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AEMC, utilities in denial as consumers flick switch to solar, batteries

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The supervision of Australia’s electricity markets has reached a new level of absurdity after the principal market rule-maker sought to portray an apparently utopian image where Australia’s electricity customers think they are getting value for money and face only one blight on the horizon – the renewable energy target.

electricity satisfaction chart.

According to the Retail Energy Competition Review, issued on Tuesday by the Australian Energy Market Commission, the level of customer satisfaction is put by Newgate Research at 74 per cent (up from 66 per cent) – and 61 per cent of customers think they are getting value for money.

The findings are extraordinary, given that most electricity customers are now being asked to pay as much for their electricity as they would if they were only attached to a diesel gen-set, and in light of the high level of disconnection, and independent surveys showing trust in utilities at a low ebb.

fig6.20 - NEM.

The idea that households think they are getting good value for money for their power even appears to be contradicted by the report’s own findings – that the level of solar ownership is likely to nearly double in the next two years, from 20 per cent to 38 per cent, and that 21 per cent of solar households are looking to add battery storage over the same time.

But the report doesn’t stop there: It largely blames the renewable energy target for the recent surge in wholesale electricity prices, saying that the departure of large generators has caused less competition in hedging contracts and caused prices to rise.

Somehow, though, the 350 page report and its 70 page addendum fails to even mention the level of market gaming by big generators cited by smaller retailers, network operators, customers and governments. It seems everyone in the industry has noticed, except the very organisation that is commissioned to do so.

The AEMC plays a critical role in Australia’s energy industry because it sets the rules of the market. But it has been widely criticised for the slowness of its response to new technologies, and its dogged defense – justified in economic rationalist terms – of the status quo.

The AEMC has been given a kick-up the backside in recent months by COAG energy ministers frustrated by its dawdling on key market reforms. The Australian Energy Market Operator has pleaded to be given control of some much-needed rule amendments to ensure the market can keep pace.

The report – channeling, as it usually does, the interests of the incumbents – was greeted with eye-rolling by some consumer advocates, who pointed out the contrast between this report and the ACCC assessment published on the same day, which describes a not-so utopian assessment of the electricity market.

“The AEMC’s latest review of the retail market shows some much-needed in-depth consideration of the issues compared with their earlier reviews, and highlights key issues with the underlying components of the energy bill,” says Craig Memery, an energy expert at the Public Interest Advocacy Centre.

“But it still reads like someone is scraping of the bottom of the red paint tin to produce a rosier image of the retail market than the rest of us are seeing.”

The problem, say critics, is that this report effectively asks the major utilities to mark their own homework, because so much about retail margins and contracts on wholesale markets is invisible. Little wonder. then, that they decided that everything should be painted in such glowing terms.

One critic, Adrian Merrick, the founder of Energy Locals and a former senior executive with EnergyAustralia, said in response to the finding of customer satisfaction:

“This is possibly the best example I’ve seen of Stockholm Syndrome in action.” Although it could also have applied as much to a regulator captured by vested interests.

“Too many now just resign themselves to the annual price increase beatings because their captor has run some nice (and expensive) TV ads.

“It’s time for customers to rise up and take control of this. Energy users themselves could be responsible for the greatest shift this industry has ever seen, and market manipulation and reports such as this simply accelerate the payback of the alternatives. ”

Merrick was particularly astonished by the findings that retailers would offer discounts of 38 per cent, or around $500 a year, when asked  by consumers. In his experience, the discounts offered are sometimes even higher, as the incumbent retailers wield their market power.

“The fact that an essential service in Australia can carry a discount between bugger all and approaching half price – given the ‘secret cupboard’ offers that retailers offer customers when they look like leaving – would be laughable if it wasn’t hurting customers so much,” Merrick says.

Quite how the AEMC managed to make no mention of the manipulation of wholesale prices in a 420 page report is a mystery.

That manipulation has been highlighted by major energy users like Rio Tinto and Sun Metals, network operators such as Spark Infrastructure, and state governments, particularly South Australia’s, along with smaller retailers such as Energy Locals and Enova.

It has been spelled out in detail in the submissions on the 5-minute rule change that the AEMC has been studying for the last two years.

In fact, it is the very basis of the original push for the rule change by zinc producer Sun Metals and the reason it is being supported by the likes of the Australian Energy Market Operator and major consumer groups.

The level of manipulation could not have been made any clearer than by the recent Queensland state government edict to its state-owned generators to change their bidding patterns.

