Mixed Greens: Flawed power system costing consumers billions

An investigation into the Australian electricity market has found that the flawed system gov­erning distribution companies is adding a collective $3 billion to consumers’ power bills. The Financial Review says that a report by British academic George Yarrow – based on the findings of an expert panel and delivered to federal and state energy ministers – has found that the system benefits the companies to the detriment of energy users. The report places blame for soaring energy costs with the “limited merits review” process, which it says has allowed distributors to challenge the price limits set by the Australian Energy Regulator. And it says energy consumers are wearing “steep rises” in power prices despite there being little proven cause for the increases approved in the Australian Competition Tri­bunal.

“Collectively, [distribution com­panies] have benefited substantially in the short term . . . whilst consumers and networks users have lost out to the tune of over $3 billion in the short term,” the report says. In most states, except Victoria, the distribution companies are publicly owned, meaning the benefit of higher than necessary prices goes to state governments. In NSW alone, the Sydney Morning Herald reports today that papers tabled in State Parliament earlier this year showed that the three power distributors – Ausgrid, Endeavour Energy and Essential Energy – all reported record profits for the December half, bumper results that are expected to be mirrored in their full-year accounts. Ausgrid, the largest of the three companies, earned a pretax profit of $610 million in the first half, easily topping its own forecast for $547.7 million.

And while the power distribution companies are clearly seeing some benefits from increased prices, the Yarrow report says the Australian Competition Tribunal had not “convincingly explained” how they were in the long-term interests of consumers. The AFR reports that the expert panel found little justification for the allowing of higher costs than originally set by the regulator, and that the structure of the appeal system undermined the successful pursuit of stated policy goals. “The panel has no hesitation in concluding that there has been considerable divergence between outcomes and the policy intentions that motivated the development of the . . . regime.” The report did not find, however, that distribution companies were unfairly “gaming” the system. Rather, it found they were behaving in a normal commercial manner. “It would therefore be unreasonable to hold them responsible for failing to do things that were explicitly entrusted to the regulatory authorities,” it says.

Clean energy investment on the up

China – and Chinese solar and wind projects, in particular – is leading a 24 per cent rise in new global investment  in clean energy in the second quarter, according to a report from Bloomberg New Energy Finance. BNEF said Wednesday in an e-mailed statement that clean energy spending rose to $56.9 billion in the second quarter compared with the first, with spending in China jumping 92 per cent in the period to $18.3 billion as several large solar photovoltaic parks and wind farms secured hundreds of millions of dollars in financing.

“These figures underline the pivotal role China is playing in the clean energy sector,” said Michael Liebreich, BNEF chief executive. China has recently quadrupled its domestic goals for solar installations, Liebreich said, and has been by far the biggest market for wind turbines for several years. “Its torrent of supply-side investment was one of the main reasons why renewable energy costs have been plummeting; we are now seeing China creating enough demand to start mopping up some of the resulting over-capacity.”

But despite these encouraging figures, the global cleantech spend is still 18 per cent below the near-record high of $72.5 billion in the second quarter of 2011, BNEF said. The report also confirmed that, while project developers are seeing investment levels increase, technology providers are continuing to face a challenging investment climate, says BusinessGreen. “[The figures] show a clear split between investment in clean energy technology and equipment providers – which remained depressed in Q2 in the face of world economic and stock market troubles – and generating asset investment, which held up well,” BNEF said.

More solar pain

German solar maker Centrotherm Photovoltaics has sought bankruptcy protection, bringing to double digits the number of US and European companies – including Q-Cells, once the world’s biggest solar-cell maker – to succumb to current market pressures, including the rise of lower-cost Chinese competitors and the global oversupply of photovoltaic modules. Bloomberg reports that the Blaubeuren-based company filed for Chapter 11-type protection in Ulm’s district court to start insolvency proceedings. It will be shielded from creditors for three months while its management tries to restructure, Centrotherm said in a statement late yesterday. The company’s stock plummeted as much as 81 per cent in Frankfurt on Wednesday to its lowest level since it started trading in October 2007. Centrotherm sells production lines used to make polysilicon, ingots, wafers, cells and panels. BNEF reports that sales took a hit as solar manufacturers delayed or canceled investment plans after panel prices plunged 45 per cent in the past year, slashing margins at the top five manufacturers. The global supply of photovoltaic panels is exceeding demand this year while at least 20 gigawatts of manufacturing capacity will close, according to BNEF data.

TrustPower goes it alone on Snowtown

New Zealand company TrustPower has delayed the search for a co-investor for the $465 million second stage of its Snowtown wind farm in South Australia, and will instead raise the finance on its own. TrustPower had set itself a reasonably tight deadline of July 31 to secure a partner to the project, and found it would likely run out of time, despite “significant interest” shown by potential investors.

The company will now make financial close on the 270MW stage 2 project before resuming its search for a partner. It says it has received committed offers of financing that are on terms “capable of acceptance”, even though it will push its debt to comparatively high levels. Analysts say that the metrics of the project look promising, and the company may wait until construction is complete before concluding a deal with a potential partner. The cost of production is estimated at around $75/MWh, but ultimately this will depend on wind conditions.