Industry: We’re gunna shut on power prices

From the Australian Industry Group:

An Ai Group member running a national company with an international parent showed me his electricity bill last week. It had doubled in the past year. His European head office pretty much told him to forget further investment while they considered their options.

This is a typical experience and our close liaison with our industrial members finds that the cost of electricity for many industrial users (excluding network charges) has risen over the past two years by 106% in Queensland, 150% in NSW, 163% in South Australia and 168% in Victoria.

It is not surprising then that power has in recent years gone from a top-10 to a top-four expense for a wide cross-spectrum of businesses.

Enough is enough. By turning an obvious strength with our abundant coal, gas and renewable resources into a competitive weakness, Australia has gone from a potential energy powerhouse to being put in the too-hard-basket in some international boardrooms.

It is not too late to turn things around but there needs to be bipartisan and nationally coordinated political and policy action. And it needs to happen now.

We need short-, medium- and long-term solutions to our malaise or else we risk losing competitiveness, real investment and jobs.

Energy security, affordability and sustainability must be at the top of everyone’s list of national priorities. We need to elevate these to leading priorities on behalf of households whose bills are rising; on behalf of industries – particularly the more energy intensive industries which, without action on reliability and affordability face an existential threat; and, of course on behalf of the many thousands of employees who work in these industries and along their supply chains.

For our trade-exposed manufacturers, the costs of higher energy prices and the costs of the buffers needed to protect against unreliable supply cannot simply be passed on. Their competitors in other countries where energy supply is better managed will be only too keen to step up and supply customers both in our export markets and in our domestic market.

Among the immediate steps is finding ways to encourage businesses and households to flatten out and reduce energy usage. Becoming more efficient in our energy use can make a real difference. It is particularly important for the times and places where lower demand can cut systemic costs. We need to better use existing resources and there is a lot that individuals and businesses can do in this regard. Demand response systems can stabilise the grid, for instance, by remotely turning thermostats in fridges and air conditioners up a degree for an hour. Governments could lead the way on this.

We also need agreement between the Commonwealth, States, industry, environmentalists and rural communities on how to get gas out of the ground. Abundant gas on the east coast is locked up by State bans. We have more gas on the west coast that we can’t get east. Meanwhile tight gas supply and higher prices are damaging industry and driving much of the recent surge in electricity prices.

Arbitrary bans are nonsensical and damaging. Now is not the time for timidity. We must surely be able to access our considerable reserves of gas on a carefully evaluated, case-by-case basis with firm regulation based on science to ensure environmental and aquifer impacts are managed properly.

We must also be able to reward our farmers who choose to utilise their land for gas development – such as with direct access to royalty payments to reinvest into their land.

Then we need to settle an energy market design that allows all energy sources – coal, gas, renewables and even nuclear – to compete to power our industries and households. Those that can deliver low-cost power, increase system stability and help meet our international emissions reduction commitments should prosper. There is room for diversity in our energy system – but not ideology.

A new coal power plant would take five to ten years to go from idea to production. Apart from questions currently around emissions intensity, flexibility and bankability, we don’t have that long to wait. But the technology should get its chance in the marketplace.

The cost and performance of renewables and energy storage are improving fast, but right now there are limits on how high wind and solar usage can go without costs escalating and stability declining. As a result, gas power is by far the most available option at scale for stabilising the grid. Those challenges can be solved, but they are simply ignored by feel-good State renewables targets. The States should drop their targets and work together with the Commonwealth on a national energy policy and national greenhouse gas emissions reduction strategy.

Meanwhile, further amending the Commonwealth’s 2020 Renewable Energy Target would wreck the only bipartisan certainty business has in the energy space and provoke more State action.

The time for a reality check is now. When South Australia’s industry and the shipbuilding program have to install expensive, dirty and typically idle diesel generators just to keep their doors open – you know we have a problem if not a crisis.

With Hazelwood closing in six weeks, South Australia becomes perilously dependent on supply conditions in NSW and Queensland, not just Victoria. As an Ai Group member told me, that’s a very long extension cord.

We now have a national economic security problem. If global boardrooms turn their back on Australia over energy or businesses are forced offshore, it will represent the biggest collective policy failure in decades.

Delivering the much vaunted trifecta of energy reliability, affordability and sustainability needs bipartisan and national cooperation. Fixing the current debacle is a massive test of our political leadership and our federal system.

Stop whining, this is Straya mate where gas reservation is for poofs:

  • we support negative gearing;
  • celebrate specufestors and borrow hundreds of billions offshore;
  • do whatever mining says;
  • pretend the economy is recovering;
  • for a strong dollar;
  • and selling our gas for more at home than we do in Japan is the fault of socialists everywhere:
qwefq

That’s economic management Strayan style.