Queensland, which for five years has rivalled South Australia as the state with the highest wholesale prices, is now the state with the cheapest wholesale price of electricity – some 30-40 per cent below its rivals.

Merrick said he was angered by the AEMC’s attempts to blame the renewable energy target for the reduced availability and higher cost of hedging contracts, an angle peddled by the AEMC that received prominent coverage – as it will have predicted – in The Australian and The Australian Financial Review.

Merrick’s company is one of those that is supposed to be victim of this, but he says the issue is not the RET, but the predatory behaviour and market power of the incumbents.

“There are more ways to achieve the benefit of vertical integration than pouring coal or gas into a traditional generator,” he said. “It would be insane for anyone to enter the market without thinking through the best way to access wholesale energy.

“Rising wholesale prices may send a retailer that hasn’t planned for volatility rushing for the exit. But the greater issue is large retailers benefiting from wholesale prices, then passing them through to customers, and then when a customer shops around the old retailer suddenly pulls an offer out of the cupboard that would be sometimes $100 or more underwater for any rational organisation to offer.

“These predatory approaches are the greatest risk to competition in the market and to the ability of new entrants to plant some blows on the incumbents. ”

Memery agrees: “The same huge disparity in retail ‘discounts’ that is reported as an opportunity for consumers to save money, is in reality confusing for people, and possibly indicative of gouging of those who don’t, or can’t, shop around.

“Worse, those who can’t pay bills on time tend to lose these bloated ‘pay on time’ discounts, which fast become bloated late payments fees in disguise.

“I hope that the ACCC’s investigations into the electricity retail market will shine a light onto these issues, and give the AEMC better insights for future reviews. “

  

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  • Brunel

    Can someone tell why the wholesale price of electrons in SA is higher than in a neighbouring state?

    I think it is due to a lack of transmission capacity.

    • juxx0r

      yep, paragraph 6:
      “Somehow, though, the 350 page report and its 70 page addendum fails to even mention the level of market gaming by big generators cited by smaller retailers, network operators, customers and governments. It seems everyone in the industry has noticed, except the very organisation that commissioned to do so.”

    • Probably more to do with the lack of competition in the market. Same issue as in Qld, but S.A. doesn’t own generators so can’t send instructions to desist. The addition of the battery storage and the government’s own gas plant – if it is ever built – should be interesting.

      • Brunel

        But there is supposed to be a single market across SA, Vic, NSW, QLD – connected via a lossy AC transmission line.

        • i don’t think the prices have ever been the same across the whole NEM. each state acts as a distinct market, but they trade with each other, if that makes sense. It true that more connections would add to competition some question whether benefit would outweigh costs

          • Brunel

            Probably something that should be looked at.

            Just about any infrastructure is cheaper and more useful than the 12 submarines costing $75 billion.

          • MrMauricio

            yeah-and spent out of the country!!!

          • Brunel

            What?

          • Adrian Merrick

            Spot on. A single connection – or even a few connections – won’t normalise the price. It’s like a massive amount of people trying to get into a train station at the same time as a moderate number are trying to get out. If there’s only one gate there will be a crush that will affect both groups. Putting in place more gates helps, but only to an extent. Unfortunately people and trains don’t always want to travel at the right times and it’s ridiculously expensive to build enough gates for rush hour demand.

      • John Blundell

        It is utterly shameful that the SA government proposes to build a gas fired plant.
        Let alone spend another $2m advertising to the public what a good job it is doing on energy.

        • Rod

          If it ever goes ahead and if it is the type some have suggested
          I applaud their plan.
          https://www.genewsroom.com/press-releases/ge-unveils-world%E2%80%99s-first-battery-storage-gas-turbine-hybrid-southern-california
          Even though it is gas powered, it is designed to manage peaks which in a high % RE grid is crucial. All of the other services it/they can provide will actually end up saving SA millions.
          The advertising is the only way they can get any traction with the constant lies coming out of the Murdoch rags and mainstream media.

          • John Blundell

            I appreciate and respect your viewpoint Rod. For the state to fund this seems strange though. We have two private sector suppliers, Engie (with inefficient old turbines I hear) and AGL, with obvious commitment to improving its efficiency. Above all we are on the threshold of a looming global climate emergency in which climate crisis becomes exponential, or where severe or unseasonal events seem to build on one another, or generate “feedback loops”, as the hot/dry/wet/cold/stormy extreme events, disease pressures, civil collapse and extinctions increase in frequency and incidence. And this means none of us realises just how incredibly quickly political decisions will have to be taken to go to ZERO emissions in energy.
            I gather the mega industrial scale battery will take care of overload and tripping of supply for several hours.

