You may have heard about Australian Chief Scientist Alan Finkel’s review into Australia’s electricity network. You may also have read about its implications on the industry or the environment, but you’re probably still wondering what exactly it will mean for you and your electricity bill. Read on to find out everything you need to know about the Finkel review’s blueprint for Australian electricity.
The report released at the start of June was created in response to increasing problems with the National Electricity Market, which services the five eastern states of Australia. These problems ranged from rapidly rising electricity prices to supply issues like those that caused the blackouts in South Australia last year.
The final report arranged its recommendations under three pillars: orderly transition to a low emission grid, system planning for security and reliability and stronger governance to oversee operations and coordinate existing market bodies. One of the key outcomes for the report is ‘rewarding consumers’ – but how much reward will you actually see from it?
The Impact On Your Electricity Bill
Consumer groups are on the fence about the review’s recommendations. While many of them are important for the long-term efficiency and effectiveness of the grid, it still has the potential to leave bill-payers open to more price hikes in the short term, if the costs of stricter regulation are allowed to be passed down to the consumer.
“The review offers sound recommendations to improve planning and transparency, but other recommendations fall short of cost-effectively future-proofing the energy system,” says Chris Memery of the Public Interest Advocacy Center (PIAC), in reference to regulations that may require renewable energy generators to add compulsory storage to their plants to guarantee reliability. “Placing additional obligations on renewable energy generators runs the risk of using less cost-efficient approaches, which translates to higher costs for consumers.”
You may have heard about Australian Chief Scientist Alan Finkel's review into Australia's electricity network. You may also have read about its implications on the industry or the environment, but you're probably still wondering -- what will it mean for you and your electricity bill? Read on to find out everything you need to know about the Finkel review's blueprint for Australian electricity.Read more
An increased share in renewables has the potential to bring electricity costs down in the long term, as the cost of new wind and solar is already cheaper than new coal or gas, and these prices will only continue to fall with advances in technology. PIAC is concerned that fossil fuel generators will use the systems recommended by Finkel to ‘game’ the market in the meantime, however:
“PIAC is particularly concerned that there is little acknowledgment of the serious problem of existing gas generation businesses gaming the energy market. They do this by withdrawing generators from the market to increase the spot price received by other generators that they own, a practice that causes higher prices for consumers and, potentially, rolling blackouts,” Memery said.
Gas generation has been highlighted by the Finkel review as an important ‘transition fuel’, helping to smooth the irregular supply provided by renewables until energy storage technology can be deployed on a large scale. However with gas supply issues currently plaguing Australia’s networks, this kind of reliance on gas could lead to further increased electricity prices. It’s not just gas, either:
“We are also troubled by the recommendation that coal-fired power stations be required to give three years notice before they shut down. This raises the very real prospect of compensation payments to aging or redundant generators, that require extensive maintenance to keep running and might not even be needed. Such compensation would come from taxpayers or consumers.”
There is some good news for consumers in the report, however, especially for those who are looking for more independence in their household electricity.
One recommendation from the blueprint suggests increased demand response measures. Depending on your energy retailer you might have already heard of demand response. It’s a system which offers a discount on your electricity bill in exchange for using less energy in times of high demand.
Mojo Power used a kind of manual demand response system during this year’s heatwave in February, texting customers to offer a $25 discount on their bill if they reduced their electricity usage between 4pm and 6pm that day. More effective demand response systems may be fully automated, however, such as giving your power company access to your energy-hungry air conditioner or pool pump in exchange for a discount on the electricity you do use.
More Support For Household Solar Panels And Batteries
Many of Finkel’s recommendations for consumers involve increased transparency and easy access to information, but the most interesting parts of the report are all about rewarding consumers who invest in solar panels and batteries. Houses with solar and batteries are less of a strain on the grid, often able to support themselves even in times of peak demand. Having more of these self-sufficient households would lessen the need for expensive infrastructure upgrades, so it makes sense for the industry to incentivise those investments.
Australia has a wealth of solar power just in rooftop panels, with the CSIRO and Energy Networks Australia estimating that up to 45 per cent of Australia’s electricity generation could come from consumer-owned sources by 2050. However the National Energy Market wasn’t designed for a system fed by millions of tiny generators, which is one big problem Finkel sets out to address.
Couple rooftop solar with the increased adoption of home batteries, and you have a consumer-owned resource that has the potential to save $16 million in network investments by 2050. To make the most of this asset, the report recommends investigating ways to both incentivise customers to invest in these technologies and to share those assets with the rest of the grid for everyone’s benefit.
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AGL is already trialing something similar with its ‘Virtual Power Plant‘, a collection of household batteries that can function like a 5MW peak demand power plant. Customers are rewarded for investing in the program with battery systems with a seven-year payback period, much lower than even the most effective independent systems on the market.
Another option may function like Reposit Power‘s GridCredits system, where consumers with batteries connected to Reposit’s service allow the company to sell their stored electricity back to the grid in response to times of increased demand. This way, consumers can sell their excess solar power for much higher than the usual going rate. While systems like Reposit’s could cause unwanted fluctuations in the grid without oversight, the Finkel review suggests they could be regulated so solar and battery owners can get the most out of their investments and help keep electricity prices affordable at the same time.
“Consumers are telling us they want a reliable supply of electricity at the lowest possible cost, but in the face of uncertainty and rising bills they are reaching for more control and choice,” said Rosemary Sinclair, CEO of Energy Consumers Australia. “Consumers are investing in solar panels, batteries and a range of the technologies, and in doing so, they are reshaping this market from the ground-up. The Blueprint will help ensure that consumers can make the most of the new opportunities that are emerging in the market, but also ensure that energy remains reliable and affordable for everyone.”
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Even if you can’t afford solar panels of your own, or live in a rental house, the review also spends some time outlining the importance of not letting low income households fall behind when it comes to affordable energy. It recommends that the COAG Energy Council should be looking into options for low income earners such as:
- Opportunities to accelerate the roll out of programs that improve access by low income households to distributed energy resources and improvements in energy efficiency.
- Options for subsidised funding mechanisms for the supply of energy efficient appliances, rooftop solar photovoltaic and battery storage systems for low income consumers.
These could include programs such as the installations of solar panels currently happening on public housing in Queensland, NSW and South Australia, or the Victorian Government’s low-interest loans for low income consumers looking to invest in solar panels.
With some good news and some bad for consumers, most consumer groups agree on one thing: Finkel’s blueprint needs to be acted upon quickly, before electricity prices get even further out of hand. “What is needed now is a proactive, clear and collaborative response from the energy sector with a laser-like focus on the long-term interests of consumers,” said Sinclair.