Rules that could have reduced network bills have been delayed another five years, following fierce resistance from coal generators. The decision could mean higher bills, and more grid defections, as networks and retailers engage in a turf war over battery storage.
New rules that could have encouraged electricity networks and to help consumers adopt technologies such as battery storage, solar PV and demand management controls have been delayed for another five years, potentially adding billions of dollars in unnecessary network costs and to the bills of electricity consumers.
In a decision labeled by consumer advocates as a “travesty”, the Australian Energy Market Commission has decided not to ask the Australian Energy Regulator to enforce the introduction of its long awaited Demand Management Incentive Scheme (DMIS) until late 2016.
This means it will not be implemented until the next five-year spending plans for networks are up for review in 2019 through to 2021. This is despite the AER having previously stated that it intended to “…introduce a revised DMIS a soon as practicable following the AEMC’s rule change process”
The AEMC’s 2012 Power of Choice Report estimated in that demand management in the Australian electricity system could deliver savings of $4–$12 billion by 2023. (These savings, if passed on to electricity consumers, could result in bill reductions of between $120 and $500.)
These savings are now very unlikely to be delivered given this delay in the DMIS. Analysts say it could add billions of dollars to network upgrades and also to consumer bills.
The delay in implementing these new rules for the running of Australia’s electricity markets is also a set-back for network-wide adoption of technologies such as rooftop solar, battery storage, and energy efficiency – and a victory for coal-fired generators fighting moves that would lower consumption from the grid.
“This is bad for demand management, distributed generation, solar PV, energy efficiency and customer-based battery storage,” said Chris Dunstan, from the Institute of Sustainable Futures.
Dunstan says that between $4 billion and $12 billion could be saved if networks looked to adopt solar, battery storage, and energy efficiency programs, rather than rely on the traditional method of making network upgrades, and building more poles and wires. “Savings delayed are savings denied.”
Queensland looks set to break its large-scale renewable energy drought, with confirmationthat government-owned utility, Ergon Energy, is launching a tender for 150MW of new solar, wind or hydro energy capacity to be added to its regional grid.
Ergon said on Monday it was looking for detailed submissions from companies with “solid reputations” in the renewables industry, who it could partner with to help meet its renewable energy requirements.
Queensland has so far commissioned very little in the way of large-scale renewables, despite being the prospective state for large-scale solar, because of its excellent solar resources, and because it is one of the few growth areas for demand in Australia.
But it seeking proposals for projects from Townsville and Cairns to the north, down the Whitsunday coast and inland to the south west region. It is looking for projects of at least 20MW, and wants them to have council development approvals, or be well down the track of getting those.
Bloomberg New Energy Finance has predicted Queensland could be the epicentre of large scale solar in Australia, because of the excellent resources and demand growth mentioned above. This has been echoed by Origin Energy, which is thought to be canvassing similar proposals.
There are a few big solar projects in the pipeline – including the Solar Choice-SunEdison 2GW Bulli Creek project in the state’s south west, which stands to be the largest in the world if it is ever fully developed – and, with a renewable energy friendly state government now in place, Ergon should be spoiled for choice.
Canberra-based renewable energy development company Windlab is proposing a 1,200MW wind and solar (600MW wind, 600MW solar PV) project for north Queensland, called the Kennedy Energy Park.
And the Australian arm of Spanish renewable energy developer FRV in May revealed plans to build a 150MW grid-connected solar PV farm south of Townsville, which would deliver up to 80 per cent of local electricity demand at rates cheaper than a new coal plant. Canadian Solar also has a 90MW project ready.
Queensland energy minister Mark Bailey said the Ergon reverse auction signalled the beginning of the large-scale renewable energy agenda of the Labor Palaszczuk government, which in May confirmed its commitment to 50 per cent renewables for the state by 2030.
“This simply would not be happening if Ergon Energy was being privatised as planned by the previous LNP government,” Bailey said in a statement on Monday.
“Our focus on public ownership and strong commitments on renewable energy gives confidence to Ergon to take this forward.”
Ergon Energy chief executive Ian McLeod said the move to invest in renewables was a common sense approach.
“Renewable energy sources including rooftop solar are already contributing over 10 per cent of the electricity for our main grid and we expect that growth to continue,” McLeod said.
“Queensland’s sugar industry’s generation of renewable energy is already contributing $45.7 million in economic value to the industry.
“We have a government owner of a retailer committed to renewable energy projects,” he said.
Ergon said companies would be able to download documentation from the company’s website next week, when the Expression of Interest was released.
