholders are in “an agitated state” about their own particular concerns?
We have an electoral system that requires us all to vote – and even then hundreds of thousands of us vote “informal” – but, as we have just demonstrated again, this can produce outcomes that do not necessarily drive good government.
It’s salutary to think that Turnbull and the Coalition would now be back in Canberra with 79 seats and a workable majority, authority dented but intact, if it were not for a fringe political party that garnered less than 12,000 votes in Tasmania, threw its preference support to Labor and cost the Liberals three MHRs they did not expect to lose.
A less weakened federal government, however, would not give us integrated carbon and energy policies. In this game, it takes nine to tango and we are a long way today from a dance – it’s still mostly a scrum.
As with all problems, a resolution is unlikely unless the issue is acknowledged – and is it not time to acknowledge that CoAG overall, and certainly in energy and carbon policy integration, is not doing a good enough job?
Interesting though the “SA energy crisis” is (to use the popular media tag), and colourful though some of the exchanges have been, the bigger game is east of South Australia with the bulk of supply and consumers located in Victoria, New South Wales and Queensland — the regions where over-capacity is a serious problem and two of the trio (Victoria and Queensland) have renewables development ambitions that are now the largest in the country, Bill Shorten’s grand plan having been drowned in the whirlpool of the federal election.
The Minerals Council has been highlighting the fact that at dawn on Wednesday in these three States, the load was being borne by black and brown coal — accounting for 91.8 per cent of requirements in NSW and Queensland at a point in time (6.30am) and 98.3 per cent in Victoria — with the mainland NEM States collectively relying on 97.9 per cent fossil fuels.
The MCA’s message: access to coal-fired power is essential to ensure households, businesses, heavy industry, schools, hospitals and train networks (among other things) can operate reliably and efficiently around the clock. The council emphasises that the present South Australian situation (41 per cent intermittent generation) may not be replicated in the other States, but it “highlights what can happen with imprudent, politically-driven energy policy.”
On the wider canvas, this has been a few days when reasons for some optimism as well as the urge to throw hands in the air over the banality of parts of the energy “debate” have both been on prominent display.
Malcolm Turnbull’s decision to merge the environment and energy portfolios has met with commendation across an interesting spectrum of advocacy.
Malcolm Roberts of the Australian Petroleum Production & Exploration Association has hailed the move as delivering “the Holy Grail” of energy and carbon policy integration and the Climate Council sees it as a “lynch pin” of economic policy, doing away with “warring ministries at the cabinet table.” The Australian Conservation Foundation also welcomes the single portfolio even as it calls for a “quick” shift in energy systems “from dirty to clean.” The Clean Energy Council sees the change as “a smart step” towards addressing the policy relationship between the energy sector and Australia’s abatement commitments
On Planet Greenpeace, of course, Josh Frydenberg’s appointment to run the new department is “a blow to the Great Barrier Reef” and “a show of contempt for the Australian public.” And the Green Godfather, Bob Brown, sees it as “burying Australia’s environmental hopes and aspirations.” They would say something like that, wouldn’t they?
(In passing, after a decade of campaigning, the kindliest media coverage from Fairfax Media and the ABC/SBS networks and massive social media support, Brown’s Greens still struggle to muster a million votes — out of 15.3 million — at a federal election.)
Whether or not the state of South Australia’s electricity arrangements is a “train wreck” (Brickworks CEO Lindsay Partridge), the mood in the current public debate is for Frydenberg and his CoAG Energy Council colleagues to demonstrate policymakers and regulators can keep up with technology developments while ensuring power remains affordable (for large users as well as the mass market) and pressing on with the transition to a lower-carbon economy. They are also being urged to “take a cold shower” (Partridge again) in considering the integration of renewables in to a chronically over-stuffed NEM.
Let’s not forget the issue is inextricably linked with the failure of east coast governments to properly address domestic gas supply. APPEA’s Roberts is calling for a “more pragmatic” approach to pursuit of a lower-carbon economy in which there is a role for gas-fired generation as well as solar and wind power.
