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What do consumers get out of the Finkel blueprint?

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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.

Screen Shot 2017-06-09 at 1.14.17 PMAccording 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.

  

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  • Brian Tehan

    Privatise the profits, socialise the losses – except that now a large cohort of consumers can opt out. As Garnaut has said, the overinvestment must be written off. After all, they’ve already made a packet out of it.

    • MaxG

      your first sentence describes the fundamental rule of neoliberalism: privatise profits, publicise costs…

      • Steven Gannon

        Clever.

      • Cooma Doug

        Great concept you describe.
        PPPC
        I listenned with great enthusiasm to the PM when he was climate positive.
        The NBN was also a huge PPPC. I will watch close the road to climate action. I anticipate the NBN level of corrupt process.

      • Robin_Harrison

        Something of a misnomer, nothing new and nothing liberal. Feudalism by another name.

        • MaxG

          yes… agree; maybe I should call AU a banana republic, which per definition is a country operated as a commercial enterprise for private profit, effected by a collusion between the State and favoured monopolies, in which the profit derived from the private exploitation of public lands is private property, while the debts incurred thereby are a public responsibility. — Maybe you like this better 🙂

  • phred01

    By the time 2030 comes around prices wound have trebled making 92$s chicken feed

    • Rod

      Is there anyone still stupid enough to believe the COALition lies that energy costs will come down?
      Remember the mad monk’s claim of $500 per year with the removal of the carbon tax.

      • Joe

        I’m still waiting for my $500 cheque…lost in the mail ?

  • Kevan Daly

    There’s no point railing about “regulatory barriers” while subsidies are flowing via the RET scheme. They both need to go.

    • Ren Stimpy

      Take away the RET and there will still be enough doubt on a 40 year investment in a new coal plant for that not to go ahead.

      So why not keep the RET which will help fill in the 21st century replacement for 20th century power now, 17 years overdue?

  • oakleighpark

    Is there any talk in Oz about Maybe its time to role out energy democracy, large scale. Also has there been any discussion about reducing grid load, big time. We know how to do deep energy retrofits of existing buildings; we know that PV and batteries use DC as opposed to AC and that most electrical items coming into a house/office use electronics these days, there fore require DC. Lets move back to DC and save on all that conversion. oh, and by-the-way, we think micrograms , especially the DC ones, would go a long way to mitigate grid vulnerability to attack.

    • Cooma Doug

      Oak
      Eventually we will be where you describe. When base load is crushed by the technology changes.

      I walked through the Empire State building in New York with a friend who was involved in the retrofit.
      They eventually cut the energy bill by 45%. I think it even got better since that time.

      The week I was there, in my down town accommodation the energy waste was more than 50 % I calculated.

      I was thinking of a system where each customer measured the frequency at their connection. Then respond with a dc load shift in the first half cycle. 5millisec.
      This would effectively split the grid into millions of independant load/ supply nodes. The power swings on the grid would be eliminated. There would be no disruption or fall into a brown out.

    • George Darroch

      Hardly any talk about energy reduction. Most of the energy use in my rented house goes towards sending heat out the walls and windows.

    • EnGee

      not silly as it sounds. A DC home,with 12V outlets to power all the gadgets. Removes all the lost energy converting DC PV to AC then back to DC again….and makes all the gadgets more reliable and cheaper.

  • john

    When world wide bids are coming in at 3 to 4 cents per kwh even at 5 or 6 i find it impossible to believe this is not going to happen even at 7 is still going to be beneficial to the final outcome.
    Actually lock them down to sub 5 cents.
    Just getting rid of the $13000 per MwH bids during peak days just remember this is huge figures for large delivery which so out-ways normal output.

    For 3 days a generator can make a years income at those prices.

  • Ian

    Looking at aurora’s cost breakdown for 2016 generating costs came in at 27% of total costs. The rest is retail costs, network , etc. If this is true, then a 30c/kWh average cost would be 10c for the generator and 20c for the process of getting electricity from generator to household. Solar plus storage would approach 15c/KWH. It would matter not even if the cost of generating electricity was zero, getting it to the household would be more expensive than generating and storing this locally. One can see why this might be a tiny problem . By how much would the grid costs (other than the generator component) be reduced if the investment in the grid was completely written off? About 4c/KWh is just to prepare the electricity bill – retail cost, that does not leave much leaway.

    • EnGee

      Wait till you get a bill for all the future network infrastructure linking all the proposed wind turbines and solar farms to the so called ‘grid’…

  • EnGee

    This $300 average increase ($500 in SA) coming on July 1. Will this now occur every future July, or every future billing quarter ?