EnergyAustralia says solar PV causing rapid structural change

EnergyAustralia, one of the big three utilities operating in Australia, says that rooftop solar PV and energy efficiency measures are causing “unprecedented structural change” to the national electricity market.

It says rooftop solar and energy efficiency are causing a significant fall in household energy consumption, more than offsetting any gains from population growth.

It says these factors, combined with an increase in renewable energy generation due to the Renewable Energy Target (RET), has caused wholesale electricity prices to fall. “This is likely to continue,” it says. “These factors are impacting the industry as a whole, providing difficult trading conditions for ourselves and our major competitors alike.”

The comments came as EnergyAustralia, which owns the Yallourn coal-fired generator – and recently purchased coal-fired generators in NSW and a range of gas and wind energy assets, along with a retail arm – recorded a loss of $HK45 million in the first half of 2013. That compares with earnings of HK$268 million for the same period the previous year.  Operating profits fell to HK$55 million from HK$807 million.

“The Australian energy market is facing unprecedented structural changes that are taking place at a rapid pace,” the company noted in a statement.

“In particular, the past two years have seen a pronounced decline in residential electricity demand in response to rising prices, and the deployment of rooftop solar photovoltaic systems and energy efficiency savings have more than offset any increase in demand from population growth.”

EnergyAustralia has been one of the most vocal opponents of both the RET and energy efficiency measures, because of the impact on its generation assets. It has been joined by  Origin Energy and many state-owned coal fired generators in pushing for the RET to be diluted or halted.

It said the federal government’s “hard-wired” 2020 renewable energy target (the fixed 41,000GWh target) will force increasing volumes of new renewable energy into an already oversupplied market.

“This will place greater risk to the stability of the underlying energy market, especially in the context of falling demand and rapidly rising electricity retail prices,” it writes. No doubt it will be hoping for a Coalition victory at the upcoming federal poll and the promised review of the RET – even though the last review was only completed in December.

It noted that the federal election “may also bring about changes to the country’s carbon policy.” It said it was assessing the implications of these changes to its business. Labor has proposed fast-tracking the carbon price to an ETS, while the Coalition insists it will repeal the carbon price altogether.

EnergyAustralia also complained that retail price regulation in NSW has resulted in tariffs that do not reflect the underlying costs of purchasing, transmitting and retailing electricity.

It said that apart from reduced margins caused by the falling demand from households, EnergyAustralia also suffered from problems at its Yallourn mine which disrupted output at the Yallourn power station, disputes with unions, technical difficulties with its new billing system, and higher integration costs of the retail business and Delta Western GenTrader contracts it acquired in 2011.

Overall electricity sales volumes were down 11 per cent,  primarily due to lower sales to large industrial and commercial customers and the reduced mass market usage. It says it recorded “churn” rates of 25.7 per cent in NSW – compared to the state average of more than 30 per cent.

It noted that it is looking at “how to optimise” the operation of Yallourn Power Station in light of the introduction of the carbon pricing regime in July 2012, lower energy demand and increased energy supply and capacity in the wholesale market.

Despite the problems and the losses, Richard McIndoe, the managing director of EnergyAustralia, received total remuneration of $HK15.4 million ($2.2 million) million in the six month period, with nearly two thirds of this coming from performance bonuses. He was the best paid in the last six months of all senior executives of CLP, the Hong Kong-based parent company, including group CEO Andrew Brandler.