Senators go on the road

The strong flow of submissions to both the Senate select committee on power prices and to the Climate Change Authority’s review of the renewable energy target is providing a rich vein of information about electricity supply – and the former can be expected to gain more media attention in the fortnight ahead when senators hold public hearings in Sydney (Tuesday), Melbourne (Wednesday) and then Perth and Brisbane the following week.

One of the Senate committee submissions is from Energetics, signed by its CEO Tony Cooper.

The consultants make some good points, I think.

In part, Cooper writes: “Energetics believes that the design and operational constraints on the networks to meet very stringent reliability standards, coupled with their operational expertise (being) focussed on supply side rather than demand side options, means that operators are very reluctant to consider non-network alternatives when planning expansions and upgrades.

“Further, except for very recent times when power prices have been rising rapidly, State and federal politicians and administrators have been more concerned about avoiding interruptions than deferring expenditure.”

Energetics wants to see changes to regulation to incentivise demand side activities, a move that the Australian Energy Market Commissions seems to be embracing in its recent look at NSW distribution services.

The consultants join other critics of the electricity supply forecasters, arguing that demand projections have been “systemically over-estimated” in recent years.

Not surprisingly, Energetics speaks up for implementing time-of-use charges to deal with the continuing growth of peak demand.

It is hard to find anyone knowledgeable about the industry who is opposed to this move.

The consultants add that they favour critical peak pricing coupled with enabling technologies to allow direct control of air-conditioning units.

It is politics that stands in the way of ToU being embraced – State governments, regardless of their color, just don’t want to get on with the job for fear of consumer and voter backlash.

The real problem area in this regard is low-income and fixed-income households and Energetics observes that (1) they are currently being penalised by soaring prices anyway and (2) governments have the means to compensate them without distorting the electricity market.

Of course, the critical issue in introducing ToU pricing is a full-on consumer information campaign allied to appropriate steps to look after vulnerable consumers. How hard is this, really?

Energetics makes another point that is worth attention: incentive measures to deal with demand need to be targeted, taking in to account the localised nature of demand rather than broad-based views across a network.

As an example, it says “resident solar PVs are not a cost-effective solution when seeking to reduce late afternoon/early evening summer peak demand in a residential-dominated network area. There is not a good coincidence between peak output from solar PVs and the late afternoon peak when air-conditioners are switched on.”

The problem with the Senate inquiry and the CCA review is that they are political ploys – the first to reinforce Julia Gillard’s “I have a big stick” speech last month, about which I have written at length here and elsewhere, and the RET review is part of the price the Gillard government has paid to bring the Greens onside in the carbon price negotiations.

Despite this, both the select committee and the CCA have opportunities to add some commonsense to the current debates about both power prices and renewables – which are OTP far too much of the time.

Neither is going to be able to complain that it has not received lots of information and advice.

The challenge in both cases is to sift good advice from self-interested and/or ideological pleadings.

For one, I’d be happy to see the senators embrace this statement from the Business Council: “Electricity prices should reflect the efficient cost of providing electricity to end-users. Prices should not be artificially held below efficient costs as this can result in under-investment which can exacerbate price outcomes in the longer-term. In particular, retail price regulation and/or government intervention should not be used to artificially hold electricity prices below their efficient levels.”

I’d like to see Christine Milne, who has put herself on the select committee as the Greens representative, sign up for that.

Going beyond the Senate inquiry, I would also like to see federal cabinet embrace the BCA principle as part of the energy white paper – which is due for release late October.

The best example of why this issue is important can be found in Western Australia, where Labor governments lowered power prices way below cost-reflective levels over a decade and their Coalition successor is finding it almost impossible to go the whole way to putting an end to a pernicious practice.

Finally, I note that the investor-owned Victorian distribution businesses have made a neat point in their collective submission to the Senate committee.

“Consumers,” they write, “expect an electricity supply which delivers to their needs across seasonal extremes and supports an ever-evolving range of electrical appliances and technologies.”

Which is why, you see, when the AEMC recently undertook a survey of 1,200 consumers in NSW, some 60 per cent of respondents indicated that they were actually prepared to pay a bit more to gain greater reliability of supply.

If the Senate inquiry does no more than teach the Prime Minister, and other politicians, that the electric power business is about a lot more than sloganeering and populism, it will perform a useful service.

Comments are closed.