rss
52

Australia energy policy turns into a farce and a public circus

Print Friendly
20170830001315707097-minihighres

(AAP Image/Dean Lewins) NO ARCHIVING

The circus that has become Australia’s federal energy policy came into full view on Wednesday, as the Coalition government danced around the very policy decisions that it needs to make, and energy utilities intensified their own internal warfare over who was to blame for soaring electricity prices.

Prime Minister Malcolm Turnbull and energy minister Josh Frydenberg summoned senior energy retailers to yet another summit, supposedly to get them to promise they will tell consumers how badly they are being screwed on prices, and what they can do about it.

Turnbull says that two million Australians are paying more than they should be for electricity, apparently those attached to so-called “standing offers”. But this misses the point completely: All Australians are paying way more than they should be for electricity.

It costs as much to plug in a kettle into a socket in the major cities and regional centres as it would in a remote community on diesel. It is a complete and utter failure of markets, policy and regulation.

And while the energy CEOs sat there trying not to laugh out loud, yet another series of reports were released highlighting the real issues that are not being addressed: the rampant gaming of wholesale markets, the need for a clear long-term policy, and why ambitious clean energy targets might be the quickest way to slash prices.

The gaming of wholesale markets has been well known, and documented, for some time. It is one of the key reasons why one of the country’s biggest energy users is pushing for a change in market rules, and why that rule change was so fiercely resisted by the coal and gas generators.

Snowy Hydro, which has also opposed those changes, had the gall on Wednesday to point the finger at others over the rise in wholesale prices, and to complain about the lack of subsidies for its Snowy Hydro generators, built decades ago. (It also claimed the RET amounted to 20 per cent of bills, which is rubbish).

Screen Shot 2017-08-31 at 1.20.01 pm

As has been documented by various reports by the Australian Energy Regulator, Snowy itself is not above manipulating markets for its own profits, as we outlined here. It is all perfectly legal, and what ACCC chief Rod Sims has admiringly called the “market at work”.

Consumers have been comprehensively screwed on all three components of their electricity bills – by the networks, and more recently by the fossil fuel generators, and the big retailers (often the same companies).

The generators and networks are now blaming each other. Snowy’s Paul Broad lashed out at the gold plating of networks, saying consumers had been “done in the eye”, while the networks have in turn lashed out at the obvious manipulation of prices by the gen-tailers.

Smaller retailers – such as Energy Locals and Enova – have pointed out there is a pox on them all.

A report by Schneider Electric – a heavyweight in the global energy industry – suggests that AGL and Origin Energy in particular had been bidding up prices 50 per cent more than they should have been in NSW, through aggressive and opportunistic pricing, adding $35/MWh to the wholesale component of retail bills.

Schneider points out that despite this high pricing, much of the black coal capacity has gone unused – something that had been visible from AGL Energy’s own accounts, where the use of coal and its cost had barely shifted in the past year, but its revenues had soared.

This uncontrolled but legal gaming has been called out by the likes of network operator Spark Infrastructure, and smaller retailers like Energy Locals and Enova, as well as numerous analysts like Dylan McConnell, the South Australia state government and RenewEconomy’s own reports.

It was laid bare by the actions of the Queensland Labor government, which managed to achieve a major cut in wholesale prices when it told its own state-owned generators to pull their head in ahead of the impending state election.

Yet the federal Coalition has only ever attacked Queensland Labor on this, and dares not upset the powerful cartel that run the nation’s fossil fuel generators.

Instead, it has made a song and dance about “visibility” of the electricity bill, knowing full well that the retailers have all sorts of means of slicing and dicing these bills to ensure their profit margins remain bountiful. The CEOs must be struggling to contain their mirth.

The Australian Conservation Foundation released a report outlining what is already known, that the government’s current target of a 26-28 per cent cut in emissions by 2030, and the outline of the Finkel Review’s Clean Energy Target, is clearly inadequate.

NEM annual average.

But it also contained modelling by Reputex which showed that if the target was raised, to a minimum 45 per cent as recommended by the Climate Change Authority, or even to 63 per cent to meet its share of an increasingly urgent climate goal, then this would actually result in lower wholesale prices, because of the influx of cheap wind and solar.

Its modelling shows a “minimum” 28 per cent CET would bring in more wind and solar, reduce the stranglehold of gas and push wholesale electricity prices down towards $60/MWh in 2020.

But it says a 45 per cent CET would result in an even more aggressive build-out of clean energy, leading to more competition and push wholesale electricity prices below $40/MWh by 2023.

