Time to end “age of entitlement” for energy incumbents

As a follow-up to the RenewEconomy article, “Are Australian solar households getting ripped off”, it should be noted that Victorian Essential Services Commission has a specific objective to protect the financial viability of the ‘industries it regulates’.

When I asked a senior government official some years back how the ESC would react if energy efficiency adversely affected the finances of the incumbents, I didn’t get a meaningful answer: the same applies to solar PV.

Maybe if we can get the ESC to regulate solar PV, then they will have to look after the interests of solar PV owners?

I still argue that debating the ‘true value’ of solar PV misses the point. In principle, in a fair market a solar PV generator could offer to sell to next door neighbours at any agreed price in Victoria by throwing a long lead over the fence.

Clearly that power is worth somewhere around the price for Green Power (including the base price) to the buyer, which is what should determine the Feed-in-tariff regardless of costs and benefits to retailers and networks – that is, about 30c/kWh. Likewise if someone connects gas or improves energy efficiency, or even goes away on holiday, they avoid the full retail price/unit.

So, on balance, a fair price for solar PV output is the standard retail price at the time of generation – this means the electricity retailer is getting the power at a discount to Green Power and sell it to others at the GP price (which will presumably increase when/if the carbon price is removed).

This allows for them to pay some network charges if the PV is increasing network costs to cope with PV, or for the retailer to finance their own energy storage, maybe on the consumer side of a nearby large business, to avoid higher network charges by managing the impacts very locally……. Now, there’s an interesting business model for retailers.

The other advantage of a simple 1:1 FIT is that it is easy to communicate (oh, sorry that’s a ‘disadvantage’ as it would further encourage PV and the community level privatisation of electricity) and administer. It is also more neutral regarding investing in over-sized or smaller PV systems or storage.

The Productivity Commission says we should accelerate moves towards more open energy markets. Until we stop basing all our analysis on the ‘entitlements’ of incumbents, we won’t achieve that. Surely the PC and advocates of privatisation can see that with around 1.3 million private generators, PV is the main driver of privatisation in energy. No reference to this in the Government’s Issues Paper on the Energy White paper either.