The release of the long-awaited Finkel Review and its promise of cheaper bills for consumers, even as emissions are reduced, underline the fundamental challenges addressing Australia’s electricity sector that the chief scientist fails to address.
Consumers have a right to ask themselves what’s in it for them. And for all the talk, and promise, of a major shift from centralised generation to a decentralised market, based around the consumer, the answer is: Not a lot.
According the limited modelling revealed so far, consumers will get savings around $92 a year by 2050. Coming on the same day, or the same week, that many consumers were told that their bills will jump $300 a year in 2017/18, that doesn’t mean much. In fact, less than nothing.
Energy Networks Australia hailed the Finkel blueprint as “the ‘last, best hope’ for energy customers”, but to consumers, the clean energy target as currently presented might simply appear as a shuffle of money between various large businesses. And little of it is coming their way.
There is some good news. Finkel points out that emissions can be reduced and electricity bills can come down at the same time. That’s because the cost of wind and solar is far cheaper than new coal and gas, even when storage or “firming” costs are added – a fact that conservatives still refuse to accept.
The problem with the graph above is that it still suggests that consumers will face a cost of electricity close enough to 30c/kWh.
Given that the cost of rooftop solar PV has already fallen to between 5c and 10c/kWh, and that battery storage is, in the words of Finkel, “coming like a freight-train” – exactly how long do they expect consumers to continue paying around 30c/kWh for grid power?
It’s not a question that any of them like to answer. SA Power Networks recently acknowledged that the combined price of solar and storage for a house or business was likely to fall to around 15c/kWh within a few years – that’s less than half the cost of grid power there. But the response of networks is simply to hit the consumer with more fixed charges.
Yes, the networks are promising to roll out all sorts of interesting proposals to consumers – demand management initiatives, trading power with neighbours, and even getting paid for “leaving the grid” for a short time.
But while giving trinkets with one hand, they are taking with another, to ensure they “get their money back” from the huge investment they have made in the networks in recent years.
Fixed charges have soared, now as high as $1.50 a day, or more than $500 a year; there are proposals to “tax” solar exports, or hit solar households with additional network fees. Worst of all is a proposal to force even those off the grid to pay for the network they choose not to use.
Finkel does address this issue, but in frustratingly small detail. His message, however, is potent.
“As the NEM (National Electricity Market) evolves, there is a risk that existing network assets will no longer be required, or will not be required to the same degree, due to the closure of existing generators or consumers,” he says.
“This possibility raises the question of how stranded assets should be handled. Some stakeholders have called for the value of network assets to be written down, either voluntarily or compulsorily, where there has been over-investment in capacity to meet peak demand or major structural changes to the load.”
Then, he notes: “Network service providers are opposed to compulsory write-downs.”
Of course they are, particularly those who have just paid huge prices for the partially privatised NSW network assets. But the reality is, it is hard to imagine how grid-based prices can come down without this measure – the falls have got to come from somewhere.
Yes, generation costs will come down as more wind and solar adds long-term certainty and cheaper prices, and when much needed reforms and new technologies like battery storage remove the ability of gas generators to manipulate the market.
The ACCC review into retail prices might find some savings, but they will be at the margin. Yes, there is a triad of exciting technologies and gadgets and iPhone apps to make electricity management more appealing.
But really, until the incumbent industry can find a way to match the cost of new technologies, rather than hiding behind regulatory barriers to defend its turf, there is not going to be a lot in it for consumers.
That also needs to be a lesson for some of the people heading up consumer groups. They should be pushing for these technologies to be used to reduce the costs of those most vulnerable and those least able to install their own solar and storage. It needs regulatory barriers to be removed, not reinforced.
