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Chasing the wrong energy villain


A great article from Giles Parkinson in The Climate Spectator of 28/10/10.

Here we go again – boom and bust in the clean-tech sector. NSW Premier Kristina Keneally declared herself to be judge and jury in the case of rising energy prices and, urged on by a baying mob from the tabloid media and talkback radio, promptly shot the wrong villain.

It doesn’t take too much research to discover that the overwhelming cause of rising energy prices in NSW are the cost of network upgrades. And it doesn’t take much more analysis to conclude that much of this is a waste, or at least misdirected money.

Keneally says she will instigate a review of these network costs, but it would be a refreshing surprise if she has the gumption to act as brutally on network charges as she has on the solar industry.

As has been shown overseas, and now in Australia, feed-in tariffs actually work, because they get stuff built. They are powerful tools, and they need to be handled with care.

There is no doubt that the 60c/kWh gross feed-in tariff in NSW was excessive and unsustainable. The NSW government was told that by the solar industry itself, and bodies like the Clean Energy Council even before the tariff was implemented, but it was desperate to pretty itself up for the upcoming election and ploughed on regardless. Now a bunch of installers and panel importers will get to pay the price.

The decision to cut the tariff back to 20c/kWh, and to keep it as a gross feed-in tariff, as opposed to a net tariff, is breathtakingly cynical. It means those putting new panels on the roof are destined to sell the electrons created by their solar panels back into the grid for 20c/kwh - mostly at peak times - and buy back electrons created by coal-fired power stations at a greater cost.

Who else but the NSW Labor right would have dreamed up a scheme that would have solar effectively subsidising the cost of coal fired energy? At least with a net tariff, customers would have a more effective hedge against the inevitable rising costs of energy received from the grid. Under the proposed amendments, you’d have to wonder why they would bother.

The solar industry proposed a tariff of 47.5c/kWh and probably would have settled for around 40c/kWh. What would make sense is that there is some uniformity and consistency in schemes across the country, but that won’t happen while Martin Ferguson is federal energy minister.

“And you wonder why we don’t have a thriving clean-tech industry in Australia,” lamented one clean-tech executive. “How could you possibly run a business with that sort of random policy change thrust upon you.”
Unsurprisingly, the energy supply association, the puppeteers in the solar energy price scare campaign, declared themselves satisfied with developments and urged other states to follow in NSW’s path.

But as they and others know well, network charges are the real villains on rising energy costs. Much of the $14 billion that will be spent in NSW over the next five years is a result of decay and neglect by state Labor governments, but much of it is also required to cater for the unrestrained growth in peak power usage fuelled by larger homes, more appliances and increased use of air conditioning.

Consider a few facts thrown up at a Green Capital conference on Monday: For every part of electricity that is created, two parts of heat are also generated, but power stations usually throw it up into the air and lose it. And of the $25 billion in energy that is traded on the wholesale energy market each year, nearly a quarter, or $6 billion, relates to just 30-40 hours of extreme peak demand.

Many of the poles and wires and transformers being rolled out by the network operators are designed to meet that peak demand, yet the network operators are not required to justify that expense over alternatives such as demand management and energy efficiency. Instead, they get their reward from the number of assets they build.
It is a situation that horrifies the likes of Ross Fraser, the chairman of Energy Response, a company that specialises in demand-side response, or shifting consumption away from peak times. “They (the networks) know jolly well that there are better profits to be made if they can clip the peaks but regulatory arrangements mean we are paying them on assets they build,” he says.

It also horrifies Allan Jones, the UK climate change and energy expert brought in by the City of Sydney to help make it energy independent and carbon neutral. He says the city can handle all its energy needs by creating a network of trigeneration plants (which are so called because they use that excess heat for heating and cooling) and renewables. But under present regulations, it’s not allowed to do it.

It’s madness. The task force on energy efficiency that delivered its report earlier this month recommended changes to the NEM that would address some of these concerns. And John Pierce, the chairman of the Australian Energy Market Commission indicated on Monday that he expected to be commissioned to review some of these measures anytime soon.

Jones says some of it could be done with a stroke of a pen. But there are great cultural barriers to overcome – principally the idea that the energy market has only one purpose, to keep the lights on, and to hell with broader issues such as climate change, the environment and concepts such as energy efficiency. As Jones points out, rooftop solar and trigeneration plants are treated as if they were coal-fired power stations, and the incumbents are determined to keep it that way.

As Chris Dunstan, from the Institute of Sustainable Futures said on Monday, distributed power, renewables and so called "smart technologies" offers the opportunity to make useful changes to the way that energy is produced and consumed. But as the mishandled rollout of smart meters in Victoria demonstrates, smart technology does not insure against dumb decisions.

One doubts that Keneally is prepared to fight the energy culture war. But let’s hope the tabloids are on her case to make sure she does.

Tags:Australia, coal fired power, eletricity prices, feed-in tariff, Kristina Keneally, NSW, renewable energy, solar power, New South Wales, Policy & Science


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