That is less than half the price of the average wholesale price in any state in 2017, and nearly two-thirds cheaper than in Victoria and South Australia.

Of course, these reports were dutifully ignored by Turnbull and Frydenberg, who are still – ostensibly – trying to massage even a modest CET design passed the right wing of their own party, and holding out that there is a role for new plants that are hilariously being described as “clean” or “low emissions”.

But this conservative rump remains bitterly attached to their climate denial, their obligations to fossil fuel lobbyists and their bizarre opposition to any new technology that threatens to upturn their horse and cart. And they have the numbers to intimidate the PM.

The Coalition has only itself to blame for the political mess it has created, scrapping the carbon price, creating an investment drought as the right wing tried to scrap the renewable energy target, and then seeking to pass the blame on to state Labor governments frustrated by the inaction in federal parliament.

But the utilities have also only themselves to blame for the business mess they have created – having taken advantage of every wrinkle and hesitation in climate and energy policy, an obliging regulatory regime and an uninformed consumer base to maximise their returns.

We can now expect an outright war between the networks and the gen-tailers as they fight for the right to engage with a consumer market that sees no choice but to take matters into its own hands, and invest in solar and storage.

Follow on Twitter: @GilesParkinson

  

Share this:

  • lin

    We can assume that the Federal government approves of the continuing theft from consumers to line the pockets of its political donors. They make disapproving noises whilst doing nothing so the media can continue to tell the lie that the Feds give a shit about the financial well-being of the average citizen.
    They have the power to act. Their lack of action means they are part of the problem.

    • Roger Franklin

      Lin – they were never going to act. It is all part of the show that the consumers and businesses is paying to watch. They are at least consistent at not making any decisions!

    • Sally Noel Triggell

      Liars, thieves and actors all. Turncoat as useful as an ash tray on a motor bike.

    • Barri Mundee

      As it stands, only some State governments- SA, Victoria and maybe Qld are a counter-vailing power to the Federal government. Apologies if I left out WA but I think their Labor government is too new to have made an impact yet?

  • Roger Franklin

    Had no expectations and… well they delivered. Top marks for being consistent!

    • Joe

      Just gotta laugh at the Turnbull. He is so concerned about energy prices, yes. He loves the big announcement with the media and cameras purporting to show him being …”A Strong Leader”. So he has now had two coffee and cake get togethers with the Energy Majors which resulted in… letters to be written to consumers that are on standing offers to let them know that there are alternative energy plans available. And we had the theatre of Big Mal doing his flyover of the Snowy and then announcing for a second time this year that Snowy 2.0 is being built….but we haven’t done that promised feasibility study yet which is due later this year. For Big Mal’s info the retail offer from my Energy Australia went up 10% last year and 21% this year. He is kidding himself if he thinks that there are big savings to be had. And Big Mal’s much vaunted Snowy 2.0 will take 6 years to build if it goes ahead before we see anything dramatic on that front.

      • Cooma Doug

        The snowy scheme has thousands of MWhrs stored already. It is used as peaking plant. But the market rules as they are now does not promote the pumping.
        A change to the rules could provide more security by storing easily over 5 GWHrs each and every day with the existing plant. Ie
        Making off peak renewables more valuable and inducing effective load shifting.
        The additional plant in the plan will be a wondeful tool in the transition.
        I believe that rule changes will provide some time to construct. Such a plant will allign contractually with most of the products now in view for the new market.

        • ozmq

          That’s very interesting Cooma Doug. What is the rule change that’s required?

          • Cooma Doug

            If we do a modern analysis of the load profile, given all the modern technology and strive for system security and a viable market, the changes need to be many. I believe it is very complex.
            In reality the concept of pumping is in an old idea of pump when the prices are low and generate when they are high. It needs to be a process where its true value is recognized and rewarded, given the nature of all things other than just the situation at that very minute.
            With the introduction of 100% clean energy utilizing storage, the value of energy is the same value at all times. Energy is of the same value be it in a battery or flowing from a wind turbine any time of the day.
            The situation at the moment is that some peaking gas plants run at low single figure capacity factors, just scraping off the top. Pumps don’t run when they get in the way of waiting for those opportunities..
            So the new market rules will need to recognize the true value of energy in all its forms where load shifting and load side options are the equal of pumping and peak generation.

            The reality of the last century was that we needed to ram the energy down their necks needed or not. With the technologies available now, that would be as dumb as it can get.

          • Ren Stimpy

            It’s imperative then that all pumped hydro facilities are owned by new players so that these are in genuine competition with (rather than in cahoots with) the gas fired generators.

