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Energy market rule-maker says no to real reform – again

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Australia’s energy market rule-maker on Thursday baulked at a golden opportunity to modernise and decarbonise Australia’s energy system by valuing electricity generated close to where it is also consumed.

roof-solarThat’s the view of the Total Environment Centre, which has been working since 2004 to reform the electricity sector – the dirtiest, most greenhouse-intensive industry in Australia.

Yet, the Australian Energy Market Commission announced that it was rejecting the proposal by TEC, the City of Sydney and the Property Council of Australia to introduce local generation network credits (LGNCs).

These credits would have recognised the value to networks of energy generated in the local system rather than requiring expensive infrastructure to travel hundreds of kilometres.

The value would have been based on the long run marginal cost (LRMC) of future infrastructure investment, and would have been the generation equivalent of the way LRMC is now being used to set network consumption tariffs.

With network charges amounting to nearly half the average retail bill across Australia, our proposal would have made it more financially viable to sell energy locally.

It would have been of great benefit to local councils, community energy groups and precinct scale co- and tri-generation facilities wanting to put local solar, wind and bioenergy into the grid to replace dirty coal and gas.

TEC is critical of the economic justification used by the AEMC to justify inaction. We had modelling done by the ISF at UTS that showed that more than half of the new investment in network infrastructure that would have been needed by 2050 would have been avoided with local network credits.

We also had work done by energy economists Oakley Greenwood that found that solar plus storage especially could be useful to networks in reducing peak demand, and that this value should be reflected in a credit to the local generator.

We never thought our proposal was the last word, and looked forward to discussing how to improve it – for instance, around only applying it to future investment over a certain threshold, and perhaps only in constrained parts of the grid.

But that didn’t happen. Instead, the AEMC plans to introduce its own ‘more preferable rule’ which consists of little more than tweaking existing requirements around network support payments to standardise information about their availability.

These payments are controlled by networks, are highly selective and often short term, and are difficult and time-consuming for outsiders to respond to. So we doubt that the AEMC’s solution will work. Anyway, information about network constraints is now available in a much more user-friendly format through ISF’s network opportunity maps.

The impact of this decision will be to push more local generators and prosumers to reduce their use of the grid, to look at private wires and microgrids, and potentially to disconnect.

TEC is also critical of the AEMC’s processes. We have been working on this rule change for three years, and today is the first time we have had any clear indication of the AEMC’s attitude. And there is no right of appeal to their decisions. In fact, no reform proposal by any group representing small consumers like households has ever substantially succeeded in being adopted by the AEMC.

Today we are therefore calling on state and territory ministers to support a change to the national electricity objective (NEO) to force the AEMC and others to take seriously the need to urgently reform Australia’s energy market to help meet Australia’s Paris climate change commitments.

If decarbonisation was part of the NEO, the AEMC would have been forced to consider better alternatives to our proposal if it considered it to be unworkable.

In the meantime, the reform option is still live until the AEMC makes its final determination, so we encourage everyone to make a submission before  November 3.

Mark Byrne is TEC’s energy market advocate.

   

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  • Michael

    I took part in one of AEMC’s online seminars about the rule change
    earlier this year, and got the definite impression that this rule change
    would not happen, and was not even under serious consideration.
    A quick look at the determination
    http://www.aemc.gov.au/getattachment/66faaff1-4c3d-4e68-945a-9307bfcd597e/Draft-rule-determination.aspx)
    suggests that AEMC’s approach is “How will this support the status quo?” rather than “How can this help the network adapt to the (inevitable) market transition?”
    A disappointing waste of 3 years.

    You’re right Mark, the NEO urgently needs to change.

  • Kenshō

    I’ve been saying academics are disposed to underestimate the tenacity of those administering networks. An intellectual is different to a shark.

    “The impact of this decision will be to push more local generators and prosumers to reduce their use of the grid, to look at private wires and microgrids, and potentially to disconnect.”

    Various types of load management behind the meter, including minimising demand charges, will have to pay for the worth of distributed generation in the short to medium term. If that’s done, eventually networks will become more pliable with time. What academics fail to understand, is it’s necessary to primarily speak with action and force change with action. That’s what a shark will understand.

  • Kenshō

    “But that didn’t happen. Instead, the AEMC plans to introduce its own ‘more preferable rule’ which consists of little more than tweaking existing requirements around network support payments to standardise information about their availability.”

    Does this mean they are going to make different parts of the grid more cost-reflective? e.g. getting power to rural and city premises would be a different cost for them to maintain those connections. Such a policy may make fringe of grid locations more prudent with their “in front of the meter” consumption and leverage high density areas to stay connected.

  • Kenshō

    What you’ve done is signalled to network managers, we’re doing this, and they’ve responded if your doing that, we’re doing this – to maximise the existing network infrastructure and see to it that as much of it survives as is possible.

    • nakedChimp

      You either think that Mark and all the others here are dumb like door-knobs or you’re really naive.
      They know this already.

      • Kenshō

        It’s not dumb. It’s underestimating the tenacity of a plutocracy.

  • Andrew Thaler

    As operator of the 408kW Singleton Solar farm I would welcome network support credits.. and I can see the network charges for peak time on the bills of local users. The local users, particularly the Singleton Council Sewerage farm take immediate benefit of the solar generation as the power only travels about 400 metres. But the network gets to charge the council around 16c/kWhr for that power in peak times. Yes, there is huge incentive for me to connect directly to the sewerage farm and offset their daytime network charges… except for those other pesky rules that make that illegal too.
    Why do we really think these cumbersome bloated over-regulated heavily bureaucratised systems are even capable of change? In my experience they are not capable, until their money supply dries up and then they change very quickly.
    In the meantime, we ‘developers’ seek to make opportunities within the existing rules… which is no easy job these days.

    • Kenshō

      Why can’t you setup a PPA directly with the Singleton Council and just get an electrician to run a 400 meter cable? You and the Council own the land. Tell the other mob to come get their poles and wires and f__k off. I think all Councils should do this.