Queensland Premier Campbell Newman and his team feigned to receive the shock of their lives when the Queensland Competition Authority delivered its recommended 21 per cent price hike for the 2013/14 year.
And there were no prizes for guessing who Newman would blame – rooftop solar, the carbon price and the federal Government. Anyone but himself, and his own team.
Queensland consumers should be worried about rising electricity prices. But they should be more concerned about a government that clings to a century old energy system, is relying on short-term bandaid solutions such as price freezes, and is refusing to adapt or embrace to the new technologies and business models that will deliver the cost-effective solutions of the future.
Solar, carbon, and Gillard are easy targets to wrap up in a sound bite and a newspaper or internet headline. But by sheeting the blame on renewables, and by appearing more focused on protecting the revenues of the state-owned network providers and generators – possibly because those assets are up for sale – Newman is digging himself into an even bigger hole and causing even greater pain for the public.
Energy experts say the Newman policy cocktail – a combination of state subsidies on electricity use, price freezes, tariff designs that add fixed costs and do not encourage peak demand reduction or energy efficiency, and his choice of demonising new technology rather than embracing it, will simply accelerate a spiral towards stranded assets rather than an efficient network.
Even the QCA got into the anti-renewable rhetoric late last week, suggesting in its press release that the increases were partly the result of the rising cost of renewable energy targets. But its own report tells us the opposite is true.
The cost of the large scale target is steady (and might produce some benefit to the state if it bothered to actually built something), and the costs of the small scale scheme (rooftop solar PV and solar hot water) will fall by 17.1%, according to the QCA figures.
The fall could have been greater, but this calculation does not factor in the early closure of the federal government’s solar multiplier, but it does factor a $40 price for each certificate, even though the QCA concedes they have never traded above $32. Even with this, the cost of the green schemes is less than the “headroom” built into all bills to allow retailers to “compete” and to make cheaper offers to some.
It’s pretty clear from the numbers that the biggest rise in bills (60 per cent) is due to network costs, including the gold plating of networks identified in numerous reports over the past year. Newman and his team continue to blame the Gillard government for this, and its lack of control over the Australian Energy Regulator.
But he knows full well that it was the state-owned networks that were able to rail-road the AER when it refused their inflated estimated of network expenditure. His claims that the government is saving $2.1 billion pretty much reflects the difference between what the AER wanted to allow and what the networks were able to impose by appealing to the ACCC.
State Treasurer Tim Nicholls also wants to sheet the blame for network costs on solar, suggesting that the number of solar households had jumped from 2,000 to 200,000 in four years, and that all this energy is being directed back into a system that has to be upgraded in order to take it.
As the network operator Energex said in its submission to the solar feed in tariff late last year, solar may require upgrades to networks in some areas, but it is also may alleviate or delay the need for network upgrades in other locations, and lead to a reduction of transmission and distribution losses. Last month, it was even hailing the presence of solar PV for making its network more robust and having less brownouts and blackouts.
The benefits of solar are likely to be experienced more in areas where there are a lot of industrial and commercial users, because the solar production aligns better with the load. But little is being installed in this sector because the utility is too busy protecting its revenues by imposing high standing charges – sometime reflecting 50 per cent or more of total costs.
In the residential sector, the same trend is appearing. Standing charges will triple under the QCA recommendation, lifting the share of fixed charges on total bills to nearly a quarter in some cases. It penalises those that use less energy – either because they cannot afford it, or because they have solar or are being energy efficient.
And the distributors are also being questioned over the way they are upgrading their network in residential areas, choosing bulk when other more cost effective options such as load management, voltage control via the inverter or storage with the PV customer are available. But these latter options lead to lower revenues.
Muriel Watt, from the APVA, says her fear is that the grid is simply being bulked up to make it “stronger” and bigger, but not smarter. “And one wonders whether this is in fact necessary expenditure to bring the grid into the 21st century, and that it would be necessary anyway for distributed storage, electric vehicles, demand management, fuel cells etc to be added in due course,” she says.
“Of course, if they are not spending the money on smart communications and control systems, but just on grid ‘strengthening’, then the grid does have the potential to become a stranded asset, as people continue to reduce their loads and/or manage them better as grid prices go up. In many cases, I suspect PV has just been the canary, highlighting grid management and voltage control problems that had never been worried about before.”
“It’s the age old thing,” says Steve McCrae, from solar firm Ingenero. “Everyone talks about costs, no-one talks about the benefits.”
Rob Passey, from UNSW, says the network operators face a conundrum – they (and the state government owners) are keen to protect their financial viability, but they are doing it in a way that makes it difficult for energy efficiency and distributed generation such as solar. He suggests the better model is to turn networks into service providers, rather than bulk billers.
Otherwise, as network costs rise more people would be given an incentive to leave the grid – a concern expressed by some retailers. The warning signs are there: Even the ABC radio and the mainstream print media in Queensland have been interviewing homeowners who are looking to go off-grid. Passey’s fear is that the same rules that apply to the water supply – homeowners pay for the mains going past the house whether they use it or not – will be used for electricity.
One way to address peak load is to introduce a greater level of time of use pricing. This possibility was raised by the QCA, even applied to solar customers only, but was not progressed. Jeremy Rich, from Energy Matters, says time of use pricing would be a fairer system than fixed single rate block tariffs, and may create better combination and allow greater alignment to the true cost of supplying their energy.
Irrigator Ian Brimblecome, a heavy energy user whose problems we highlighted last year Why new solar tariffs could drive a man to diesel, says the regulators are not doing their job. “The best example of this is where I pointed out that the supposedly cost reflective tariffs give a $20000 cost for 99MW and $70000 for 100MW, and yet all they can do is note the anomaly – not try and remedy it.”
But at least he is hopeful. He suggests that at the end of the “transition” period in seven years time, the energy industry will “look completely different.”