          • Greg Hudson

            AKA Snowy Hydro I presume you mean ?

          • Ren Stimpy

            The only way to gain stability of electricity pricing over the long term is to slowly eliminate the fueled sources of power generation. Gas is the most expensive so the priority should be to develop more non-gas dispatchable generators (to complement wind and solar PV) – i.e. grid batteries, pumped hydro, CST and biomass generators – not necessarily on the grand scale of Snowy Hydro, just many smaller projects distributed all around the country. Keep ALL of these out of the hands of the gas generator owners so that genuine competition with gas ensues i.e. there will be no deliberate curtailment of the non-gas dispatchable power by the owner or operator with the intent to get higher prices for their gas fired power.

        • Malcolm M

          The question I have about Snowy 2 is why would it work (financially) when the existing Tumut 3 hardly ever seems to be used in its pumped storage mode ? It already has 750 MW of pump and 1500 MW of generation. For a relatively small investment, the generator-only units could be changed to pumped generators, thereby able to soak up 1500 MW of excess solar or wind. Is it
          – the rules
          – the conflict of interest, that pumped storage generation would compete with Snowy Hydro’s once-through hydro output, reducing peak prices
          – the relative lack of variable renewables in NSW ?
          – the cycling nature of NSW coal plant (unlike the base load coal power stations in Vic and Queensland)

  • Chris Fraser

    I’m getting close to the conclusion that selling off State-owned generators was a stinking crap-pile of an idea. You get these energy CEOs sitting in their executive suites, spending more time thinking about ways to make profits than ways to deliver cheap reliable energy.Competition – what a crap-pile of an idea when controlled by so few. At least the generators used to be owned by all of us.It’s only because of this liberal-ideological view of competition that these CEOs have to turn up for tedious meetings with Malcom about pricing.

    • Joe

      The competition is between the Energy Majors as to who can make the fattest profits and which CEO can land the biggest pay cheque everything else is just decoration. And it gives Big Mal the chance to put his smiling face on TV and tell us all what a….. “Strong Leader” he is.

    • MaxG

      What took you so long 🙂

      • Chris Fraser

        Ha I must have believed their steaming pile of crap over the social good of selling the farm.

    • Jexpat

      Hate to break it to folks, but Australians got royally conned by both Liberals and Labor- in the very same way as Californians got conned and stolen from by Enron, Dynergy, Duke and others in the mid-1990’s, culminating in the so called “California energy crisis.”

      One would thought that this would have been an example of what not to do -and a lesson well learned- and not to be repeated.

      • nakedChimp

        Huh?
        The lesson was good and made the local opportunists hungry for the same..
        Just look over to Germany, they are on their way to privatize their Autobahns, piece by piece.
        Already one of the projects they got hilarious results – the rent for the private ‘owner’ didn’t materialize, due to slumping transport volume since 2008 and only picked up recenty – they are at a loss currently.. and do what? – they sue the government, ie. the taxpayer for that lost revenue.
        It’s at court now..

        It will get worse, much worse, before any of this will get any better.

        • Jexpat

          I got you one better: look at NSW.

          “Privitising” -ruining for corrupt purposes the world’s best and most efficient model of land titles.

    • Barri Mundee

      You’re getting close to that conclusion?

      I came to that conclusion years ago. Most privatisations, and the electricity industry is but one of the more outstandingly bad decisions that were foisted on us under the guise of “efficiency” and TINA (there is no alternative). For the sake of a one-off addition to State government coffers we exchanged a public-owned utility that served all citizens and that paid an annual Public Authority Dividend to the State, for a private monopoly that operates mostly for the benefit of shareholders and senior managers.

  • MaxG

    The whole thing is called neoliberalism… I hope people will understand what it means one day. It is an underlying principle to everything… until such time, the public will be screwed by default; by default it is done what harms the public… think about it; google it… learn and understand… once you do, you understand what’s wrong with today’s world…

    • nakedChimp

      And learn how to recognize monopolies.. there are many out there.
      Once you get that, your view of the world will change.

  • DevMac

    So, what were the actions to be taken away and worked on, and within what timeline?

    Without both of these being specified, nothing will happen, and the whole meeting was a complete waste of time. All meetings should start with a goal in mind, and end with an action plan to meet such goals and a time frame in which those goals should be met.

  • Dee Vee

    No one believes renewables are cheaper. AGL charge an extra 5.5c per k.w for renewable energy. The only way you’d get public support for this is if there is irrevocable legislation put in place GUARANTEEING lower prices.

