New concerns have emerged about the Coalition government’s new energy plan, and its effect on large-scale renewable energy projects and rooftop solar.
The proposed share of renewable energy under the scheme unveiled by the Energy Security Board suggests the uptake of rooftop solar would need to be deliberately slowed to meet the numbers, or large-scale projects brought to a stop. Without such measures, the ESB’s forecasts simply don’t add up.
(They may argue that this is a target, but that was also true of the Finkel Review, and its forecast of 42 per cent renewables made it a sitting duck for the conservatives afraid of wind and solar. So the forecasts do mean a lot in the current policy debate).
The ESB said it expects a renewable energy share of 28-36 per cent by 2030, including the contribution of rooftop solar.
But the Australian Energy Market Operator, in its own long-term forecasts, predicts that rooftop solar will total around 19.9GWh by 2030, as more and more households and businesses turn to solar to deflect high grid costs, which are clearly not going to come down under the ESB’s newly unveiled plan.
That 19.9GWh accounts for 10 per cent of all demand, which leaves other renewables at between 18-26 per cent on the ESB estimate. At the bottom end, that represents a halt or even a reduction from 2020 levels, which will be 23.5 per cent under the renewable energy target.
The Greens have already expressed their dismay, noting that the target put by the ESB reflect a slowdown from business as usual.
The Finkel Review estimated that doing nothing on the policy front would still result in 35 per cent renewables by 2030, and non hydro renewables would be just below 30 per cent.
RenewEconomy sought clarity on this from the ESB and the agencies that are its principal components – AEMO and the AEMC (Australian Energy Markets Commission).
Did the ESB intend this figure to include rooftop solar, and therefore represent a stop to the deployment of either large or small-scale renewables? Or is the ESB actually predicting a renewable share of up to 46 per cent by 2030 (including small-scale solar)? That would frighten the Coalition horses.
We didn’t get a direct response on the numbers: An AEMC spokesperson said the ESB considered renewables to be an important part of the energy mix, “but the value of these resources to consumers is directly compromised if it results in unreliable and unaffordable electricity.”
She later said there was no intention to stop rooftop solar, but did not explain how all that renewable energy fitted in to the ESB numbers.
This revelation comes amid increasing concern that the report presented by the ESB was both rushed and half-baked. It was put together in less than three weeks following a request from the federal government desperate to produce a Plan B for Finkel’s clean energy target.
And it appears that the Coalition, which took months to consider Finkel, accepted this proposal from the ESB on the very day it was received.
The ESB letter is date-marked October 13, and that is the same day the Coalition revealed it was about to unveil its new policy to the party room on October 16. So much for careful consideration and review.
There are also concerns about the role of John Pierce, the fiercely conservative head of the AEMC, and the extraordinary powers he appears to have conferred on himself.
The basis of the ESB policy document, which Pierce is said to have largely authored, is that new reliability and environmental guarantees are to be written into the market rules. As the principal market rule maker, he will be the final arbiter of the policy design and how this will be done.
It is not a prospect that makes the renewable energy industry comfortable, given his attacks on renewable energy targets and household solar in the past, and his fierce defense of incumbent interests.
The document presented by the ESB included only three pieces of data, and all are under scrutiny.
One is the 26 per cent emissions reduction target, because it is clearly inadequate in light of the Paris deal, and there is no provision for a target beyond 2030, which does not augur well for investment certainty, or for a good climate outcome.
The other issues are around the forecast share of renewables, because it represents a massive slow-down, and the assumed cost savings, said to be $100 a year but now revealed to have been made up and thrown into the document to make the political optics look good.
Any move to try to slow down rooftop solar would, of course, be met with a tremendous political backlash, given that solar is now the only option that consumers have to reduce their electricity bills, and given that the ESB proposal will effectively lock in high electricity prices for at least another decade.
Rooftop solar is now the single biggest existential threat to the current utility business model. The CSIRO and the networks say that consumers will account for up to half of all demand by 2050, but unless action is taken to address market rules, many could leave the grid.
