Abbott's energy plan will encourage consumers to quit the grid

Abbott’s energy plan will encourage consumers to quit the grid

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Energy White Paper dammed by Professor Ross Garnaut for promoting coal at expense of solar, and shaping tariffs in a way that will simply encourage consumers to quit the grid.

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Energy White Paper dammed by Professor Ross Garnaut for promoting coal at expense of solar, and shaping tariffs in a way that will simply encourage consumers to quit the grid.

Utilites and regulators have been repeatedly warned about the need to adapt their business models and tariff settings to take into account the rapid changes in energy technology – particularly in rooftop solar and battery storage.

The Abbott government’s energy white paper even mouthed the same words, noting the rapid energy transition that would change the way that energy was delivered.

But words are all it delivered. According to Ross Garnaut, the leading economist and former climate change advisor to the Labor government, the energy white paper has failed to do anything about it, either through its energy vision for the future, or its policy recommendations.

It ignores climate change, encourages investment in coal-fired generation, discourages solar power, and seeks to hobble investment in large-scale renewables.

Garnaut accuses the energy white paper of seeking to block new competition from decentralised power – essentially rooftop solar – by forcing solar households to pay higher fixed charges.

Garnaut says these fixed charges are perverse and not cost reflective at all, because they simply discourage consumers from using less energy.

And, as RenewEconomy pointed out in its analysis of the energy white paper, the document ignores the much larger cross subsidies from urban to regional users, and from household and small business to large industrial users.

“The urban-regional transfers convey no benefit to many intended beneficiaries now that many can meet their own requirements locally at lower costs to themselves,” Garnaut writes in an opinion piece inScreen shot 2012-09-17 at 2.49.35 AM the Australian Financial Review (subscription required).

“The unintended consequence of applying fixed charges indiscriminately is uneconomically large incentives to disconnect from the grid.”

This is exactly the warning that has been made to utilities and regulators over the last few years – by CSIRO, former US energy secretary Stephen Chu, even the Australian Energy Regulator (which sets prices but not tariff design).

They, and numerous financial analysts, have repeatedly pointed out that erecting barriers to protect incumbent technologies and business models will be self defeating.

The CSIRO, for instance, has suggested one third of users could disconnect from the grid if utilities do not adapt. UBS and other analysts suggest it may be economic for households – even those in big cities – to do so from 2018. The utilities can see change happening, but are counting on it occurring slowly.

Garnaut goes on to note that the energy white paper relies on the now redundant “new policies” scenario from the International Energy Agency, and obsolete forecasts for Chinese and global demand for coal.

“This obsolescence means that tens of billions of dollars of investment in expanding coal supply capacity will never return the cost of capital,” Garnaut writes. “A better-informed government might have encouraged caution into private decisions, instead of reinforcing errors.”

Garnaut also ridicules the Abbott government’s attack on the renewable energy target, particularly in the absence of a carbon price, which Garnaut says would have been preferable.

He said even analysis undertaken for the Warburton review showed that the RET substantially reduces carbon emissions in the electricity sector while reducing the present value of electricity costs for users.

“Keeping the RET target at 41TWh would reduce electricity costs. Some coal-based electricity generators would face earlier closure. Temporary underperformance against the target would generate some government revenue with no damage to the economy and little upward pressure on prices compared with a lower RET target. Do the sums.”

And Garnaut is damning of the proposed exemption of trade-exposed emissions intensive industry from RET obligations – something which now appears to be a bi-partisan position.

“The RET lowers wholesale electricity prices for emissions-intensive industries, which are already compensated for most of their renewable energy certificate obligations,” he writes.

“With their losses already mostly socialised and their gains from lower wholesale prices capitalised, the white paper wants to increase the net subsidy.

“The Age of Entitlement has never had it so good.”

Some good aspects noted by Garnaut include its focus on effective competition and its refusal to countenance payments for closures of coal fired generators.

“Three-quarters of Australia’s coal-based generators are living beyond their design dates. Those that are losing money need no help to close,” Garnaut notes.

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20 Comments
  1. Neil_Copeland 6 years ago

    All this commentary is falling on large deaf ears 🙁

    • Coley 6 years ago

      How come?

      • Neil_Copeland 6 years ago

        I’m afraid most of you may have misunderstood my joke. I merely meant Tony Abbott will not be listening.