You know the cliché about work that can be 59 minutes of boredom and one minute of white knuckle excitement and danger? In the electric power industry, this happens when a major power plant loses its connection to the grid, instantly and dramatically unbalancing the supply and demand of electricity. Blackouts follow if there isn’t an instant response.
Last week I had a similar exciting moment at a conference of utility commissioners, where I learned that a key grid reliability requirement during these emergencies has not been provided by new natural gas plants.
Assumptions are not always true
Throughout the electricity engineering community, there is an assumption that, when that kind of supply-demand imbalance incident happens, there will be an automatic response within 5-6 seconds from conventional (gas, coal, hydro) generators that stabilizes the power supply. How valid this assumption is matters, because it is used by practically every utility study and commentary aimed at highlighting limits to using renewable energy to replace fossil-fuel power plants. (See here, for example.)
The assumed difference between conventional power plants has figured prominently in current debates about the adoption of renewable energy versus an over-reliance on natural gas and coal.
Surprised looks all around
But what if that assumption turned out to be wrong? In a thinly attended session on a Sunday at the summer meeting of NARUC, (the National Association of Regulatory Utility Commissioners) I attended, a representative from NERC (the North American Electricity Reliability Corporation) committee process made an astounding revelation, that this assumption has indeed been mistaken.
The reality is that a thousand gas-fired power plants built in the U.S. do not operate properly in white knuckle emergencies. In the discussion with regulatory staff, Troy Blalock, reliability expert at South Carolina Electric & Gas, explained how jaws hit the floor as NERC’s investigation into reliability questions found that all three of the gas generator manufacturers (GE, ABB, Siemens) predominant in the U.S. had for years been delivering equipment that fail to provide this “essential reliability service”. As word spread around the 3-day NARUC conference, this news caused the same speechless, open-mouth expression.
The need for energy industry incumbents to get on board the energy revolution that is rapidly transforming electricity markets around the globe is a well-worn theme. But what about consumers?
The inevitable and unstoppable shift to solar and storage is likely to see a big change in the way that tariffs are structured – hopefully for the better, rather than the worse – but it may just mean another level of complexity for consumers in what is already a thoroughly opaque market.
As a new report by the CSIRO has pointed out, “meaningful demand-side participation” – which is code for using solar and storage to help manage the grid, such as surges in peak demand – by consumers will be critical to optimising Australia’s future decentralised, distributed electricity systems and stabilising costs.
But as this same report also notes, inspiring millions of electricity consumers to “make a substantial and enduring mass shift in electricity usage that flattens peak demand” will be no easy task, particularly when you factor in “the pervasive human preference for simplicity, familiarity and certainty.”
And when the key to effecting this mass shift – according to most industry stakeholders – is to get customers to actively uptake cost-reflective or time-of-use energy pricing, and to make the most of it using solar and storage – the task starts to look nigh on impossible.
In its survey-based study, Australian Consumers’ Likely Response to Cost-Reflective Electricity Pricing, published on Wednesday, the CSIRO found that “consistent with well-known biases against complexity, novelty and risk …Australian consumers generally prefer flat rate tariffs to all forms of cost-reflective pricing.”
The most recent head of the National Australia Bank, one of the country’s most powerful financial institutions, has made extraordinary revelations about the back-lash from government to business that dared speak out in support of sensible climate change and renewable energy policies.
In an opinion piece for Fairfax Media, and later in interviews with Fairfax and ABC Radio, the now retired Cameron Clyne lamented the economically reckless policies of the current government and the “will-ful ignorance and blindness of political leaders and some business people in Australia.”
And he also spoke of retribution to those who did speak out.
“You put your head out there and it’s going to get smashed off,” he told Fairfax Media. Later, he told ABC National; National program that he had suffered months of “emails and abuse” after supported a carbon price in 2011, and the political environment had worsened under the Abbott government.
Clyne’s comments confirm what has been obvious to most, but also reveals the extraordinary behind-the-scenes pressure imposed by a government installed to essentially to frustrate climate change action and to block the development of renewable energy.
The Abbott government has scrapped the carbon price and slashed the renewable energy target. Its policies have resulted in a surge in energy industry emissions and an investment drought in renewable energy.
It has also dismantled the Climate Commission, and cut funding for climate change research. It has tried, and failed, to scrap the Climate Change Authority, the Clean Energy Finance Corporation and the Australian Renewable Energy Agency.
Behind the scenes, government bureaucrats are told that the words clean energy, clean-tech and climate change are not to be used, and there are myriad reports of the intense pressure that government ministers have put incredible pressure on business people who speak in favour of a carbon price or renewable energy, or who are seen to criticize government policy.