Yahoo News Energy ministers warned not to overreact on electricity reliability rules
Energy users and suppliers have warned ministers that consumers will pay the price if they go overboard reworking the reliability standard in the national electricity market. The warning comes as regulators have proposed a new rule change imposing fines of $100,000 on power retailers offering dodgy discounts.
Influential groups from the Business Council of Australia to the Australian Council of Social Service have issued a joint statement warning energy ministers ahead of their first face-to-face meeting in almost 12 months that striving for “an unobtainable goal of 100% reliability” in Australia’s power grid will impose massive cost increases on users.
The strongly worded intervention comes as the Australian Energy Market Commission has proposed new regulations governing conditional discounting practices by energy retailers, because some discounts can result in customers being hit with heavy penalties if they pay their bills late. Under the AEMC proposal, if retailers fail to limit conditional discounts, they could be fined $100,000 per breach.
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Federal and state energy ministers will meet in Perth on Friday, and both the federal minister, Angus Taylor, and the Victorian minister, Lily D’Ambrosio, have flagged they want to overhaul the current reliability standard, which was endorsed only last year to apply from 2020 to 2024. The reliability standard is a mechanism that signals to the market the requirement to deliver enough capacity to meet consumer demand for electricity.
Seven business, energy and welfare groups argue that governments are now “in grave danger of overreacting to short-term reliability concerns, rather than making more considered reforms and ensuring investments are in the long-term interests of consumers”.
The Ai Group, the Australian Council of Social Service, the Australian Energy Council, the Brotherhood of St Laurence, the Business Council of Australia, the Energy Users’ Association of Australia and the St Vincent de Paul Society say the energy market operator has already taken steps to minimise the risk of blackouts over the coming summer.
The group says “further hasty steps will have negligible impact on system reliability over the upcoming summer – but they can undermine our efforts to manage the continuing transition in our electricity system”. They warn that constant rule changes won’t create the stable investment environment necessary to keep the lights on and emissions falling.
Another industry body, the Clean Energy Council, said the most important thing for energy ministers to address was what it described as a dramatic decline in investment in large-scale renewable energy this year. It said the average quarterly investment in new clean energy generation had fallen 60%, from more than 1,600 megawatts of generation capacity to about 500 megawatts.
The fall in investment follows the national renewable energy target, equivalent to about 23% of generation, having been met and no policy introduced to replace it. It also coincides with widespread concerns about under-investment in electricity transmission.
Kane Thornton, the council’s chief executive, said barriers to new clean energy investment included problems getting new wind and solar farms connected to the grid, a lack of long-term national energy policy and the energy market being “no longer fit-for-purpose”.
He said new large-scale generation was needed to keep power prices down and ensure system stability. “A sustained slow-down in the level of new investment will have a significant impact on Australia’s energy prices and reliability at a time when existing coal-fired generation is becoming less reliable and is increasingly exiting the system,” he said.
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In a letter to ministers, the council called for agreement on several steps it said were needed to address the issue. They included the development of markets in “ancillary services” that recognised the value of generators that provided inertia, fast frequency response and voltage support – all needed to stabilise the system – and a long-term policy that harmonised existing state programs, refined existing federal policies such as the emissions reduction fund or introduced something new, such as the abandoned national energy guarantee (Neg).
Ahead of Friday’s meeting, Taylor has signalled he wants to pursue a series of deals with the states to roll out new generation and transmission – an approach that has followed the Morrison government’s decision to ditch the Neg. The Neg was a casualty of the federal Liberal party’s leadership eruption last August.
The Coalition initially faced pressure from some of the Liberal state governments, including New South Wales, to revive the Neg, which was supported by most stakeholders in the energy sector. But the states have in more recent times pursued a plan B, giving Canberra specific wishlists of projects they want assistance with.
The Australian Capital Territory has warned this approach to managing Australia’s energy challenges is deeply problematic. The energy minister, Shane Rattenbury, told Guardian Australia this week: “We need leadership and collaboration. I’m concerned the minister wants to cut deals with states he sees as collaborative. Having an overall plan would be optimal.”