        • Coley 6 years ago

          Fair crack, just that you often get trolls on forums such as this, dismissing those in favour of RE, EVs ect as ‘niche fantasists’ and yogurt knitters etc, and whose message is limited to the company of RE coverts only.
          Certainly agree that Abbot & Co aren’t listening,but from what I can gather they hitched their wagon to the wrong train but can’t move from their entrenched position without losing all credibility.
          So they are in the position where they have to enable policies which will give them and their backers as much of the public purse as possible before they are ditched?

  2. bill 6 years ago

    I disagree Neil. No deaf ears here. I really do not give a stuff what Abbott and the good Dr Nahan (WA) think. What is important to me is the price point of storage. Once that threshold hold is crossed, its out with the shears. Only no clicks, just a silent amputation.

  3. Chris Fraser 6 years ago

    Thank you Ross our thoughts exactly. The wreckers are completely out of touch with the RE readership.

  4. derekbolton 6 years ago

    If only he had dammed it – might never have leaked out.

  5. Stan Hlegeris 6 years ago

    This is a sad situation. Whatever mistakes we’ve made in the past, we now have a great grid which could be the backbone of a clean energy system, enabling all comers to compete to sell the cleanest and cheapest electricity. But the commonwealth and apparently all of the states are lined up against this practical use of the resource we have.

    OK, that’s long enough to be sad. Our alternative is to drive the grid operators to bankruptcy, so let’s get to work. All your friends are doing it.

    Since the end of the Feed-In tariff in Queensland, the average size of a new PV system has been almost 5kW. Why so big when there’s no reward for exports? Because most of the new owners are planning to go off the grid as soon as they think it’s practical. A big new reduction in electricity demand is coming soon. The sooner the better.

  6. phred01 6 years ago

    Right on the money as soon as battery technology becomes affordable by mass production in electric cars. Grid defections will not be gradual but a rush. Coal and the generators will be left holding the baby crying to the federal govn’t for compensation

    • Coley 6 years ago

      Whey, they need to try for it soon, because once Abbot & Co are gone there will be little sympathy for their friends in the FF sector.
      That’s my take anyway, but its only based on what I read so I could be wrong.

  7. david H 6 years ago

    I am pleased to see that we are not proposing to use tax pays money to pay the big genco’s to close their 40+ year old power stations, all of which must have been written off years ago.

    • electroteque 6 years ago

      Once they sell it all off which they have already sadly there will be traps set and handouts made.

  8. Glenn Albrecht 6 years ago

    I have just installed a BYD Lithium 8kwh, 3kw Distributed
    Energy Storage System (DESS) at my rural property in NSW. It is teamed with a
    Solar Australia 5.2 kw PV system. Yes, it was expensive, but it has the
    capacity to pay for itself in approximately 10-15 years (its warranty time is
    10 years). So far, it has demonstrated that it can reduce my grid supplied
    power by 80-90% and the bulk that I use is delivered in the form of cheap
    off-peak electricity for re-charging the battery at night (we are on Green
    Power as well). I have solar plus battery power during the day, battery power
    alone from 2.00pm until midnight and then if needed, off-peak to recharge the
    battery. The battery power is available for blackouts as there is a built in
    emergency power and lighting circuit. The economic case for this technology is
    already strong, but economics is not the only reason for the investment. The
    emotional burden of being an ongoing part of the problem of global warming is
    great, and to invest in technology now that makes our house and property carbon
    negative is one way to reduce that ethical burden. The more people commit to
    this new technology, the sooner prices will come down. But if you only do
    things for crude economic reasons, most likely you are part of the problem.

    • Mike Dill 6 years ago

      I seem to be out of the loop. What did you pay for the DESS all in?

  9. barrie harrop 6 years ago

    Once home storage reaches a payback period of 4–5 years,it will not be a good time to be an investor in poles/wires,this is about 2–3 years away.

    • wideEyedPupil 6 years ago

      the gentailers and networks they are coupled with will be forced to innovate. they’ll try for govt payouts instead. innovation will mean very low fixed payments, connection capacity pricing models, thin/fat pipe and perhaps demand response and time of day pricing to incentivise customers back and hold on to what they’ve got left. when the commercial premises start leaving the grid they are truly on borrowed time.

  10. electroteque 6 years ago

    battery tech is really picking up pace although I’ve newly discovered Nife batteries which were invented in the early 1900’s and last decades !

    • Mike Dill 6 years ago

      Nickel-Iron batteries have been around since Edison. I fact, they are sometimes called Edison Batteries (google it). Never enough volume to get the price down.

      • electroteque 6 years ago

        Yes they are pricey but last 20 years. Would be good to see them come down in price. I’m not very convinced lithium will be a good idea let alone last.

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