Grattan Institute’s Tony Wood raises the thought that governments may have to consider paying subsidies to ensure support generation sources, such as gas plants, are available when intermittent supply is in strife.
Wood has told “The Australian Financial Review” today that moves by Victoria’s and Queensland’s Labor government to pursue 40 and 50 per cent renewables in State power mixes could increase market volatility and consumer prices on the east coast. “Each of the States is just doing its own thing,” he says. “However you look at it, (this) is a bad idea when it is supposed to be a national market.” He points to a possible outcome of the Victorian policy that results in neighbouring NSW burning more black coal.
Frydenberg, whose new department of the Environment and Energy has been approved by the Governor-General and is in the process of hiving off from the Department of Industry, says calling the next CoAG Energy Council meeting is “a top priority.”
He attributes the SA “energy crisis” to a combination of weather, a (transmission) maintenance issue and a higher reliance in the State on intermittent capacity. The NEM issue is a lot bigger (and more complex) than that — and a sample of this is the current Minerals Council push for adoption of a four-point plan that requires a technology-neutral approach to power supply, creating an environment where nuclear energy can be considered on its commercial and abatement merits, Australia sticking to the Coalition’s existing 2030 national abatement target and allowance of the use of international carbon permits here.
To which, as Ernst & Young’s Matt Rennie pointed out in a commentary last month, can be added the fact that the existing electricity legislative and regulatory system is designed around a central generation model and “simply isn’t equipped to adapt to the dynamic and evolving technological environment.”
Turned in to political-speak, you can hear this resonating in the latest comments of Tom Koutsantonis, the SA Treasurer and Minister for Energy. “You have to ask yourself whether the market is structured properly to be able to deal with the old energies not coping with the new energies,” he declares.
Read that against the Australian Energy Council calling again for “an integrated policy process to drive the transition of the energy system to a lower-carbon future rather than relying on State-based targets and intrusive regulation.”
Meanwhile Senate power broker Nick Xenephon, his standing enhanced by the federal election, is calling for an upper house inquiry in to renewable energy when Parliament resumes at the end of next month.
Senate forays in to the electricity arena over the past several years have been less than useful and another one is not a promising prospect, especially if it is designed to push the special interests of South Australia, but it’s probably going to happen, so we should gird ourselves for the usual suspects to climb once more on the merry-go-round.
Among the many commenting this week, the Energy Networks Association’s John Bradley observes that the current situation is “an enormous opportunity to achieve true integration of policy at a time of dynamic change” and warning that the NEM “could drown under the weight of competing federal and State policies.”
I remain to be convinced that the present bout of waving is not really another sign of drowning, but there’s no denying that “lifeguard” Frydenberg has a real opportunity right now to launch a rescue operation.
The next few months could be very interesting in addressing this situation, “could” being the operative word.
I had barely put up my post on the South Australian electricity issue at the weekend (“Tomorrow’s problem today”) when I discovered that the State Treasurer and Energy Minister had given an astonishing interview to “The Australian” newspaper.
In it Tom Koutsantonis is quoted as “vowing to smash the national electricity market in to a thousand pieces and start again.”
He reportedly warned other east coast States that “the energy crisis is coming to get them – every jurisdiction is facing what we’re facing now.”
Perhaps most remarkably, Koutsantonis blamed the federal government – and presumably he means this in a non-partisan way – for “encouraging South Australia, which has the best conditions for wind, to chase the energy source as part of the RET.”
To which he added: “Wind is paid by the Commonwealth to produce power. If you are going to pay wind farms to produce electricity regardless of demand, you better make sure that it is distributed equally across the country because you can’t have a national policy implicating just one State.”
Koutsantonis is reported as calling on Malcolm Turnbull to schedule an urgent meeting of federal and State energy ministers “to undertake energy market reform,” saying “if you want a true national electricity market, you really need all of the States interconnected” – by which he means the eastern States.
“What we have,” he said, “is a series of State-based markets with very poor interconnection between them.”
The NEM, he declared, “is not a national electricity market.”
These comments follow a statement by Premier Jay Weatherill at the time of the SA Budget in mid-June, when the attention of the nation and the media was focused on the federal election, that “we need a true national energy market that supports renewable energy and doesn’t punish it.”