Comments

  1. you would think here in aust we have a competitive advantage with all this gas and coal coming out of our ears

    we pay 25c/kwh for electricity

    in California, its 12c/kwh..

    its getting to the stage of being a health hazard….the poor thinking twice about putting on the aircon for the kids or grannie because of the cost….shame shame shame

    go figure…I didn’t know calif was endowed with major coal fields

  2. UNAUSTRALIAN

    “Demand response systems can stabilise the grid, for instance, by remotely turning thermostats in fridges and air conditioners up a degree for an hour. Governments could lead the way on this.”\\

    You will take my cold beer and my aircon control out of my cold, dead hands!

    • ‘Demand response system’ doesn’t do just that. When the smart meter is in place, everyone will be prepaying for power, not after. In times of high demand, power company will still jack up the prices, and people either pay through the nose or be cut off. It’s the remote power being turn off that makes ‘smart meter’ attractive.

      • Having worked a bit in the space on the IT side, trust me that the companies in question are a long, long way from being able to do that. Even if they wanted to or were allowed to. Its all they can do to manage not arbitrarily cutting off life-support customers, or accidentally turning an entire property ‘live’.

        What the industry generally is excellent at is gouging customers, mostly through poor efficiency and unnecessary complexity.

  3. ”It is not too late to turn things around but there needs to be bipartisan and nationally coordinated political and policy action. And it needs to happen now.”

    Then it ain’t going to happen !

    • Reply to self.

      To what extent was the Ai Group ‘injuries’ self inflicted? I didn’t see or hear them supporting any of Labor’s carbon pricing or other policies that would have eased the situation. I saw support for the Lib Nat neoliberal economy wreckers ! They are also part of the problem, and will never be part of the solution !

      • Exactly. I mean, it sure sounds like we need a way to provide certainty and an economically efficient way of allocating resources – like, say, a price on carbon…

  4. “… this is Straya mate where gas reservation is for poofs”. This is the kind of rhetorical flourish that makes me feel like I’m getting value for money out of my subscription.

    Thankyou sir!

    • Lots of +++++++++++++++++++++++++’s
      Hammer , nail, head.
      This entire energy cluster f#ck is the direct result of Privatisation.
      It does not work for the common good or National interest.

    • Or you could always increase the CSA, and hence the current carrying capacity. Whichever’s cheaper.


      You could transmit electrons from PER to SYD and only 9% of the electrons will be lost!

      I really hope you don’t mean this.

      • Did you watch the video by ABB?

        1830 km long transmission line to carry 6000 MW.

        China supposedly has a 3000 km long transmission line at 1100kV.

        Another case of AUS is right and the rest of the world is wrong? Yeah, with all the power cuts in Adelaide.

      • Failed Baby Boomer

        Even South Africa has had a HVDC transmission system from Cahora Bassa hydro for many years.
        From Wikipedia; The system was built between 1974 and 1979 and can transmit 1920 megawatts at a voltage level of 533 kilovolts DC and 1800 Amperes. . . . . The 1,420 kilometres (880 mi) long powerline runs through inaccessible terrain, so it is mostly built as monopolar lines 1 kilometre (0.62 mi) apart.

      • What problem are you guys actually trying to solve, other than some other guys have got some kit that includes long transmission lines through rough terrain, so we should get some too?
        wrt South Africa, whilst AC there are already 500kV overhead transmission lines in Australia, and many of them use a large CSA than the 565 mm2 used for the Cahora Bassa dam project. Ergon and Energex both went crazy a few years ago buying Sulfur and Venus, which would give them 2100 Amps under the same conditions (presumably summer noon, still, given it’s a bundle of four conductors)

      • Dude, South AUS keeps getting power cuts due to a lack of transmission capacity.

        Sydney was flooded a few days ago when Perth or Adelaide had power cuts – ie, at exactly the same time!

        Thus SYD people did not have air conditioners on and had spare electrons that could have been transmitted to Adelaide during their heatwave.

        There are power stations in Perth that could aid another city from time to time.

      • If we accept that it was lack of transmission capacity rather than market manipulation that stopped Adelaide getting power last week (and market manipulation still seems by far the most likely culprit), I guess the question that you haven’t tried to answer is along the lines of why is UHVDC necessary to build additional transmission capacity?
        The other question might be, if it was a transmission bottleneck that left Adelaide without power, rather than insufficient generating capacity, as seems to be your argument, why is finding extra capacity on the other side of the country the best solution, rather than from, for example, Victoria, or fixing the bottleneck’s within the SA network?