    • Sally Noel Triggell

      We have renewables and they are way cheaper and we are not on a premium feed in tariff. You believe in fairies that’s your business, We believe in renewables and saving money, works for us.

      • solarguy

        I’m with you guys, my hybrid system leaves me in credit every billing period. Beating the bastards at their own game gives me a feeling of…………. well, VICTORY!

    • Joe

      DV, as I understand it the 5.5c kwh is for signing up to GreenPower scheme which the Energy Majors make available to customers. If you are a home owner you could install your very own GreenPower scheme via Rooftop Solar which is indeed a GUARANTEE of a lower energy bill.

  • bedlam bay

    A repeat of the Howard Telstra sale (who can forget Sol Trujillo) and price gounging and the NBN fiasco. The LNP still peddles the myth that they are the best economic managers. Plus the NSW LNP sale of nearly 200 state entities inluding the Land Titles registry. $1.6 billion proceeds to fund three sports stadiums with declining attendance.

    • neroden

      Australian Liberals, like US Republicans, define “good economic manager” as “steals the maximum amount for their cronies”.

      You just have to know that the words mean! 🙂

    • Joe

      Every Public Asset is… FOR SALE. If it ain’t already sold…GOING SOON. The stupidity of privatisation is that public assets have been built and maintained over the years by the public / taxpayer. In effect these are our assets, assets that are held in trust by Governments on our collective behalf. Use of assets come at a modest price not at ‘price gouging’ levels. Then a Government decides to privatise public assets which in many cases is selling the asset back to the public, that’s us who paid to build the things in the first place. So how does it feel to pay for an asset twice over and then get ripped off when using the asset that your previously owned. Governemnts have no right to just willy nilly flog off public assets. Despite the NSW COALition trumpeting a mandate for the privatisation of NSW’s electricity industry, no such mandate exists.

  • bedlam bay

    In Sydney in July network charges up 17% and total billing up at least 6% pa for the last ten years (cpi 2 to 3% pa) plus huge CEO salaries (Chief postie Ahmed Fahour $10.8M exit).

  • Cooma Doug

    NOW I HAVE SEEN EVERYTHING

    Please tell me if I am wrong here. I just watched the PM claim a victory today.

    He declared, in a victorious tone, that in their meeting today they have convinced the energy retailers to send out information that they have already sent us several times.
    When we had that big wind last week, I spent an hour picking up yellow bins along our street. There were countless documents as described blowing out to sea, closely followed by mysterious and confusing NBN deals.

    • stalga

      He did it twice at the Paris talks. That’s the lawyer in him I figure. It doesn’t come across as sincere. You can mostly tell when he’s bullshitting instead of just waffling. Abbott is a much better liar, more practice.

    • stalga

      When you are screwing someone slowly, it’s best to make them think they’ve had a token victory every now and then. It keeps them on the leash for longer.

    • Joe

      …wasn’t it heartening to see Big Mal acting the part of a …’Strong Leader’…instead of just telling us that he is a…’Strong Leader’….ha, ha, ha.
      Yes, sending out those magical letters by Christmas and ‘barcodes’ on future bills….I can’t wait for these so called hundreds of dollars in promised savings to drop into my mailbox. Thank you so much to my… ‘Strong Leader’.

  • Phil

    Dodgy the new word that even the PM uses. Dodgy Banks , Dodgy power , Dodgy NBN , Dodgy buildings , Dodgy food labelling , Dodgy investment planners , Dodgy education systems , Dodgy age care charges , Dodgy citizenship . This list is only part of the exhaustive full list of Dodgy. Australia the Land of “DODGY”

  • Robert Westinghouse

    Turnbill….just smoke and mirrors. Nothing will change and we will continue to pay more and more. We have to pray for more grid defection and Big Energy can all go bankrupt. I am praying to all the gods for grid defection.

  • john

    The result of selling off the networks with a guaranteed return on investment of 10% then putting in place so called retailer sellers is a total joke.
    How on earth can 14 different retail sellers who all have the same overheads deliver a cheaper price?
    They all read the same meter does not this give you a hint you have been sold a damp squib?
    As to selling off the networks now that was a dogie idea.
    The rigging of the wholesale market price of power has been an ongoing problem and this has to be addressed forthwith.
    Some as in the Queensland Government has directed its on generators, who used the rigging system to profit handsomely have been directed to stop the action.
    Frankly when you privatize a public delivery obligation you wind up paying more there is not other way to spell it out.
    As to Malcolm’s meeting today no doubt it will play well with the ill informed.