It is important, Weatherill said, that “as a nation we create an energy network that allows greater access for consumers to South Australia’s renewable energy endowment.” He fired off a letter to Malcolm Turnbull and to Bill Shorten seeking “immediate and unqualified commitment” to greater grid interconnection.
The Koutsantonis outburst at the weekend has been followed, according to “The Australian Financial Review,” by the Northern Territory Chief Minister, Adam Giles, calling for a “national summit to deal with issues arising from the crisis in South Australia caused by the State’s over-reliance on renewables.”
Giles is reported as wanting the summit to include a focus on the Northern Territory gas pipeline to the southern and eastern States and also on connecting the NT to the NEM.
The SA situation, he said, “transcends State or Territory borders.”
The “Financial Review” story also quotes Australia’s Dow Chemical CEO, Tony Frencham, as describing today’s eastern States’ energy situation as “a train wreck that has been unfolding for three years.”
Frencham linked LNG developments in Queensland and moratoriums on drilling for gas in Victoria and New South Wales as helping to create “a triple whammy” for energy-intensive industries.
The “Australian Financial Review” has followed this up with an editorial (“SA energy madness”) in which it accuses South Australia of “particular indulgence” in “demanding massive handouts to sustain uncompetitive manufacturing industries while at the same time indulging in a subsidized green energy push that makes the same industries even more uncompetitive.”
Now the NEM is a complex construct – physically one of the world’s biggest “machines” – and it is fertile ground for a multitude of views and claims as well, as it has turned out since about 2007, for major interventions by politicians pursuing their own agendas.
Those of a more serious mindset should, I suggest, read a new paper recently published in Elsevier’s “The Electricity Journal” under the title “Climate and electricity policy integration: Is the South Australian electricity market the canary in the coalmine?”
Written by AGL Energy economists Tim Nelson and Fiona Orton, it runs to six double-column printed pages, so I’m not going to do it justice in a few words here – but I think, in the context of the political hollering of recent days, it is worth drawing attention to the authors’ concluding paragraph:
“The current trajectory of climate and electricity policy puts Australia on a long-term collision course with real world financing constraints and customer expectations in relation to stable pricing outcomes being unmet. If Australia persists with an energy-only market, it is likely that aspects of the South Australian experience may be replicated in other regions with the market price cap in the NEM needing to lift to between $60,000 and $80,000 per MWh. In a practical sense, this means that new electricity generators will receive little revenue for most of the year, with their high fixed costs recovered through a handful of extreme pricing periods. Investors would likely balk at investments with such extreme pricing risk, causing new investment to become intractable. This would result in the compromising of public policy goals in relation to affordability, reliability and improved environmental outcomes. Accordingly, it is desirable that further reform of the NEM occur.”
Leaving aside all other aspects of the public hoo-ha of the past 10 days, and the risibility of SA politicians blaming federal governments for their current fix, the scenario painted by Nelson and Orton is, to put it mildly, highly undesirable.
The need for the integration of climate change and energy policies is a high-level imperative for Australia, one to which the jurisdictions have been paying lip service through relatively junior ministers without the high-level attention the issue demands.
By putting the heat on Canberra, and specifically Malcolm Turnbull, Weatherill, Koutsantonis and Giles are doing the country a favour, however parochial their interests.
The Prime Minister has shown no sign over the past seven months of seeing the energy/climate policy integration issue as requiring his attention.
In the present political environment, he might be pleased to have an issue to deflect attention from his other hassles.
He has a letter from Weatherill and a call from Giles demanding action.
My advice to him is carpe diem – seize the day.
As the week ends, the (Adelaide) hills and other places are alive with the sound of chin music over what the national financial newspaper describes as “turmoil in South Australia’s heavily wind-reliant energy market.”
The State’s power problems became national headline news when SA Treasurer and Energy Minister Tom Koutsantonis took what he calls “the extraordinary step” of requesting that mothballed Pelican Point gas power station be switched on to assuage the supply cost fears of “alarmed” manufacturers.