        China uses UHV DC and AC because the generation is concentrated at one end of the country and the consumption is concentrated at the other end. That is not the case in Australia. At the same time, I don’t see where a lack of 1000kV+ technology is stopping someone from building a transmission line from Perth to Adelaide, if there’s a case for it.

  5. Newcrest Mining Ltd. has raised concerns over Australia’s energy pricing and stability following blackouts in a number of states, as temperatures rise across the country.

    Managing Director and CEO Sandeep Biswas said that while Newcrest has not yet had to find new sources of energy for its Cadia mine in New South Wales, it is concerned about the current situation.

    “Clearly we are concerned. We have current contracts in place that will end within the next 12 months,” the executive said during a Feb. 13 conference call.

    “I think there’s clearly a need for a coherent policy that addresses the needs of low-cost energy such that we can compete on a level playing field with our competitors overseas.

    “It needs to provide competitively priced energy domestically, and obviously it also needs to address the environmental impacts of climate change.”

    Soaring temperatures in the eastern states of Australia have led to power shortages in South Australia and New South Wales as the grid fails to cope with increased demand.

    BHP Billiton Group said in early December 2016 that two blackouts in South Australia since September cost it A$100 million, and Australia’s energy policies are putting jobs and investment in the state at risk.

    Newcrest does not have any plans to build a power station at its Cadia mine to support the expansion of the operation, but the company is looking at improving transmission to the site.

    “Depending on the size of any potential expansion we may just have to boost that up in terms of an extra line coming into the site,” Biswas noted.

    Newcrest is looking at a number of options to expand capacity at Cadia to as high as 40 million tonnes per annum.

    The current processing plant is permitted up to 32 mtpa, but the company is also considering building a new plant that could process up to 40 mtpa.

    Newcrest is undertaking a prefeasibility study, which is slated for completion in the third quarter of fiscal 2017, to determine the best way forward.

  6. Go back 60+ years and it was a Liberal/Country Party coalition that invested heavily in hydroelectric power and transmission grids to ensure that Australia has the energy security to ensure industrial and domestic expansion.

    Menzies must be turning in his grave to see the rabble of poo throwing monkeys that the Liberal Party has become, controlled by the pockets of a few big businesses working against the national interest.

      • Did he really? I always thought the Snowy was one of those 1940’s ALP projects that the Liberals gladly embraced and then took 100% credit for.

      • Oh yes, he was happy to take credit in the end. But he was calling it a ridiculous pie-in-the-sky scheme in parliament when it was proposed.

        Curtin and Chifley were disturbed at the shortcomings WW2 exposed. Hence the car industry and Snowy scheme. They’re probably our two greatest leaders.

      • Chifley had an alternative business model for Australia. That it fell apart little by little in the 65 years after his death is arguably the greatest tragedy that has befallen this benighted country of ours. So it won’t be all that long now before those indigenes whose forebears were colonists or immigrants become strangers in their own country. All this as a result of 60 years of government incentivised by flaky market-driven imperatives; these acquiesced to by a silent majority pandered to by both sides of politics.

        http://adb.anu.edu.au/biography/chifley-joseph-benedict-ben-9738

  7. Electricity – who gives a toss! Those new ghost apartments don’t need it! Every smart investor knows you buy the dogbox and leave it empty. That is the pathway to prosperity set by our glorious political leaders.

  8. Arbitrary bans are nonsensical and damaging. Now is not the time for timidity. We must surely be able to access our considerable reserves of gas on a carefully evaluated, case-by-case basis with firm regulation based on science to ensure environmental and aquifer impacts are managed properly.

    We must also be able to reward our farmers who choose to utilise their land for gas development – such as with direct access to royalty payments to reinvest into their land.

    Unforunately, it’s not that easy.

    Take someone on say, 200 acres, sitting above or abutting a CSG point. Whose to say that his neighbours, who share groundwater, and air, with him, don’t also have a say in this development.

    Industrialisation of agricultural land is a community concern due to the inability to contain air/water pollution.

    Notwithstanding this is a fair point if the land is nowhere near anyone else/wind drift and not near a water table.

    So much risk.

    Probably ought look elsewhere than CSG.

    • “We must surely be able to access our considerable reserves of gas on a carefully evaluated, case-by-case basis with (no) regulation based on (biased, purchased) science to ensure environmental and aquifer impacts are (ignored) properly”

      No thanks. Only gotta fuck it up once.

      • Agree, it’s not the kind of thing you want to loosen regulations on (which is essentially what he is saying). My limited experience says they are flying blind on a lot of this CSG stuff. Up until the past decade they really had no idea.