          • Rod

            It is all conjecture at this stage.
            Given the delay in any further announcements and given AGL’s TIPS A upgrade announcement, it may be on the backburner.
            If the hybrid unit/s were to go ahead, I would see them being used very sparingly (and to minimise the price gouging SA has been subjected to) White elephant maybe, but if they participate in frequency control and other grid services and they operate when spot prices are high they will pay for themselves.
            Pelican point is quite efficient at 50% however one of the units is due for a major service.
            SA’s biggest problem at the moment is having enough generation spare to cover Summer peaks over the next 2 years, (if RE is low and/or if the interconnector has issues).
            No argument from me re the urgency to get more RE into the system. In the short term peaking gas is one way to do that. At 129MWh I see the Tesla battery project as mainly about short term grid stability rather than covering generation shortfalls.

          • John Blundell

            Thanks so much for your detail Rod, You’ve furnished me with facts I didn’t know.
            Me I’m a little too given to indignation and “utterly shamefuls” in reacting to comments, posts or articles — Donald Trump syndrome. I blocked him myself :-). The hyperbole comes too easily as i plough my way through the inbox.Thanks for helping me to modify it because it means a lot to me to be able to use these fora in a contributory fashion. My special interest is education and persuasion on sustainable energy and authentic green macroeconomy. We’re in agreement about the diabolical mainstream newsmedia. So much to be done, hey..

          • Rod

            Many more learned folk on this forum than me but happy to help.
            Re: education and persuasion. I find the best way is to concentrate on the micro economy. When individuals experience the savings in energy and dollars to be made from energy efficiency and solar energy in their own home they are soon converted to the possibility of extending that to the macro level.

          • John Blundell

            For most people, yes, it begins with household and personal expenses.
            But people with greater wealth and conservative ideological beliefs – those whose social class exercise political clout – prefer to wait for disaster to strike on the micro level, in their own backyard, and even then will not acknowledge macro global reality on carbon in the atmosphere.
            Look at the SA charades and denialism after 28/9/2016 – led by the PM and the ABC in fact and tragically still grabbing airtime.

  • Mark Roest

    Re: The idea that households think they are getting good value for money for
    their power even appears to be contradicted by the report’s own
    findings – that the level of solar ownership is likely to nearly double
    in the next two years, from 20 per cent to 38 per cent, and that 21 per
    cent of solar households are looking to add battery storage over the
    same time.
    Yes, AEMC is engaged in Orwellian Doublespeak, aka massive, ubiquitous propaganda.

  • Joe

    The only value for money is what you get….from your very own Rooftop Solar! With the home batteries catching on…even more value for money to be had! With all the privatisation, The NEM has cannibalised itself. It is farcical that the utility companies and The COALition Gov. look to shift blame. RE is a convenient whipping boy for Rupert’s news rags and those radio shocker jocks. As consumers we don’t want an electricity market where profit is being gouged, we want an electricity service at a fair price, NOT extortion like what we have seen.

  • Bill Holliday

    I have been waiting for a Net Meter from AGL since last year and I am NOT happy. I am on two phases, one with an I-Credit 400, programmed with Structure 26 and the other has a Landis & Gyr EM1000. I wonder whether it is possible to just rewire the meter board so that the inverter is wired “behind the meter” and all the loads are on that phase. Which meter should I choose and would the meter play up if sometimes in the middle of the day it was run backwards?

    • Ian

      The old school meters with the disc and the dials will simply run backwards.

    • Adrian Merrick

      What region are you in Bill?

      • Bill Holliday

        Sydney inner west.

        • Adrian Merrick

          We’ve got someone in Sydney that might be able to help in some way. Just drop me a note at [email protected] and I can ask him to contact you.

  • Phil

    This is GREAT !. Consumers are not silly and they will and are starting to divest OFF the grid anyway.

    If your home and using your solar panels most of the day that’s baseload you are NOT drawing from the network much at all , if at all.

    Throw in some batteries and you ONLY need the grid as a silent genset option for cloudy days , abnormal weather or events

    Gradually the grid becomes a less useful tool and asset.

    The longer the high electricity prices exist the quicker people will embrace the renewables with battery storage as the baseload.

    If you wanted to be Green and promote renewables you could NOT possibly do it any better than the current and previous government policies have.