These events have brought all the trolls out from under their bridges, including those blaming the situation on privatization and others calling for yet another public inquiry (in to the cost and reliability of the State’s electricity supply) – as well, naturally, as the deep green boosters, who see developments as a sinister plot by incumbent fossil-fueled suppliers and another effort to reinforce “skewed attacks” on greater use of renewable energy.
It seems to me that the latest happenings reinforce a point made by the Australian Energy Council two months ago when it described South Australia as an “accidental experiment” – a test case of global interest of what happens when a large amount of intermittent generation replaces 24/7 but high emissions power stations.
The situation has led energy commentator Ben Heard to say “there are few worse advertisements for clean energy than the current market in South Australia,” adding that, while renewable developments are not alone in wearing blame, “the Pollyanna group-think that no line can ever be drawn to the obvious shortcomings of variable generators is starting to positively stink.”
Meanwhile Hugh Saddler, Australian National University academic and Pitt & Sherry consultant, opines this week that “the real reason wholesale electricity prices in SA are higher than in the three eastern States is that the cost of conventional generation is higher because SA does not have access to large low-cost coal resources, (being) low-quality and expensive compared with coal in Victoria, New South Wales and Queensland.”
He argues that there is “no relationship” between the share of wind generation and wholesale prices in SA and that the key drivers of the problem are high wholesale gas prices and a lack of competition between conventional generators in the State.
Saddler speaks up for a NEM rule change currently being considered by the Australian Energy Market Commission: settling market wholesale over a much shorter time than is currently the case to drive more competition.
It must be noted that another immediate cause of “turmoil” in SA power supply is that the cold blasts of winter on the southern coast have coincided with maintenance under way on the high voltage interconnector between the State and Victoria, which is the conduit for a (relatively) substantial supply of Latrobe Valley brown coal power helping to sustain the local market (contrary to that noise about SA being able to operate on “zero coal” these days).
As well, of course, this is another twist in eastern Australia’s whacky experiment with simultaneously linking its gas supply to the global market (via the Gladstone LNG developments) and failing to resolve the impediments to development of abundant additional resources for domestic use because of an ideological scare campaign about the environmental impacts of the gas industry at a time of mainstream political instability.
While all this is going on, the AEMC has announced that it has initiated a review of system security in the NEM.
This is different from reliability of supply and refers to technical management of power quality, one of those big ticket issues that never trouble the lives of consumers because it is secret engineers’ business – until it goes wrong.
As the commission explains, in order to sustain power supply in a satisfactory state for users, the security of the system “must be maintained within a tight operational range,” which is a great deal easier to do with conventional generation (eg coal, gas and hydro) than with wind and solar. In the case of South Australia, as the AEMC notes, the get-out-of-jail card in a situation where large amounts of wind and solar are being added to the system is recourse to the interconnector and the synchronous (brown coal) generation on the other side of the border.
“Where there is an outage of this interconnector, risks to system security (in SA) increase significantly.”
Higher risk and higher cost, as all should know, are the Siamese twins of electricity supply.
The Australian Energy Council points out in a website explainer this week, amusingly headlined “Power quality, the dark side of the Moon,” that a critical issue here is FCAS, which is not some joke acronym (you know, like FCUK that the hip only recently displayed on T-shirts) but “frequency control ancillary services.”
The nature of the NEM in the past has seen a very low cost of FCAS because of the availability of conventional, synchronous generation. A big trick in today’s market transition, with a growing volume of intermittent renewables capacity and inadequate high voltage interconnection (the SA situation), is to ensure that FCAS remains fit for purpose – and this raises the issue of cost and who pays.
The AEC commentary (you’ll find it at www.energycouncil.com.au/analysis/power-quality-the-dark-side-of-the-moon/) asks whether a new, larger FCAS requirement can be achieved through market signals or whether, yet again, a problem will see government intervention.
As the association darkly observes, “if the past decade of reactive government policy decisions is any guide, there is no guarantee that these (imposed) ‘solutions’ will be either fully effective or efficient.”
