Energy “reliability” obsession could lead to more gold plating, warns ACCC

Australia’s current obsession with “reliability” of electricity generation could lead to the same sort of expensive energy asset gold-plating Australia has already seen in its poles and wires sector, Australia’s competition watchdog has warned.

In comments on ABC Radio on Monday morning, ACCC chair Rod Sims said there were already too many consumers paying “way too much” for their electricity, in large part due to unrealistic reliability standards placed on network companies in the past.

And he said that the current focus on reliable generation – often misrepresented by conservatives in politics and the media as baseload fossil fuel generation, like coal – was excessive, and risked a similar outcome for consumers.

“We’ve had excessive reliability standards in the past, and that has pushed up the poles and wires investment operating costs and consumers have paid for that in a big way,” Sims told ABC Radio’s AM program.

“Around 40 per cent of the increase in (electricity) prices… is due to higher network charges, so they are a crucial part of the equation.

“What we want to make sure (with the NEG) is that there is not an excessive focus on generation reliability, because…. a minute part of any outage is due to generation.

“Usually outages are due to the network. So let’s not overly focus on generator reliability, let’s have a balanced scheme that, yes, achieves reliability… but let’s do it in a way that can also help us lower electricity prices by integrating our energy and our environmental markets.”

This assessment follows numerous calls to go “light” on the reliability guarantee for that very reasons – that more than 98 per cent of outages are due to faults on the gold-plated network, and not from the lack of supply.

But don’t tell this to conservatives and vested interests. Or rather, do tell them.

Tony Abbott reportedly wants the Liberal Party to be re-marketed as the “party of coal”, Pauline Hanson demanded new coal generators instead of Snowy 2.0 in a piece in The Australian, and on Friday the Minerals Council claimed in the same paper that  coal is “the only reliable source of energy.”

“The heavy lifting of providing affordable and reliable energy can only be done by lowest-cost dispatchable energy supplies available 24/7,” said Minerals Council coal program executive director Greg Evans.

Again, this was, in response to comments from Snowy Hydro that its 2.0 pumped hydro scheme “could out-compete any new coal plant.”

But as Snowy Hydro and the coal lobby duke it out over which is the more reliable generator, the experts over at the Energy Security Board, and at the Australian Energy Market Operator, are having a different conversation entirely.

For them, the premium is now on “dispatchability” rather than reliability – a service that is more likely to be provided by new technologies on offer, including batteries and demand response, in concert with wind and solar generation.

“We need flexible capacity that can be switched on and off,” said AEMO chief Audrey Zibelman all the way back in September last year.

“Our advice was fairly pragmatic… We are concerned that on a 45°C day if we lose a generator we want reserves in the system to be able to respond.

“In our report we identified the fact that with amount of variability (from solar and wind energy and electricity usage) is changing rapidly, we need resources that can change rapidly.

“That may be different to traditional baseload resources, which do not move a lot. It doesn’t mean baseload is bad, it’s just that we need a different portfolio. (Baseload) may not be able respond in the time period we need it to respond.”

But despite this pragmatic advice from AEMO, the federal government has continued to lobby for coal, calling on companies like AGL Energy to keep their ageing coal plants open longer – and even entertaining far-right fantasies that new coal plants could be built – in the name of “keeping the lights on.”

Just a few weeks ago, at the Australian Energy Week conference, federal energy minister Josh Frydenberg invoked this very scare tactic to reassure an increasingly agitated pro-coal segment of the Coalition.

“There has been some media speculation about what is the future for coal… I believe that under the NEG, which puts a premium on reliability, coal will have its best chance to continue as an important source of energy generation in the market,” federal energy minister Josh Frydenberg told the recent Australian Energy Week conference.

“People who think we can decarbonise the Australian economy overnight, don’t understand the reality of situation if we do so, we would actually see the lights go out on the east coast of Australia.

“Coal continues to be a critical part of our energy mix. We have (existing) coal-fired power stations in Australia with an average life of 27 years, and certainly under the NEG there will be more of an incentive to invest in those existing power stations.”