We"re Headed for an Electricity War
The traditional electricity industry has been stunned by the enthusiastic uptake of solar panels across the nation. Why? Because rapid uptake of rooftop solar power, solar hot water and energy efficiency technologies are eroding the profits of coal fired power stations, retailers and network businesses.
It's no surprise that with multi-billion dollar investments at stake, many businesses are fighting back. Without prompt government action, healthy competition for Australia's energy future could turn into an ugly war.
Policy support for solar panels has already been slashed. There is talk of winding back the national Renewable Energy Target and even introducing new subsidies for coal power stations.
Perhaps the most insidious threat to clean energy is the move towards a new system of billing. Rather than the current system of charging customers mainly for what they use (in cents per kilowatt-hour), electricity providers are shifting a bigger percentage of each bill towards fixed daily access charges (in cents per day).
Fixed charges cannot be easily avoided by consumers who save energy or generate their own power. The Queensland Competition Authority has already proposed households with solar power pay a mandatory tariff along these lines.
But this rearguard tactic could prove counter-productive in the longer term. Increasing fixed charges increases the temptation for customers to avoid them by leaving the grid altogether. The solar power industry is keenly anticipating continued falls in the cost of battery storage that will allow solar customers to disconnect from the main network to extend the solar industry's growth.
If this technological arms race gets out of control, we could have expensive battery storage capacity installed in streets that already have expensive spare network capacity.
"The unspoken fear of all utility managers is the "Death Spiral Scenario". In this nightmare, a utility commits to build new equipment. However, when electric rates are raised to pay for the new plant, the rate shock moves customers to cut their kWh use. The utility then raises its rates even higher - causing a further spiral as customers cut their use even more€¦ In the final stages of that death spiral, the more affluent customers drastically cut purchases by implementing efficiency and on-site [solar PV] power, but the poorest customers have been unable to finance such measures€¦"
This is a scenario we can and should avoid. Our electricity networks will be crucial to determining whether the transition to clean energy will be smooth and efficient or wasteful and acrimonious. We urgently need our network businesses to embrace emerging clean energy technologies, to focus on consumer benefit and to develop more sustainable business models. For this to happen, we need governments to act.
There are numerous case studies where Australian electricity network businesses have helped consumers to reduce demand, and reaped the rewards. For example, on Queensland's Magnetic Island, electricity provider Ergon Energy has encouraged consumers to install solar panels and smart meters and replace inefficient lights. Peak electricity demand has been reduced by 46 per cent and overall energy consumption by 40 per cent. In the process, Ergon Energy has saved millions of dollars because they now will not need to install a new power cable to the island for at least eight years.
The rapid power bill increases we've seen in Australia over the past five years have mainly resulted from network businesses investing more in infrastructure to meet rising electricity demand. Electricity prices nationally have risen in real terms by 70 per cent between June 2007 and December 2012. Network investment is still running at an unprecedented and astonishing rate of over $20 million per day.
It's no surprise that with multi-billion dollar investments at stake, many businesses are fighting back. Without prompt government action, healthy competition for Australia's energy future could turn into an ugly war.
Policy support for solar panels has already been slashed. There is talk of winding back the national Renewable Energy Target and even introducing new subsidies for coal power stations.
Perhaps the most insidious threat to clean energy is the move towards a new system of billing. Rather than the current system of charging customers mainly for what they use (in cents per kilowatt-hour), electricity providers are shifting a bigger percentage of each bill towards fixed daily access charges (in cents per day).
Fixed charges cannot be easily avoided by consumers who save energy or generate their own power. The Queensland Competition Authority has already proposed households with solar power pay a mandatory tariff along these lines.
But this rearguard tactic could prove counter-productive in the longer term. Increasing fixed charges increases the temptation for customers to avoid them by leaving the grid altogether. The solar power industry is keenly anticipating continued falls in the cost of battery storage that will allow solar customers to disconnect from the main network to extend the solar industry's growth.
If this technological arms race gets out of control, we could have expensive battery storage capacity installed in streets that already have expensive spare network capacity.
"The unspoken fear of all utility managers is the "Death Spiral Scenario". In this nightmare, a utility commits to build new equipment. However, when electric rates are raised to pay for the new plant, the rate shock moves customers to cut their kWh use. The utility then raises its rates even higher - causing a further spiral as customers cut their use even more€¦ In the final stages of that death spiral, the more affluent customers drastically cut purchases by implementing efficiency and on-site [solar PV] power, but the poorest customers have been unable to finance such measures€¦"
This is a scenario we can and should avoid. Our electricity networks will be crucial to determining whether the transition to clean energy will be smooth and efficient or wasteful and acrimonious. We urgently need our network businesses to embrace emerging clean energy technologies, to focus on consumer benefit and to develop more sustainable business models. For this to happen, we need governments to act.
There are numerous case studies where Australian electricity network businesses have helped consumers to reduce demand, and reaped the rewards. For example, on Queensland's Magnetic Island, electricity provider Ergon Energy has encouraged consumers to install solar panels and smart meters and replace inefficient lights. Peak electricity demand has been reduced by 46 per cent and overall energy consumption by 40 per cent. In the process, Ergon Energy has saved millions of dollars because they now will not need to install a new power cable to the island for at least eight years.
The rapid power bill increases we've seen in Australia over the past five years have mainly resulted from network businesses investing more in infrastructure to meet rising electricity demand. Electricity prices nationally have risen in real terms by 70 per cent between June 2007 and December 2012. Network investment is still running at an unprecedented and astonishing rate of over $20 million per day.
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