A big further challenge, I suggest, is getting the mass market to understand even the true bare bones of the SA issue – rather than the stuff fed to them by mainstream and social media – because, as we know too well, in our modern political environment, the role of government leaders is to follow popular sentiment, which, in a vicious cycle, is fuelled by the shock jocks, ideologists, trolls and vested interests.
Why this is vital, I’d argue, is because South Australia’s current problems are a pointer to the wider east coast issues that can (and probably will) flow tomorrow from a national “dog’s breakfast” policy and regulatory approach to the transition to a low-carbon economy.
Millions of Australians have been told this week by the News Limited tabloids, whose owners are shareholders in the One Big Switch bulk-buying business, that they are “paying the highest power prices in the world.”
The consultants’ report for One Big Switch on which that claim is based, comes to this conclusion via using money market exchange rates and excluding taxes.
Also contained in the report, but not the focus of News attention, is a comparison using estimated power purchasing parity (PPP) rates of exchange and including the taxes imposed on electricity purchases in various countries.
(PPP is used to adjust data to exchange rate differences and ensures a like-for-like comparison when purchasing the equivalent quantity of goods or services in all countries surveyed.
(A website commentary by the Australian Energy Council back in April declared that, on a PPP basis, “electricity for household consumers was the most expensive in Germany, Portugal, and Poland, while it was cheapest in the United States, Canada and Norway.” There was a significant gap of around 29 US c/kWh between the least and most expensive power prices. AEC said Australians, on average, have among the best affordability ratings on a ladder of 30 OECD countries.
(Sydney’s “Daily Telegraph,” however, now tells its readers that “more than a million NSW households are paying more for electricity than any other developed nation.”)
What the One Big Switch consultants find, on a PPP basis and including taxes, using Australian cents per kilowatt hour, is that electricity mass market costs in Portugal, Germany, Italy, Denmark and Greece are all higher than the standing tariff costs in Victoria and South Australia – the most expensive in this country.
They are also more expensive in Ireland, Japan, Belgium and Austria when Victorian and South Australian electricity market offers are taken in to account.
In New South Wales, which the “Daily Telegraph” says has “the highest power prices in the world,” all the above countries are more costly on the PPP-plus-taxes basis for householders than the State’s standing tariff rate. Residential customers in the Netherlands and Britain pay more when the market rate is the comparison.
The Quensland market rate is cheaper than in the UK, Netherlands, Austria, Belgium, Japan, Ireland, Greece, Denmark, Italy, Germany and Portugal (in ascending order).
On the PPP-plus-taxes basis, as well, households in Western Australia pay less than all these countries plus France and New Zealand – and those in Tasmania pay less than all the above plus Finland and Luxembourg.
The issue here is not the utility of a bulk-buying service – there are apparently some 600,000 Australians who find this a convenient way to pursue lower costs in a range of services, including electricity – but mass market media telling the community something that is misleading at best when the critical factor is what consumers actually pay on a like-for-like basis,.
This whole game is the more peculiar when you take in to account that the taxes excluded to help support the “highest in the world” line relate in part to efforts to boost renewable energy – which in turn is what the media and opinion polls tell us the community most favor.
As I noted in a previous post, the German Energiewende taxes, for example, add 200 euros a year to household bills.
How we are expected to have an “adult debate” about energy issues in a media environment of this nature is a big question indeed.
The challenge of getting more Australians to shop around for their power is a real one and the extent to which bulk buyers can facilitate this is surely to be supported but demonising suppliers in the media to pursue a commercial outcome should not be allowed through to the keeper without comment.
The Australian Energy Market Commission, in its latest review of the energy retail scene, notes that there are now 22 retailers in each of Victoria and New South Wales, that nine out of 10 consumers it surveyed know they can choose who supplies them and that 30 per cent of those polled were “actively investigating” options at the time.
Across the NEM, the commission found, the proportion of consumers expressing satisfaction with their power retailer stands at 73 per cent this year (up from 66 per cent in 2014) with seven per cent dissatisfied. “Being happy with their current retailer is the number one reason consumers give for not shopping around,” it observes.
The benefits of doing so, however, are real.
In NSW for example, the average residential bill in the Ausgrid network area is $1,308 annually and shopping around can see this cut $256.