  • phred01

    The Lib govn’t hangs in the balance on the decision by the high court

  • Ian

    Slightly off topic, but does anyone know accurately how much aluminium smelters pay per KWH for their electricity? Such as the big Tomago plant in NSW?

  • Bruce Dalkeith

    AS A PENSIONER THAT RELY NEEDS HELP A LOT BEFORE I FREEZE TO DEATH I CAN NOT RELY UNDERSTAND WHY MY BILL DOUBLED I ASK BUT TO ME I SHOULD TALK TO THE WALLS AROUND ME THEY WOULD COME UP WITH A SOLUTION I THINK SO MY ELECTRICITY BILL WENT DOUBLED IT COST ME HALF MY MISERABLE PENSION OF $880 A FORTNIGHT I HAVE GAS FOR COOKING I SEEM TO NOT KNOW THE COST OF ELECTRICITY.

    • riley222

      No answer Bruce but they’re going to get done so bad next election, maybe that will help to warm you up a bit.

    • Farmer Dave

      Bruce, there is a whole army of companies out there working their hardest to extract plunder out of people like you, aided and abetted by complicit or incompetent public servants and politicians. Some of the companies are even owned by state governments.

      If we work our way along the electricity food chain, starting with the generators. They bid to supply electricity into a market whose design allows them to legally play games with each other so that they can charge a lot more than the minimum they need to break even. One of the regulators observing their game playing just said that we were seeing the market at work. Indeed: a market designed to help the plunderers.

      Next come the distributors, the poles and wires folks. Here the market rules guarantee them a return on the money they have spent on building the networks. So, they predict that power usage will go up heaps, throw lots of money at more poles a wires, and when the usage went down, instead of the up they predicted, they still get to charge their 8% to 10% on they money they spent, except that their increased plunder is spread out over fewer electrons travelling their network, so the toll per electron goes up, and we all pay more.

      Then we get to the retailers who have learned from the mobile phone companies that if they devise a bewildering array of plans that no one understands, then their customers will just stick with their current plan, which will magically transform into one of the most expensive around as it “expires”.

      Basically, Bruce, I know it is no consolation, but it is all about plunder.

    • Barri Mundee

      Bruce, could I implore you to vote against any conservative party at the next federal election.

  • Robert Comerford

    Don’t bet on this lot being gone next election.
    I often hear conversations around the traps about how they are glad Labor is not in office or the carbon tax would make their bills even higher.
    Never under estimate the idiocy of the Australian voter.

  • solarguy

    The next election will be the energy battle ground. If we are to win we have to convince punters to turf out the LNP on their heads.

    • Cooma Doug

      In 1995, a certain computer cost 4000 dollars. Today I noticed a device for 10% of that cost. The device today compared has capabilities thousands times more effective. Perhaps millions in some aspects.

      If we calculate the true dollar value comparison
      allowing for the past few years of very low inflation, the relative true cost 20 years from now for off grid energy home is potentially stunning. Even if we use very generous assumptions in favour of the status quo.

      If we are generous in determining the present values, if we accept that I am wrong by a factor of 10 to 1 for future cost reductions and go with the impossible idea of little technology improvement, there are some clear outstanding obvious conclusions.
      Stand alone homes wont be on the grid.

      • solarguy

        Stand alone homes are just that because it is too expensive or impossible to connect to the grid. However, I designed my hybrid system to be able to cut the cord if needed, but now with the increase in FIT from 6.1 to now 12.5cents/kwh, I’m laughing even harder because I’m getting even more credit off my bill than I thought I would. In fact may next bill should be in credit about $100.00

        So who the hell would want to go off grid under those circumstances, when it pays to stay? In the near future a lot more will be able to afford to have a PV and storage system like mine!

      • Richard

        Yes they will because there will be a massive fee to exit the grid and ongoing taxes for generating your own energy. unless you join in with a utility provided solar battery scheme.
        In which case the charges will be waived.

        if you want to get off the grid do it now before they make it impossible! And under no circumstances instal a utility or retailer provided solar/battery system under contract

        • solarguy

          For the last sentence, I agree. For the former let’s just wait and see.

      • john

        Go back a decade from 1995 and add a few years and a computer cost $3200 and had a magnificent 8 KB of extended memory and you had to program it your self.
        Yes the early adopters allowed the late take up of the technology at a lower cost this is typical of tech implantation and broader consumer experience.
        As to solar my first quote was $64 thousand dollars for a 5 kilowatt system.
        Now much better panel and inverter is available for perhaps less than 10% of that this is what happens with consumer take up of a product.