Pick up the speech of any senior executive from a big utility – network, generator or retailer – or the head of most energy “institutions” and it doesn’t take you long to discover what their key “message” is. “This is all about the consumer,” they insist. “The consumer must come first.”
All about the consumer? Excuse me, aren’t these the same utilities who have contrived to create the most expensive electricity in the world – thanks to the gaming of markets, gold plating of the grid, regulatory capture and removal of competition?
The cynicism is breathtaking, and was there for all to see at one of the biggest knees-up for the “big end” of the energy industry, the Energy Summit hosted by the big end of town’s favourite news-sheet, the AFR.
The common theme: There is virtually no long-term energy policy left so let’s get rid of the last one standing, and kill the rooftop solar rebate before too many more consumers hook up to the technology.
“Anarchy,” is how the chair of the Energy Security Board Kerry Schott described it. “I would love to see it go,” said Mark Collette, the head of markets for EnergyAustralia, echoing the recommendation by ACCC chair Rod Sims, a long time solar skeptic, to kill the rooftop solar rebate by 2021, and the endorsement by the head of Origin Energy, Frank Calabria.
And there is no doubt that the emergence of the “pro-sumer” – households and businesses that can generate and even store their own power – is the biggest existential threat to the business models of big energy.
It means, for one, the end of the traditional method of extorting profits. It means the end for the business models for most of the “base-load” generators that are nearing the end of their life anyway. And it means the end of how they have framed their retail businesses around the unspoken mantra that “confusion is profit.”
The big end of town know too well the transition is inevitable, and have predicted as much themselves.
But in the name of shareholder returns and their option packages they are determined to slow it down – just as they have the carbon price, the renewable energy scheme, and anything else that looks like a sensible thing to do that would also benefit consumers: such as demand response, energy efficiency, changes to settlement periods, encouragement for big batteries.
In this light, the comments by EnergyAustralia’s Collette are particularly grating. EA is probably most exposed to the consumer revolution that is taking place before it, given its dependence on profits from the huge Yallourn brown coal generator and the like.
Collette describes the solar rebate as “regressive”, and says if it is removed “that’s an instant bill saving for every consumer.” How much? Well, according to the ACCC, about $15 a year, or 30c a week, or 4c a day. You get the picture.
And do note that this sum does not include any of the benefits, such as the lowering of wholesale prices because of rooftop solar. We know that this happens because the big end of town complains about it all the time, and regulators note how it has narrowed and delayed the daily feeding frenzy of big energy known as peak demand.
And we know rooftop solar can help defray network spending, because Ausgrid says so, and is willing to offer rebates to encourage it.
Collette and others seek to justify their complaints by claiming that renters and low-income households are the ones who are penalised most. This from the very companies who have screwed those customers blind with their own regressive pricing policies, and who increased profits three-fold in just the last year.
If they are so worried about that constituency, then why not develop schemes to assist renters and low-income households to add rooftop solar and storage, as the South Australian Labor government proposed. It can’t be that hard.
As one observer emailed RenewEconomy, Collette’s comments seem remarkably tactless, but she noted: When you sell radishes, the last thing you want is for your customers to grow their own.”
Particularly when solar households can slash their bills by between $600 and usually more than $1000 a year by installing solar. That’s more than $1,000 per customer per year not going into the pockets of big energy. It’s nothing to do with the assumed 4c a day penalty to rentals.
“And what is wrong with continued subsidy of rooftop solar?” our correspondent asks. “If the polluter is not made to pay, it is perfectly sensible to encourage those who reduce pollution. And with rooftop PV now so attractive, a little petrol goes a long way. Pouring petrol on that fire is excellent policy.”
And, our correspondent notes, exactly where is the evidence of the detrimental impact of rooftop solar? The network lobby began a campaign a few months ago trying to blame solar inverters for all sorts of issues, such as blackouts but were shot down by evidence. The problems they cited were fixed years ago,
“Policy makers and regulators are once again having the wool pulled over their dewy eyes by the vested interests. Remember gold plating anyone?” our correspondent concluded.
It was striking being at the All Energy conference in Melbourne last week, where presumably the big end of town thinks that anarchy reigns supreme.
At All Energy, and similar conferences, the focus was on the next stage of the energy transition and the technologies, ideas and business models that will enable it: storage, monitoring, peer-to-peer trading, virtual power plants, voltage regulators.
As Nigel Morris, a solar industry veteran now working at one of those enabling technology companies, Solar Analytics, observed: “The solutions are all out there.” All one had to do was go out and look. Even better, entry was free! (You can hear those comments and others from our Energy Insiders special “live” podcast at that event.)
Nothing like this at the AFR Energy Summit. OK, so I wasn’t there, but I read the speeches, the tweets and the report, and on past experience when you get a bunch of CEOs, regulators, politicians, and lobbyists from the big end of town, all in the same room, it ends up as a bidding contest for self-serving policy proposals.
Now, there just might be a smart way around this – modifying the system to encourage more storage, as Warwick Johnson from SunWiz has suggested. But just like the proposals to buy out excessive state feed-in tariffs (and exchange them for batteries), they are put in the too-hard basket by lazy politicians and greedy utilities.
Fortunately, there are some people in high places who do see what is at stake here – both for the grid as a whole and for the consumer.
AEMO CEO Audrey Zibelman didn’t buy into the “anarchy argument” at the conference, but she is aware of where we are heading in rooftop solar, and she is deeply aware of both the challenges of this transition and the opportunities.
Zibelman stands out because she prefers to embrace those opportunities rather than wail about the threats.
By 2040, rooftop solar will likely account for half of the grid’s capacity, and by 2050 half of all demand will be met by “distributed energy”. In most states – and in South Australia and Western Australia first, and within a few years – the output of rooftop solar will equate to demand from the grid.
Zibelman recognises that this transition cannot be stopped, and any attempt to do so would likely result in the most undesirable outcome – more households will flee the grid, and the grid will lose a valuable resource.
Far better to embrace the future, and work out how to deal with it. That means encouraging storage, so that excess capacity can be used in the evening. And to encourage peer-to-peer technology and virtual power plants that can also serve to enhance grid security.
“If people are making investment in rooftop solar, the best thing we can for Australia do is to make sure those consumers are able to become what we call pro-sumers through third parties, so they can participate and we can get value out of those resource to benefit everybody,” Zibelman says.
Which is more or less what you would expect a grown up to say, however frightful the consequences are for incumbent businesses – we are talking here of new players in the market, new technologies (VPPs and peer-to-peer), and new models.
What it needs is a plan. And right now AEMO is the only institution that has one – the Integrated System Plan, which addresses not just what needs to be done to deal with rooftop solar, but also the grid’s transition to a majority supply of wind and solar.
It’s actually not that hard, and not that expensive. In fact, it will probably save money over the long term if you believe the likes of the CSIRO, Alan Finkel, and even the networks in their moments of clarity.
And best of all, it can even meet the IPCC targets that the politicians find too hard to contemplate. And no, Zibelman notes, phasing out coal and transitioning to a smart, clean grid does not mean the lights going out.
Anarchy? Wikipedia defines it as “the condition of a society, entity, group of people, or a single person that rejects hierarchy.” If that’s what is occurring, the hierarchy and the vested interests have no one to blame but themselves.
But what is really happening is a consumer led transition. So, for the good of us all: Deal with it, don’t fight it.
Giles Parkinson is founder and editor of RenewEconomy.com.au, and is also the founder of OneStepOffTheGrid.com.au and founder/editor of www.TheDriven.io. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.