        It is irrelevant anyway because the problem is not supply, it’s market regulation (or lack thereof). Power demand has been dropping for years.

      • Jumping jack flash

        Yes Ranald.
        Power generators and retailers have effectively priced themselves out of the market.
        The tipping point seemed to be around 2007, coinciding with massive government subsidies around that time to move to solar.
        Anyone who is able to is going off grid. It is cheap and easy to do so, even without the generous subsidies.

        They are now gaming their “market” to extract required profit for their shareholders, simply because they can.
        The investigation into the withholding of starting the second generator which would have prevented SA blackouts on the weekend has pretty much proved this.

        Now it is time for the government to act. But they won’t. How dare they meddle in private companies’ markets?

      • Speaking as one who was heavily involved wih the CSG Free Northern Rivers campaign , the whole campaign was funded by the community by donation, and fund raising events such as CSG the Musical.
        The movement ha the largest work force in the Northern rivers , all voluntary.

  9. The Canberra pricks pander to the Greenies’ renewables because of CO2 emission from burning coal/gas.

    So we get stuck with costly renewables whilst we give away the cheapest of coal/gas to china/india to burn anyway, and buy back their value added products like steel, aluminium, and solar panels made from burning coal/gas.

    Meanwhile, AIG group wants us to trash farmland for gas fracking, because setting up a gas reservation scheme to get some of the cheap ocean gas given to china would impact some of their LNG members’ profit margin.

      • “Costly renewables” whilst there is no storage for surplus energy.

        All it does is make the grid inefficient and susceptable to peaks and overloads.

        If government wasn’t driven by profit margin from donors, home and large-scale battery systems would be pushed, and local manufacturing of battery systems would happen.

        However, whilst cheap gas/coal is being given away to be burnt anyway, why aren’t we just doing burning it ourselves in a cleaner way?

  10. The solution is a reservation policy, which is the solution almost very other country in Australia’s position has taken in the past. Unfortunately, our politicians no longer see the national interest as in their interest. We are doomed.

    • It’s quite a similar dynamic to a resources rent and a sovereign wealth fund, isn’t it? Capture some of the value for the direct benefit of the nation. Simple, strategic choice.

      No, we can’t do that. We’ll rely on some free-market ideology and trickle-down. Cos that works.

  11. [email protected]

    Hazlewood shuts in 6 weeks…..this will be funny

    http://reneweconomy.com.au/nem-watch/

      • [email protected]

        they’ll squib hazlewood ..they’ll have to.

  12. adelaide_economist

    There is room for diversity in our energy system – but not ideology.

    Hahahahaha. Mmmm. Yeah, no ideology guys, but by the way those damn blocks on CSG are really bringing us down and would totally solve all the problems!

    Gas reservation? Restructuring NEM pricing approaches to minimise gaming? Focus on whatever ownership structure delivers better outcomes rather than supporting mindless privatisation because the AiG is basically a Liberal echo tank? [crickets chirping]

  13. ErmingtonPlumbing

    Yes

    All this ridiculous Privatization idelogy is starting to fail.
    From above coments on Coporate electricity suppliers.

    “They are now gaming their “market” to extract required profit for their shareholders, simply because they can.”

    Where are the Voices calling for the clear solution to this Energy supply fiasco,….Nationalisation of the country’s Electricity generation and supply.
    No tax increases or debt to pay for it either.

    Just as our sovereign Nation can produce as much of our own currency as required,…we can also produce as much Enegery as required as well.
    It just needs the will to do so.

    We need to all stand up and demand better from our lazy, sellout Politicians.

    • Total overtake of the economy, market, society by private / corporate actors is a VERY VERY common refrain throughout history.

      It always, without exception ends in absolute total disaster and needs to be rescued by the public / state. Always.

      Look no further than the Merchant Trading Companies – especially the British East India company- absolute disaster from day one for the people and they were only kicked out of their brutal oppression (57 million dead Indians – worlds greatest slaughter) when things just got so bad that the people at home started finding out.

      .

      Australians aren’t much better……than those Indians – literally.

    • The rent seeking economy is going to finish by eating itself when productive industry has finally been wiped out Then it will die a slow death. This will be almost impossible to reverse since there will be hardly anything left to build on for recovery except low wage service industries. There will first be mass confusion, then dismay, and finally great anger, when people finally realise that their country has been sold out from under their feet for shiny, foreign made trinkets but it will be far too late.

  14. We were told that NSW electricity prices were so high because of the 60c solar gross tariff. Now that that has completely ended I’d like to see whether my bill goes down.

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