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Turnbull just needs to look back into his own past to address high power prices

23 Jun 2017
by Tristan Edis

Australia’s electricity and gas prices have reached historic heights that are squeezing household budgets while threatening the very survival of some Australian manufacturers.

This is not a problem facing us some time in the future, is it problem right now that requires urgent action.

Suggestions that the government should seek to deal with this crisis via some kind of procurement process to underwrite a new coal fired power station has a few fatal flaws. But there’s one in particular that even those who consider global warming a hoax should be concerned about. That is that a new coal power station will take at least five and probably seven years to be built. By the time it might help the situation many manufacturers will have shut down permanently.

Other power station options also have their problems. A new gas power plant won’t actually help reduce power prices because gas prices are so high and gas supplies hard to come by. This is likely to remain the case even with the government imposing gas export controls. Pumped hydro, like that announced by prime minister Turnbull, will take as long as a coal power plant to build. Wind and solar plant are far faster to build but don’t meet the government’s desire for so called “baseload”. And if coupled by batteries, they too require a high power price to be viable.

But there is an option available that is fast to deploy, will lower power prices and improve reliability, while emitting no CO2. Yet strangely no one seems to be talking about it in the wake of the Finkel review.

It involves helping consumers cut their demand for energy via energy efficiency and smart controls that can shift demand out of peak periods, reducing the need for expensive gas-fired power plants. This is also known as demand management, and power systems all around the world make explicit efforts to prioritise it before they look at building new power stations. But in Australia our energy market institutions and regulatory rules are entirely structured around energy suppliers.

The Finkel review recognised this when it recommended:

More attention should be paid to how we can best reward consumers for demand management and the power they generate through distributed energy resources like rooftop solar photovoltaic. When combined with improved energy efficiency, this will help reduce consumers’ electricity bills.

 

Unfortunately the review recommended that we undertake another review to see how we might do this. We’ve actually already had multiple reviews that have come to the same conclusion as Finkel: cutting out energy waste would be vastly more cost-effective and faster than building power stations, as well as the poles and wires to transport it to our homes and businesses. Unfortunately though, the recommendations from these reviews have typically been watered down or buried via an energy bureaucracy dominated by energy suppliers. A key source of the problem is that several state governments which oversee this bureaucracy happen to also be major shareholders in energy suppliers.

The federal government’s recent decision to bypass the Coag energy council to revoke the ability of network monopolies to appeal regulator decisions reflects the frustration with a process captured by energy suppliers.

Back in 2007 an ambitious environment minister rolled out a series of initiatives aimed at improving Australia’s poor levels of energy efficiency. He worked with the states to introduce long overdue energy efficiency standards for new buildings and refrigerators that brought us into line with other nations. He even started an international movement by banning the horribly inefficient incandescent light bulb. At the time he told the ABC’s Four Corners program that the cleanest power station is the one you don’t need to build.

His name was Malcolm Turnbull.

Two years later Australia’s electricity demand started going down after almost 100 years of continuous growth. With this decline in demand so followed the cost of electricity on our wholesale market (but not retail prices due to poor regulations on network monopolies).

But since then we’ve pulled back on energy efficiency initiatives as electricity suppliers complained of an oversupply of power generation. This actually improves power reliability and reduces prices, but for some bizarre reason politicians and the energy bureaucracy listened to them.

 

If our prime minister wants to do something urgently to address high power prices and poorer reliability, he just needs to look back into his own past.