    • Joe

      As the Sonnen executive recently said when unveiling the SonnenFlat scheme…thank you very much, great timing, best advertising ever…and Sonnen doesn’t have to convince anyone that the current system is broken.

    • solarguy

      That’s what I’m doing, running the whole house load, including A/C’s from the PV and battery. It doesn’t just save me money, it makes me money. For instance, yesterday, PV produced 39.6kwh, consumed 16.7kwh and sent 22.9kwh back to the grid. I only need to send back 8kwh/day to brake even on the SAC charge. I can’t wait for my next bill which will be in credit.

  • Robert Comerford

    How many here got to partake in that survey??… not me!

  • MaxG

    My solution to this mess is simple: let the government utilities go back into selling electricity. This will drive the leeches out of business. Electricity prices should drop by lowered operating costs and avoided profit… the public would directly benefit. The government would write its own renewable agenda, making fossil fuel lobbying useless. But I reckon my agenda is too social :))
    Imagine the follow on savings: no regulator, no time wasting on surveys and reports, none of the fluff surrounding current activity in trying to regulate the market.

    • Adrian Merrick

      Those savings sound very attractive Max!

    • Phil

      MaxG the thought correction police are probably already on their way to see you.

      Thankfully i’m a geek and can and did go affordably off grid (as you have)

    • Alastair Leith

      WA is in government hands (Synergy is the main state owned gentailer) and we haven’t seen a large scale wind farm approved in a decade. Be careful for what you wish for! Synergy is likely to be broken up or exposed to the markets by the new government though, so all the fossilised wood who rose to the top by not understanding climate change and renewables will be wondering what hit them soon.

      • MaxG

        The question is then: why does the government not do its job?
        Also, it is easier to sell off, and have the public pay (the consequences) — what the other reason for the privatisation run was.

        Also, government policy is either lacking or not long-term; or parties change every election (sorry, I am not across WA issues).

  • Scottman

    Are these fools for real! I see 2015 figures for satisfaction, if so, I think way back then I was happier than I am now re elect prices.
    I’m glad these slow gits don’t work for the ABS we would be so far behind the eightball.
    Come on you guys/gals get up to speed this is the 21st century we have light speed communications you know.
    Do we really pay these mugs?

    • Adrian Merrick

      Yes you do. I think you (we) also pay the ABS guys that ran the last census. ’nuff said. Taking back control means there won’t be much of a market left to write nonsense reports on. That has to be a good thing.

  • Ray Miller

    Maybe the AEMC can hand out their report to the ACCC public meetings on energy pricing being held at present? If the AEMC had been present in the Brisbane meeting today they may get the true answers for their survey?
    How is it possible the AEMC still have jobs?

    • Adrian Merrick

      We ask ourselves this question every day Ray. Just wait until you see the Power of Choice rule change.

  • Grpfast

    Perhaps these gen- tailers should return some of the money they’ve ripped of their customers.
    Then we might have some respect!

    • MaxG

      It’s called taxes, which their accountants are masters to reduce to next to nothing.

  • DJR96

    The AEMC board and management have clearly demonstrated why they all need to resign and all the positions re-filled by people that understand the current situation and reform it with 21st century solutions.

    Put bluntly, they are ‘the wolves in charge of the hen house’. Industry protectionism at its finest (or worst!). Absolutely not acceptable.

  • Radbug

    A recent contributor to Zero Hedge wrote that the US grid couldn’t take the power drain by widespread adoption of EV’s. Whatever. The Australian grid is 75% of the investment of the US grid for 16% of the population. The goldplating undertaken will allow EV’s in Australia, no problem. And now, in addition, we’re looking at Li-S.

  • Les Johnston

    Vote with your feet from the big 3. They will offer 28% cut on elect and 20% on gas to stay. The report does not emphasise the reluctance of consumers to move suppliers. Whatever, the reasons, this is market failure. How is the AMEC addressing market failure?

    • MaxG

      You can hardly call it market failure if people are either too stupid or ignorant to change.

  • Alastair Leith

    From the 2016 CEC report. The correlation between renewables deployed and increased energy prices would seem to be non-existant. So the causation argument by AEMC is not supported. what this announcement by AEMC does do is paint their bias and capture by gentailers across the sky for all to see and prove they are not fit for purpose as a regulator in this sector. I wonder how many CC deniers they have in their midst too?

    https://uploads.disquscdn.com/images/fdb355743e621bda1c03bca85dbd046d621ed510a54a33114eb91a6fd7711a3c.png