ESB chair Kerrie Schott noted in the letter she signed that: “The growth of distributed energy storage including battery storage and the participation of customers in energy markets in particular need to be monitored.”
No one seriously believes they would intervene, but energy policy in this country left the realms of serious consideration some time ago, and there are some who argue that households be banned from disconnecting from the grid.
This is justified on the basis that the networks should be allowed to recoup their sunk investments in the grid, regardless of the fact that it was clearly gold-plated.
The dodgy numbers in the ESB document are yet another sign of what is increasingly seen as a rushed and ham-fisted attempt by the Coalition government to produce a policy on the run. This was not what was expected of the ESB, which only met for the first time in early September.
Much faith and hope had been stored in the ESB – given the status and reputation of its members, who are highly respected and talented individuals and the heads of the key agencies, AEMO, AEMC and the AER (regulator).
But the nature of this intervention has angered the states, who as part of the COAG energy council are key stakeholders in the ESB and had expected it would work with them, and not behind their backs to deliver what appears to be as cover for the Coalition’s policy failures, presented as a fait-accompli to the states.
ACT minister Shane Rattenbury has told journalists there are real concerns about the process, and this has been echoed by others. Indeed, the states feel they have been blindsided. One source noted that the request of the ESB had circumvented its stated responsibilities ….
…It will have responsibility for the implementation of recommendations from the Independent Review into the Future Security of the National Electricity Market (Finkel Review), and provide whole-of-system oversight to the Council on energy security, reliability and affordability in the NEM. It will facilitate better planning, co-ordination and action between governments, the Energy Council, and market bodies.
Indeed, some say that the ESB was actually set up to try to dilute his influence over policy and rule changes, and to force him to hurry up and stop kicking proposals endlessly down the road. Now he sits in the middle, directing traffic.
In this instance Pierce certainly moved with a speed which stunned observers and defied the normal glacial pace of reform and rule considerations at the AEMC. “It took them five years to get a change to the 5-minute rule, but now they have re-written the main rules for the NEM in just 10 days,” said one.
More importantly, under the ESB proposal, Pierce would emerge with extraordinary powers, because it would be his organisation, as the principal rule-maker, that would write the rules for the new reliability and emissions guarantee, rather than parliament.
This has set off alarm bells around the industry for other reasons. Pierce is no fan of the renewable energy target, and has argued consistently for its replacement.
He is no great fan of rooftop solar support schemes either, and earlier this year voiced his support for a new rule that would bill solar households for exporting power to the grid, a sort of solar tax.
He has previously rejected local generation credits, argued against network devaluations, and in his submission to Finkel noted: “Decarbonisation is not an active consideration in developing the grid and regulatory regime of the future.” He also painted this dystopian view of the energy market earlier this year.
And there is no doubt that the outline of the NEG effectively reinforces the dominance of the energy incumbents.
They will meet their obligations under virtually invisible energy market tools such as caps and hedges, and if any smaller retailer struggles to meet their obligations, they will lose their licence and their clientele would go to the retailers of last resort – the big three utilities. David Leitch suggests it will reduce competition. Happy outcome.
Analysts say it will inevitably reduce competition rather than expand it, and most say increased competition is the fundamental ingredient to reducing prices.
To add further colour to this development, and the decision by Turnbull to dump Finkel’s proposed clean energy target and put the design of the new policy in the hands of Pierce, it is said that Finkel and Pierce did not get on.
A couple of sources have told Reneweconomy of the first meeting between Finkel’s review panel and the AEMC, at which point Finkel asked, ‘is anyone here an electrical engineer’.
Upon being told no – the AEMC is largely made up of lawyers and economists – Finkel then said: ‘Then why are we here’. Finkel and Pierce are said to have had fierce disagreements over the role of markets and market design.
But it seems the decision to dump the CET and confer extraordinary powers on Pierce and his team is the ultimate riposte, or revenge: The economists and the lawyers are now firmly in the driving seat. And the incumbents and the ideologues are piled into the back seat, fully expecting to enjoy the ride.
As published by Giles Parkinson on 19 October 2017 – New Economy